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Palo Alto, CALos Angeles, CASan Francisco, CAMcLean, VANew York City, NY

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Making the Technology BusinessWork

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FFor over twelve years, Sherwood or over twelve years, Sherwood Partners, Inc. has built its reputation Partners, Inc. has built its reputation based on a proactive and communicative based on a proactive and communicative approach to its clients and their approach to its clients and their constituents.constituents.

TToday, we enjoy a strong mind-share oday, we enjoy a strong mind-share and brand recognition for our unique and brand recognition for our unique services and professional capabilities. We services and professional capabilities. We are considered one of the premier are considered one of the premier business and advisory firms in technology. business and advisory firms in technology.

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Some definitions of financial Some definitions of financial terms:terms:

BULL MARKET – A random market movement causing an investor to mistake himself for a financial genius.BEAR MARKET – A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.VALUE INVESTING – The art of buying low and selling low.P/E RATIO – The percentage of investors wetting their pants as the market keeps crashing.BROKER – What my broker has made me.STANDARD & POOR – Your life in a nutshell.MARKET CORRECTION – The day after you buy stocks.CASH FLOW – The movement your money makes as it disappears down the toilet.YAHOO - What you yell after selling it to some poor sucker for $240 per share.WINDOWS 2000 – What you jump out of when you’re the sucker who bought Yahoo at $240 per share.INSTITUTIONAL INVESTOR – Past year investor who’s now locked up in a nuthouse.PROFIT – An archaic word no longer in use.

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PPositioning Your ositioning Your Company for the Company for the

Coming Growth CycleComing Growth Cycle

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GROWTHGROWTHWebster’s defines growth Webster’s defines growth as…as…

““a stage in the process of growing, the a stage in the process of growing, the process of growing, progressive process of growing, progressive development, evolution, increase and development, evolution, increase and expansion”expansion”

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GROWTHGROWTH

Webster’s also defines growth Webster’s also defines growth as…as…

““an abnormal proliferation of tissue an abnormal proliferation of tissue such as a tumor”such as a tumor”

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So….what is your definition So….what is your definition of the “coming growth of the “coming growth cycle?”cycle?”

Economic expansion and Economic expansion and prosperity; orprosperity; or

Recession or something Recession or something much worse.much worse.

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SHERWOOD BELIEVES:SHERWOOD BELIEVES:

Expansion and ProsperityExpansion and Prosperity

Recession or Something Recession or Something WorseWorse

Somewhere BetweenSomewhere Between

IF SHERWOOD IS RIGHT:IF SHERWOOD IS RIGHT:““Positioning” Your Company Positioning” Your Company == Survival Survival

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In the Non-Business World:a) Living longer than the other guyb) Existence in the face of severe problems and conditionsc) Have a great time and Party, Party, Party…

In the Business World:a) Preserve cashb) Control costs, especially head count, overtime, rework,

facility costs (i.e., rent) and capital expendituresc) Increase profitable sales d) When necessary, restructure the right side of the balance

sheete) Even the winners have had tough times…knowing what to

hold on to and what to leave behind is the key to any success

Survival:Survival:

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What is a profitable sales volume?What is a profitable sales volume?A positive gross margin? If so, A positive gross margin? If so, how much?how much?Sales to reach breakeven?Sales to reach breakeven?Sales to maintain market Sales to maintain market share?share?Sales based on another sound Sales based on another sound business decision?business decision?Sales to meet an analyst’s Sales to meet an analyst’s expectations?expectations?

In Technology…Sales is the KEY Validator

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Lessons Learned in The Lessons Learned in The BubbleBubble

Adoption

Absorption

Time

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Time for Good Business Time for Good Business Judgment…back to Judgment…back to BasicsBasics

Geez, business stinks

This may not surprise you, But our captains of industry seem shocked

Adam Lashinsky, CNN/Money Contributing Columnist

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ISIS THE CURRENT THE CURRENT ECONOMIC SITUATION ECONOMIC SITUATION LIMITED TO TECHNOLOGY?LIMITED TO TECHNOLOGY?

NONO

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Five Elements of Change

CONSOLIDATION

GLOBALIZATION

COMMODITIZATION

TRANSPORTATION

INFORMATION

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Manufacturing

Transportation

Leisure and Travel

Retail

Technology

Foreign Trade

What Sector Will be The Engine for Recovery?

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The most lopsided ten-year stretch was the 1990s, when the S&P earned a whopping 219.9 percent from the start of 1995 through the end of 1999, but only 29.9 percent from 1990 through 1994. (See accompanying chart.) The only decades in which the first half produced better results were the 1950s and the 1960s.                         In some decades, the first five years were deeply in the red -- the 1910s, 1930s and 1970s. This decade, too, has been negative so far. But the index has been positive in the last half of every decade since 1900.

What's more, stocks always hit the low for the decade during the first five years. The fastest arrival of the bottom was in the 1950s -- on Jan. 3, 1950. Investors waited the longest for the bottom in the 1910s -- on Dec. 24, 1914.

Some Interesting Facts

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What brings value to a What brings value to a business?business?

Net incomeNet incomePositive Positive cash flowcash flowProfitable Profitable future future growthgrowthInvestor Investor ReturnReturn

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4 KEYS TO TURNING 4 KEYS TO TURNING SURVIVAL INTO SUCCESS:SURVIVAL INTO SUCCESS:

Accountability:Accountability:Business Plan Business Plan ValidationValidation

BenchmarkingBenchmarking

Corporate Governance:Corporate Governance:LegalLegal

FinancialFinancial

EthicalEthical

Cost ContainmentCost Containment

Asset PreservationAsset Preservation

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Where Trouble StartsBurn Rate HighOut of Runway Investors Lose ConfidenceBusiness Model Does Not WorkNo Ability to Close a Sale/ MergerManagement Goals not AchievedCompetition Takes the LeadManagement Has Lost Credibility

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Objectivity is the Most Powerful Tool

Wrong Product for Right Market

Wrong Market for Right Product

Wrong Management Team

Management EmotionTied to One Wrong Direction

Loss of Flexibility

Unable to Make Decisions

Refusal / Inability to Work With Outside Ideas

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Today….it’s “Back to Today….it’s “Back to Basics and Cash is King”Basics and Cash is King”

For the Marines….it’s “when the going gets tough, the tough get going.”

For many companies in the late 90’s economy, it’s “When the going got tough, the cash kept going”.

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A Sherwood Truism..

“When you watch the cash, Profits come naturally”

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Reduce the Risk of Failure

Almost All Failures Result From Poor Focus

Understand the Facts of Failure For

Future Decisions

CreatePositiveChange

BeProactive

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The Knowledge

of Viable Options

is the Key to

Success

Getting Real is the

Second Key

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Lessons LearnedLessons Learned

ContinuouslyFocus onExit Pan

Know YourCustomer

BringProfessionals

in Early

Focus onResults

PreserveCash

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FinancialFinancialCommunityCommunity

CreditorCreditorCommunityCommunity

LegalLegalCommunityCommunity

Why…

SHERWOODPARTNERS, INC.

EXCELLENT EXCELLENT REPUTATIONREPUTATIONRESULTSRESULTSImplementationImplementation