UBS Tech M&A

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UBS Technology M&A

March 2005

Discussion of Current Industry Trends

STRICTLY CONFIDENTIAL


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[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.ppt

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Table of Contents

SECTION 1 M&A Market Conditions 2

SECTION 2 M&A Drivers and Considerations 8

SECTION 3 UBS Overview 14


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SECTION 1

M&A Market Conditions


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3

M&A Volume in the US

Large, strategic combinations are backProctor & Gamble / Gillette, JPMorgan / BankOne, Cingular / AT&T Wireless, Sprint / Nextel,

Oracle / PeopleSoft, Symantec / Veritas, Johnson & Johnson / Guidant and Wachovia / SunTrust Significant financial sponsor activity in the middle market

Taking advantage of depressed market conditions and attractive debt markets

Current rebound in activity across all industries is reflective of a return to a healthier market

608

433

529

1,045

1,411

1,219

1,328

530

407

296

15411611097

0

250

500

750

1,000

1,250

1,500

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

($inbillion)

Volume up 41% in 2004vs. 2003

Source: Securities Data Corporation


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Technology M&A Activity

Technology M&A Volume Has Increased Steadily Since 2002 Lows

58 58

98

157

65 46 47 65

2660

148

233

36

19 17

2524

$85

$143

$485

$124

$6415

22

65

95

$65

$311

$103

0

50

100

150

200

250

300

350

400

450

500

1997 1998 1999 2000 2001 2002 2003 2004

DealValue(US$

Billions)

0

500

1,000

1,500

2,000

2,500

3,000

No.ofDeals

> $10bn

$1bn - $10bn

< $1bn

No. of Deals

1997 1998 1999 2000 2001 2002 2003 2004

No. of Deals 1,133 1,409 1,862 2,648 1,705 1,318 1,329 1,508

Source: Securities Data Corporation

Note: Oracle/PeopleSoft included as 2004 transaction, original hostile offer was first launched in Q3 2003


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M&A Deal Activity is Intensifying

Market recovery in 2003 and stability in 2004 have increased corporate confidence and created anenvironment conducive to M&A transactions

Technology companies are exiting defensive, "survive the downturn" mentality and reviewing strategic options Recalibrating under invested businesses

Capturing upside as economic conditions continue to improve

Technology M&A deal volume increased 60% in 2004

M&A pipeline is expected to be strong for 2005

281 325 352

371 370 394

345

399

100

200

300400

500

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2003 2004

102.6

$64.2$64.9

40

60

80

100

120

2002 2003 2004

(1%)60%

Number of Announced Transactions1 Technology M&A Deal Volume (US$ Billions)1

179 additional transactions were announced in 2004 compared with 2003

Volume of discussions has intensified drastically

Source: Security Data Corporation

Note:1 Oracle/PeopleSoft included as 2004 transaction, original hostile offer was first launched in Q2 2003


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Current Trends in Technology M&A

TREND OVERVIEW RECENT TRANSACTIONS

Resurgence inDeal Activity

A recovery in technology stock prices and increased corporate confidence have driven

M&A activity Companies have restructured their businesses and increased earnings

Companies are eager to make acquisitions to capture upside as market condit ions improve

2004 marked the return of the Technology M&A mega-deals

Deals over $1 billion represented 36% of deal value in 2004, versus 27% in 2003

Return of landscape shaping deals such as Symantec/Veritas, ARM/Artisan and thecompletion of Oracle/PeopleSoft

IBM / Ascential ($1,100mm)

Symantec / Veritas ($13,521mm)

Lenovo Group / IBM PC Business

($1,300mm)

CA / Netegrity ($451mm)

Juniper / Netscreen ($3,816mm)

Oracle / Peoplesoft ($10,300mm)

ARM / Artisan ($933mm)

SectorConsolidation

Sector consolidation continues to drive M&A

As companies refocus on growth, they are seeking opportunit ies to expand productofferings, acquire new technology and achieve critical mass

