CONFIDENTIAL October 20, 2003 Technology IPO Perspectives PRESENTATION TO: Annual Venture Capital...

CONFIDENTIAL

October 20, 2003

Technology IPO Perspectives

PRESENTATION TO:

Annual Venture Capital Ecosystem Meeting

Table of Contents

1 Historical IPO Perspectives

2 Current IPO Perspectives

3 The Global Settlement and IPO Underwriting

TECHNOLOGY IPO PERSPECTIVES / October 20, 2003 3

1 Historical IPO Perspectives


Historical IPO Perspectives

> 1,804 technology companies have gone public in the U.S.

> $118 billion in total capital raised

> 33% have been acquired

> 14% have gone bankrupt or liquidated

> 41% have appreciated in value since IPO date(1)

> 41 have been “ten baggers”(2)

> May 2001 – date of the last telecom equipment IPO

By the numbers since 1980

(1) Determined at acquisition date if acquired.(2) “Ten-bagger” defined as lifetime stock price appreciation in excess of 1,000%.


13

33

12

82

2413

36 34

1727 23

4656

95

80

148

203

129

85

308

19 168

221

0

50

100

150

200

250

300

350

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03


Number of IPOs (January 1, 1980 – December 31, 2002)

Source: Securities Data Corporation.

Cyclicality of IPOs

follows the evolution

of new industries

and broader

economic themes

PC Revolution Retrenchment Networking Internet Revolution Retrenchment


$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

(in

million

s)

Average IPO Market Value Average IPO Size


Average IPO Market Value and IPO Size

Source: Securities Data Corporation.Excludes Accenture and Agere IPOs in 2001.

(January 1, 1980 – October 13, 2003)

PC Revolution Retrenchment Networking Internet RevolutionAverage IPO

market value and

size have steadily

increased as

investors demand

greater liquidity

and companies

with greater critical

mass

Retrenchment



Average Number of Underwriters per Technology IPO(January 1, 1980 – October 13, 2003)

2.0

1.71.8

2.0

1.82.0

2.1

1.9

2.1 2.22.1

2.42.5

2.9

3.2

3.7

3.43.3

3.8

1.9

2.3

2.0

2.6

1.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Source: Securities Data Corporation, EquiDesk.

Increase in deal size

and competitive

dynamic among

investment banks

has increased the

average number of

underwriters on an

IPO



> Like the 1983 NFL quarterback class (Elway, Kelly, Marino), the 1986 IPO class yielded exceptional value

> Approximately $400 billion of value creation from 10 companies that went public in 1986

> Lesson: As industry leaders emerge, sectors consolidate and disproportionate value is ascribed to #1

• Phase 1: Technology emerges

• Phase 2: Several companies compete to grow the technology and market

• Phase 3: Leader emerges

• Phase 4: Industry consolidates

• Phase 5: Leader captures disproportionate value

IPO Darwinism



Technology Sector is an IPO Leader

2002 Sector Breakdown (by # of IPOs) 2003 Sector Breakdown (by # of IPOs)

Source: EquiDesk.

> Despite a poor environment for IPOs, technology has increased its share of total IPOs in 2003 from 2002

> Given the emerging growth characteristics of technology companies, the technology sector is well suited to capture a significant portion of the IPO total

Other6%

Consumer9%

Healthcare6%

Financial Institutions

31%

Real Estate12%

Industrials6%

Technology24%

Media/Telecom6%


27%

Healthcare19%

Other14%

Consumer21%

Energy1%

Real Estate5%

Industrials3%

Technology9% Media/Telecom

1%



> Eight technology IPOs completed since June 2003

• Financings occur in brief windows of opportunity

> Average post-IPO market capitalization was $530 mm – with the smallest at $173 mm

> All issuers were profitable in 2003 and have visibility into 2004

> Issuers had limited to no exposure to telecom carrier capex

> Stocks have performed well – up 49% on average

• In difficult financing environment, higher levels of scrutiny are placed on those that can go public

2003 IPO Observations

Gross %Date Company Proceeds @ IPO Current +/ - @ IPO Current 2003 2004 @ IPO Current @ IPO Current

9/23 AMIS Holdings, Inc. 600.0$ 20.00$ 19.90$ -0.5% 1,437.3$ 1,430.1$ NA NA NA NA NA NA9/18 SigmaTel 150.0 15.00 23.12 54.1% 504.0 776.8 NA NA NA NA NA NA7/30 NetGear 98.0 14.00 17.24 23.1% 380.8 468.9 0.34 0.54 41.2x 50.7x 25.9x 31.9x7/23 Ipass 98.0 14.00 23.83 70.2% 821.8 1,398.8 0.26 0.41 53.8x 91.7x 34.1x 58.1x7/16 Intervideo 39.2 14.00 17.85 27.5% 173.6 221.3 0.66 1.00 21.2x 27.0x 14.0x 17.9x7/9 Digital Theater Systems 65.3 17.00 30.00 76.5% 222.7 393.0 0.70 0.84 24.3x 42.9x 20.2x 35.7x

