Sample Valuation
PRESENTATION TO INVESTORS | VALUATION ANALYSIS
Project Google
CONFIDENTIAL | 25 JANUARY 2010
Sample Valuation
Table of Contents
I. INDUSTRY OVERVIEW………………………………………………… 3
II. COMPANY OVERVIEW………………………………………………… 6
III. FINANCIAL OVERVIEW……………………………………………….. 10
IV. APPENDIX……………………………………………………………….. 18
Confidential Project Google
Sample Valuation
Project Google
INDUSTRY OVERVIEW | INTERNET SOFTWARE & SERVICES
3
Sample Valuation
Industry Overview Project Google
Global Search Market Posted 46% Growth in 2009
The worldwide internet search reached over 131 billion queries in December 2009. This statistic
represents:
4 billion searches per day
175 million searches per hour
2.9 million searches per minute
The U.S. had the largest share of the global individual search market with 22.7 billion searches
conducted by people age 15 or older.
0
5,000
10,000
15,000
20,000
25,000
United
States
China Japan United
Kingdom
Germany France South
Korea
Brazil Canada Russian
Federation
December-08
December-09
92% 28% 53% 44% 61% 38%
35%
48%
13%
Glo
ba
l S
earc
hes
(M
M)
Top 10 Countries by Number of Searches Conducted 22%
1) Source: “comScore Reports Global Search Market Growth of 46 percent in 2009.” (January 22, 2010)
2) Source: “comScore Reports Global Search Market Growth of 46 percent in 2009.” (January 22, 2010)
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Sample Valuation
Industry Overview Project Google
Google Sites Had a Dominate Share Of Search Query Volume in 2009
The U.S. core search market grew 16% overall in 2009
Google Sites search query volume grew 21 %
Microsoft Sites had the greatest growth in search volume at 49%
Ask Network increased its search query volume by 12%
5
Sample Valuation
Project Google
COMPANY OVERVIEW | GOOGLE INC.
6
Sample Valuation
Selected Company Data
Company Information
Company Name Google Inc.
Ticker: GOOG
Fiscal Year Ending Dec-31-08
Fiscal Year Ending + 1 Dec-31-09
Fiscal Year Ending + 2 Dec-31-10
Marginal Tax Rate 35.0%
Beta 1.08
Selected Market Data
Stock Valuation Date Jan/25/10
Share Price as of (01/25/10) $529.0
F.D. Shares Outstanding 320.3
Equity Value $169,435.4
Net Debt ($21,994.4)
Enterprise Value $147,441.0
Google NASDAQ
0 %
100 %
200 %
300 %
400 %
500 %
600 %
700 %
Nasdaq
Company Overview Project Google
(1) (2)
1) Based on company filings.
2) Based on closing prices as of January 25, 2010. 7
Sample Valuation
Google Stock Price Trading History (1)
Volume Share Price
0
2,000
4,000
6,000
8,000
10,000
12,000
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
Volume
Share Price
Vo
lum
e in
Th
ou
sa
nd
s
High (01/04/2010) $626.75
Low (03/09/2009) $290.89
Average $456.18
Price
High (04/17/2009) 10,730
Low (12/24/2009) 858.7
Average 3,480
Volume
Company Overview Project Google
1) Source: Yahoo! Finance.
Note: Price and volume data are based on closing prices and volumes. 8
Sample Valuation
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
12 Feb 09
Google Exits Radio Advertising
Business. - Reuters
26 Mar 09
Google Cut 200 Jobs From Sales Force. -
Reuters
03 May 09
Apple and Google Ties are Investigated. -
NYT
05 Aug 09
Google to acquire On2 technologies.-Reuters
16 Sep 09
Google Acquires Carnegie Mellon Spin-Off ReCapture Inc. - Reuters
03 Apr 09
Google Could Be in Talks To Buy Twitter. - Reuters.
09 Nov 09
Google Signs Agreement To Acquire AdMob. -Reuters
23 Nov 09
Google To Buy Display Advertising Startup Teracent. -DJ
06 Dec 09
Google Buys Online Word Processing Startup AppJet.-
Reuters
13 Jan 2010
Rejecting Censorship, Google Threatens To Quit
China. -Reuters
26 Oct 09
On2 Technologies Announced Proposed Settlement in Litigation. -Reuters
Company Overview Project Google
Google Stock Trading History (1)
1) Yahoo! Finance.