Regulatory environments created product opportunities for acquirors and at the same time

forced smaller listed firms to re-assess the pros and cons of operating on a standalone basis

3Com / TippingPoint ($408mm)

Credence / NPTest ($663mm)

Serena / Merant ($380mm)

Cisco / NetSolve ($137mm)

StockConsideration

Stock consideration has become a more favorable M &A currencyas technology stockprices have recovered

Most technology companies have been trading at or close to their three-year highs

In some recent deals, cash consideration has been linked to stock consideration asacquirorstap into the equity markets to raise fundsfor acquisitions

Improvements in capital markets have allowed companies to raise cash at a low cost throughconvertibles or straight equity

Symantec / Veritas ($13,521mm)

Safenet / Rainbow ($463mm)

Credence / NPTest ($663mm)

Issued convertible

Serena / Merant ($380mm)

Issued convertible

Private EquityActivity

Private equity players continue to show interest in acquiring technology companies

Some technology stocks have enjoyed only limited participation in the market recovery

Low interest rates have enabled private equity players to borrow at low costs to fundacquisitions

The downturn has created companies with lower cost structures and higher profitability

The recent market recovery has provided private equity players with better exit opportunities

Carlyle / Insight ($2,100mm)

Golden Gate Capital / Blue Martini($54mm)

Veritas Capital / DynCorp from

CSC ($850mm)

Bain Capital, Silver Lake Partners,

Warbug Pincus / UGS PLM from

EDS ($2,050mm)


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M&A and IPO Activity in the Technology Sector

Number of Announced M&A Transactions and IPO Filings

Source: Securities Data Corporation and UBS Equity Capital Markets Group

Note: Oracle/PeopleSoft included as 2004 M&A transaction, original hostile offer was first launched in Q3 2003

1,133

1,409

1,862

2,648

1,705

1,318

1,508

1,329

124

100

309

235

23 19 21

60

0

500

1,000

1,500

2,000

2,500

3,000

1997 1998 1999 2000 2001 2002 2003 2004

No.ofAnnounc

edM&A

Deals

0

50

100

150

200

250

300

350

No.of

IPOsFiled

M&A IPO


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SECTION 2

M&A Drivers and Considerations


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Principal Drivers of Technology M&A

AchieveScale

Critical mass and financial strength

Customer leverage

Increased distribution and sales support

Market position consolidation

Leapfrog competition

ExpandProductOffering

New market entry product or geography

Capture new customer bases Buy vs. make time to market

Engineering talent and/or management acquisition

Off-income statement R&D

OfferCompleteSolution

Fill product gaps

Capitalize on installed base

Accelerate time to market

Strengthen channel partnerships

Offer one-stop shop


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M&A Considerations

Business

Rationale

Compelling strategic rationale

Create or consolidate market leadership position

Essential new technologies, markets or products

Financial

Considerations

Transaction multiples compared to public comparables and precedent transactions

Impact on combined company revenue and earnings growth t rajectories

Effect on margins

Revenue and cost synergies

EPS accretion / dilution

Market

Reaction

Market perception of target company / merger partner

Consistent, simple to understand story

Financial parameter clarity

Price paid / consideration mix

Execution

Risk

Time to closure

Anti-trust / regulatory

Tight contract terms

Integration strategy

A number of factors to consider in pursuing any M&A transaction


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Process Considerations

Public Offering Versus Sale

Initial Public Offering Sale of Business

PROS:

Primary shareholders retain voting control and existingmanagement continues to execute the strategic vision of thebusiness

Proceeds from an IPO can be used to increase scale throughacquisitions or fuel organic growth

Shareholders can participate in potential upside should thebusiness continue to execute and market conditions remainfavorable

CONS

The organization must take on the costs associated withpublic filing and compliance requirements while managinggreater scrutiny by investors

An IPO lock-up prevents current shareholders from achievingimmediate liquidity

There is a high degree of uncertainty in future capital marketconditions

There is the potential for a downside in valuation should thebusiness lose traction