6/12 FormFactor 84.0 14.00 26.92 92.3% 462.0 888.4 0.17 0.41 82.4x 158.4x 34.1x 65.7x5/12 iPayment 80.0 16.00 23.85 49.1% 235.2 350.6 0.84 1.05 19.0x 28.4x 15.2x 22.7x

Average 151.8$ 49.0% 529.7$ 741.0$ 40.3x 66.5x 23.9x 38.7x

Gross %Date Company Proceeds @ IPO Current +/ - @ IPO Current 2003 2004 @ IPO Current @ IPO Current

9/23 AMIS Holdings, Inc. 600.0$ 20.00$ 19.90$ -0.5% 1,587.3$ 1,580.1$ NA NA NA NA NA NA9/18 SigmaTel 150.0 15.00 23.12 54.1% 414.0 686.8 NA NA NA NA NA NA7/30 NetGear 98.0 14.00 17.24 23.1% 290.8 378.9 287.0 336.0 1.0x 1.3x 0.9x 1.1x7/23 Ipass 98.0 14.00 23.83 70.2% 707.8 1,284.8 136.0 190.0 5.2x 9.4x 3.7x 6.8x7/16 Intervideo 39.2 14.00 17.85 27.5% 120.6 168.3 60.0 76.0 2.0x 2.8x 1.6x 2.2x7/9 Digital Theater Systems 65.3 17.00 30.00 76.5% 178.9 349.2 51.5 68.0 3.5x 6.8x 2.6x 5.1x

6/12 FormFactor 84.0 14.00 26.92 92.3% 352.0 778.4 92.0 134.0 3.8x 8.5x 2.6x 5.8x5/12 iPayment 80.0 16.00 23.85 49.1% 237.9 353.3 215.0 257.0 1.1x 1.6x 0.9x 1.4x

Average 2.8x 5.1x 2.1x 3.7x

2004E P/ E

Stock Price Enterprise Value Estimated Rev. 2003E EV / Rev 2004E EV / Rev

Stock Price Market Cap Estimated EPS 2003E P/ E



SigmaTel’s IPO Case Study

Critical Mass (approximately $20 million quarterly revenues)`

High quality customer relationships

Significant growth in targeted end-markets

Profitability in year of issuance

Potential for core technology to serve additional markets in the future

Experienced management team with proven track record

Filing Mid June 2003

MarketingEarly September 2003

Pricing(9/18/03)

Current(10/13/03)

$350 - $400 million $410 - $470 million $504 million $799 million

Increased 32% on the first day of trading

Currently up 54%

Strong visibility at least one-year forward (period that the valuation will be based upon)


2 Current IPO Perspectives


Current IPO Perspectives

> Downsizing of the past 3 years has led to significant operating leverage

> Positive Qtr/Qtr revenue and earnings growth in Q1 and Q2, expected for Q3

> Equity fund flows positive every month since April

2003/2004 Outlook

Domestic Equity Funds Flow

($2.0)

($9.2)

($1.9)

$4.3

$3.2

$7.7$6.9

$5.7 $6.0

($12.0)

($10.0)

($8.0)

($6.0)

($4.0)

($2.0)

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

J an-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03

(in b

illio

ns)

FY 2002: ($27.3B)FY 2003: +$20.7B

FY 2002: ($27.3B)FY 2003: +$20.7B



> Investors are cautious when valuations fluctuate dramatically, making IPOs difficult to accomplish

2003/2004 Outlook (continued)

0%

10%

20%

30%

40%

50%

60%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003YTD

Percentage of Trading Days per Year NASDAQ Moved +/- 2% in One Day

Extreme levels of

volatility have given

way to greater

stability

Source: Wall Street Research.



> Strong performance of 2003 IPO class

> Interest rates remain low

> IPO calendar beginning to build

• There are currently 61 IPOs filed with the SEC – 10 of these are technology companies


Current Sector Breakdown of IPO Backlog1

($7.1 Billion)

1Source: Dealogic; IPOs filed/ revised within the last 180 days, current amount filed greater than $30mm. By number of transactions.

Technology14.6%

Media/Telecom4.2%


18.8%

Energy6.3%

Healthcare22.9%

Industrials2.1%

Real Estate8.3%

Other12.5%

Consumer10.4%



> Since 1980, every ten years significant new technologies have emerged

• Early to mid 1980s – PC

• Mid 1990s – Internet

• ?? Mid-2000s – Broadband connectivity and mobility utilizing cost-effective infrastructure




What are Company Metrics for an IPO?

Critical mass – at least $100 million in revenue

Demonstrated momentum through quarterly sequential revenue and earnings growth

Profitability in year of issuance

Good visibility one year forward (the period valuation will be based upon)

Product and customer diversification

Experienced management



> Earnings momentum focus will shift from margins to revenues by early to mid-2004; lack of quarter/quarter revenue growth

> Jobless recovery restricts economic growth

> A few lesser quality companies capitalize on the IPO window and subsequently underperform

> Another shock to global geopolitical events

What Can Change Our Positive Bias?