PROS:

Reduces or eliminates execution risks of the currentbusiness plan as well as future capital market uncertainties

M&A valuation includes control premium

Can offer a more immediate path to liquidity for currentshareholders

Avoids the costs associated with being a public company

Partnering increases opportunity to cross-sell and up-sellthrough larger distribution platform and gain rapid criticalmass to better compete

CONS:

Primary shareholders relinquish voting control and newmanagement executes the strategic vision of the company

Cash transactions eliminate the upside participation in thepro forma company

Integration and execution risk of combined business


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30%

36%

39%

40%

52%

61%

0% 10% 20% 30% 40% 50% 60% 70%

ERP

Business Intelligence

Record Management

Process Control

Storage

Security

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2003 2004 2005 2006 2007

($

millions)

Advisory Services IT Spending

Sarbanes-Oxley 404 Compliance

Benefits Costs

Intended to restore investor confidence in U.S. publicmarkets

Drives greater consistency and transparency in reportedfilings

Increased executive accountability over financial reporting

Increased spending at the CFO and CTO level to meetcompliance criteria

Increased cost of being public, especially small cap companies

Entails significant allocation of resources

Not meeting SOX deadline requirements or announcinginadequacies in significant controls can have negative effect onstock price

UTStarcom

Chordiant Software

Interpublic Group

Advisory Services Vs. IT Spending Mix for SOX ComplianceAnticipated Technology Spending to Support SOXCompliance

Source: Forrester Research survey of 454 technology decision-makersSource: Gartner 2004 estimates


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Typical Timing of an M&A Transaction

Illustrative Timeline of a Sell-Side Controlled Auction Engagement

Negotiationsand Closing

Negotiate and sign definitive agreement

Closing

DueDiligenceandPreparation

Marketing

Preparation of managementpresentation

Initiate contact with buyers

Activity

Due diligence meetings

Information Memorandum

Finalize buyer list

Deliver Information Memorandum

Finalize management presentation and data room

Buyer due diligence

Receipt and review of final proposals

Organizational meetings

Action

Weeks

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17


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SECTION 3

UBS Overview


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UBSA Leading Global Financial Services Firm

Wall Street

PowerhouseFORBES 2004

The UBS WayBLOOMBERG 2004

Worlds Best

Investment BankEUROMONEY 2004

Worlds Best BankEUROMONEY 2003

Best Investment BankTHE ECONOMIST 2003

Worlds Best

Investment BankINVESTMENTDEALERS DIGEST 2002

UBS is a banking giant but, a Wall Street powerhouse? Oh

Yes.

This is a house thats grown out of its regional shell to

assume premier proportions in world finance. But its the push

into the rarified realm of Investment Banking that sets UBS

apart.

BIG KID ON THE BLOCKFORBES

UBS has achieved what once seemed impossible for any

European investment bank: it has broken into the front rank inthe US market, source of roughly half the global investment

banking fee pool. In the 12 months ending in April 2004, it

doubled its share in announced US M&A deals.

WORLDS BEST INVESTMENT BANKEUROMONEY 2004

Our strength is backed by industry accolades


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UBSA Leading M&A Advisor with Rapid Improvement in MarketShare

20032004

# of Transactions / Market Share120032004 Market Share

versus 20002002

Notes: Data represents all M&A deals worldwide greater than $100 million in transaction value. Full credit given to acquiror and target advisor(s). Excludes withdrawn deals, equity carveouts,exchange offers, and open market repurchases

1 Market share based on number of transactions. Market shares do not sum to 100% due to multiple advisors on each transaction (e.g., target advisor and acquiror advisor)

UBS has positioned itself as one of the leading M&A advisors worldwide and has unprecedentedmomentum, capturing more market share than any other bank since 2002