3 The Global Settlement and IPO Underwriting


The Global Settlement and IPO Underwriting

> Banker / Analyst diligence proceeds on a dual-track

• Bankers cannot ask an Analyst to visit a company

• Analysts and Bankers may not attend the same meetings with companies

• No discussion of anticipated equity rating is permitted

> Research Analyst “Teach-Ins” to salesforce

• Viewed as an education opportunity, not as a sales or marketing opportunity

• Can discuss business fundamentals and information contained in prospectus

• May discuss the Analyst’s financial estimates

• May NOT comment on the transaction structure or pricing

• Bankers may NOT attend Teach-In’s

> Management Presentation to the salesforce

• Analysts may NOT attend (permitted to view presentation from a different location)

• Bankers and ECM may attend

• Analyst estimates may NOT under any circumstances be announced or distributed

Underwriter Selection and Pre-Marketing



> Roadshow Preparation

• Analysts may NOT participate in the preparation of, contribute to, comment on, or review the roadshow presentation

• Bankers may NOT solicit input from Analysts on the roadshow presentation

> Marketing and Roadshow

• During marketing process, no event can be attended by Bankers and Analysts together

• Analysts may NOT introduce management to buyside accounts during roadshow

• Analysts may NOT provide input into the roadshow schedule or identify investors to target

• Analysts may NOT attend roadshow meetings

• Analyst estimates and other perspectives/opinions may NOT be discussed or distributed in any manner, at any time by Bankers or Management during the roadshow

Marketing



> Analysts’ communications with Investors

• Analysts may NOT make outgoing phone calls or other communications to Investors to solicit interest in the offering

• Analysts may respond to incoming calls from Investors and discuss:

– Business fundamentals of the company

– Information contained in the prospectus

– Analyst’s previously published research reports and financial model

• Analysts may NOT discuss or provide an opinion with respect to:

– Structuring or pricing of the transaction

– Any information not contained in the prospectus

> Bankers and ECM personnel may NOT direct and Analyst to initiate or take calls from investors

> Analysts may NOT communicate investor feedback to Bankers or ECM personnel

> Analysts may not participate in the pricing call

Marketing


CIBC World Markets

2002 & 2003 YTD Lead and Co-Managed Equity New Issues

Source: Dealogic EquiDesk.Assumptions: Ranked by number of issues for lead and co-managed deals.Includes IPOs and Follow-ons, excludes closed-end funds and REITs.Based on calendar year pricing dates and on total issue amount, allocates 100% to each manager.

CIBC’s strength is

with middle-market

companies; we have

a long record of

successfully

executing

transactions for

these companies

I ssuer Market Cap Less than $1 Billion All Deals

Pos. Manager # of

Deals

Total Amt.

($mm) Pos. Manager # of

Deals

Total Amt.

($mm)

1 CIBC World Markets 73 8,654 1 Credit Suisse First Boston 184 72,946

2 Merrill Lynch & Co 72 14,615 2 Merrill Lynch & Co 176 68,138

3 Credit Suisse First Boston 68 13,875 3 Citigroup Global Markets Inc 150 72,815

4 UBS AG 66 8,770 4 UBS AG 146 52,914

5 Lehman Brothers 55 7,558 5 J P Morgan Securities Inc 142 64,136

6 US Bancorp Piper J affray Inc 53 4,767 6 Morgan Stanley 141 56,777

7 Bear, Stearns & Co 52 7,106 7 Goldman, Sachs & Co 131 66,857

8 J P Morgan Securities Inc 46 12,083 8 Lehman Brothers 123 48,358

9 Morgan Stanley 45 7,984 9 Banc of America Securities 104 48,636

10 RBC Capital Markets 45 4,180 10 Deutsche Bank AG 97 41,605

11 Deutsche Bank AG 43 8,211 11 CIBC World Markets 94 19,565

12 Societe Generale 42 5,796 12 Bear, Stearns & Co 92 32,233

13 Citigroup Global Markets Inc 39 9,832 13 US Bancorp Piper J affray Inc 61 7,281

14 Raymond J ames 39 2,823 14 Wachovia Capital Markets, LLC 59 24,161

15 Goldman, Sachs & Co 35 12,072 15 RBC Capital Markets 59 9,457

16 Banc of America Securities 35 8,037 16 Societe Generale (Paris) 55 16,289

17 Thomas Weisel Partners LLC 30 3,003 17 Raymond J ames 54 6,386

18 Legg Mason Wood Walker Inc 28 2,599 18 AG Edwards & Sons Inc 41 7,695

19 Needham & Co Inc 28 1,899 19 Legg Mason Wood Walker Inc 41 7,593

20 BMO Financial Services 25 3,073 20 Thomas Weisel Partners LLC 39 7,155

CONFIDENTIAL October 20, 2003 Technology IPO Perspectives PRESENTATION TO: Annual Venture Capital...

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