6.4%

8.1%

8.5%

8.6%

10.4%

10.8%

12.2%

13.0%

13.8%

14.8%

Lazard

Lehman Bros

Merrill Lynch

Deutsche Bank

CSFB

Morgan Stanley

Citigroup

JP Morgan

Goldman Sachs 459

426

403

377

333

322

265

262

252

197 (38%)

(23%)

(11%)

(5%)

(2%)

(1%)

+3%

+6%

+9%

+23%

CSFB

Merrill Lynch

Morgan Stanley

JP Morgan

Citigroup

Goldman Sachs

Lazard

Deutsche Bank

Lehman Bros


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February 2005

US$415 million

Sale to eBay

February 2005

US$850 million

Sale of Selected DynCorpUnits to Veritas Capital

November 2004

US$137million

Sale to Cisco Systems

July 2004US$170 millionSale to FindWhat.com

May 2004US$663 million

Acquisition of NPTest

May 2004

US$380 millionSale to Serena Software

March 2004US$463 millionSale to SafeNet

January 2004US$601 millionSale to Manpower

January 2004US$467 millionFinancial Restructuring

November 2003US$295 millionSale to NetScreen

Overview of UBS Technology M&A Group

Strong technology-focused M&A presencewith deep industry knowledge andcompany relationships

Experienced in a wide range of advisoryassignments

Buyer advisory

Seller advisory

Cross-border transactions

Merger of equals

Shareholder value protection

Leveraged transactions

Technology M&A Expertise 2004 Technology M&A Transactions Less Than $1 Billion

Source: SDC

Financial Advisor Rank Value ($mm) No. of Deals

Goldman Sachs & Co 1 7,168.2 17

Morgan Stanley 2 6,025.4 22

Credit Suisse First Boston 3 5,187.3 15

UBS 4 4,476.8 11

JP Morgan 5 4,375.4 14

Banc of America Securit ies LLC 6 2,148.2 5

Citigroup 7 2,114.1 12

Jefferies & Co 8 2,093.0 21

Lehman Brothers 9 1,560.4 9

Rothschild 10 1,492.6 3

Selected Recent Transactions


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Contact Information

UBS Securities LLC555 California StreetSuite 4650

San Francisco CA 94104Tel. +1-415-352 5650

www.ubs.com

UBS Investment Bank is a business group of UBS AGUBS Securities LLC is a subsidiary of UBS AG

This presentation has been prepared by UBS Securities LLC (UBS)for the exclusive use of recipient (together with its subsidiaries and affiliates, the company)using information provided by the company and other publicly available information. UBShas not independently verified the information contained herein, nor does UBS make any representation or warranty, either express or implied, as to the accuracy, completeness or reliability of the information contained in this presentation. Any estimatesor projections as to events that may occur in the future (including projections of revenue, expense, net income and stock performance) are based upon the best judgment of UBS from the information provided by the company and other publicly availableinformation as of the date of this presentation. There is no guarantee that any of these estimates or projections will be achieved. Actual results will vary from the projections and such variations may be material. Nothing contained herein is, or shall berelied upon as, a promise or representati on as to the past or future. UB S expressly disclaims any and all liability relati ng or resulting from the use of this presentatio n.

This presentation has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer t o buy or sell any securities or related financial instruments. The company should not construe the contents of this presentationas legal, tax, accounting or investment advice or a recommendation. T he company should consult its own counsel, tax and financial advisors as to legal and related matters concerning any transaction described herein. This presentation does not purportto be all-inclus ive or to contain all of the informatio n which the company may require. No investment, divestm ent or other financial decisions or actions should be based solely on the informati on in this presentation.

This presentation has been prepared on a confidential basis solely for the use and benefit of the company; provided that t he company and any of its employees, representatives, or other agents may disclose to any and all persons, without limitation of any

kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to the company relating to such tax treatment and tax structure. Distribution of this presentation to anyperson other than the company and those persons retained to advise the company is unauthoriz ed. This material must not be copied, reproduced, dist ributed or passed to others at any time without the prior written consent of UBS.

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UBS Tech M&A