Note: Price and volume data are based on closing prices and volumes. 9
Sample Valuation
Project Google
FINANCIAL OVERVIEW | GOOGLE INC.
10
Sample Valuation
Financial Overview Project Google
$200.00 $700.00 $1,200.00 $1,700.00
$1081.61
$1617. 37
$ 553.59
$540.46 $1348. 58
$626.76
$600.00 $635.00
Median: $659.9
$170.89
$193.75
$290.89
COMPARABLE
PUBLIC
COMPANIES
PRECEDENT
TRANSACTIONS
DISCOUNTED
CASH FLOW
PREMIUMS PAID
ANALYSIS
52-WEEK RANGE
ANALYST PRICE
TARGETS
$781.66
212.2% - (50.0%)
(3.6%) - (31.7%)
(1.3%) - (60.0%)
(83.4%) - (14.9%)
(11.1%) - (16.0%)
175.4% - (67.0%)
GOOGLE VALUATION –
IMPLIED PRICE PER SHARE
Valuation Summary PREMIUM
TO 01/25/2010
PRICE: $533.50
7.2x – 34.7x
7.9x – 50.8x
18.8x – 25.6x
18.4x – 42.7x
10.8x – 21.0x
20.2x – 21.2x
9.5x – 60.1x
10.8x – 90.0x
30.8x – 43.5x
30.1x – 75.0x
16.2x – 34.9x
33.4x – 35.3x
EBITDA P/E
IMPLIED 2009E MULTIPLES
1) Based on selected comparable companies for the “Internet Software & Services” sector.
2) Selected transactions are based on data provided by techcrunch.com and company press-releases.
3) Reflects WACC of 12.1% and exit multiple of 14.5x.
4) Source: Techcrunch.com. Includes transactions greater than $1 billion from 2007 to date.
5) Based on closing prices as of January 25, 2010.
6) Based on selected Wall Street analysts„ equity reports on October 16, 2009.
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Sample Valuation
Financial Overview Project Google
Multiples Analysis Share
Price % of 52- Market Enterprise
Company Name Ticker 1/11/2010 Week High Capitalization Value Cash Debt LTM FYE +1 FYE +2 LTM FYE +1 FYE +2
Amazon.com, Inc. AMZN $120.4 17.5% $52,915.0 $49,030.0 $4,001.0 $116.0 2.3x 2.1x 1.6x 30.9x 27.5x 19.2x
eBay Inc. EBAY $23.7 8.2% $30,630.3 $27,671.0 $3,159.3 $200.0 3.3x 3.2x 3.0x 9.2x 9.0x 8.0x
Yahoo Inc. YHOO $15.9 12.0% $22,220.8 $17,801.3 $4,503.1 $83.6 3.7x 3.8x 3.6x 10.3x 10.5x 10.0x
Microsoft Corp. MSFT $29.3 7.0% $260,494.6 $260,494.6 $36,728.0 $5,996.0 4.1x 3.8x 3.5x 9.8x 9.5x 8.6x
Maximum $120.4 17.5% $260,494.6 $260,494.6 $36,728.0 $5,996.0 4.1x 3.8x 3.6x 30.9x 27.5x 19.2x
75th Percentile $52.1 13.4% $104,809.9 $101,896.1 $12,559.3 $1,649.0 3.8x 3.8x 3.5x 15.5x 14.7x 12.3x
Median $26.5 10.1% $41,772.6 $38,350.5 $4,252.0 $158.0 3.5x 3.5x 3.3x 10.1x 10.0x 9.3x
Mean $47.3 11.2% $91,565.1 $88,749.2 $12,097.8 $1,598.9 3.3x 3.2x 2.9x 15.0x 14.1x 11.5x
25th Percentile $21.7 7.9% $28,527.9 $25,203.5 $3,790.6 $107.9 3.0x 2.9x 2.7x 9.6x 9.4x 8.5x
Minimum $15.9 7.0% $22,220.8 $17,801.3 $3,159.3 $83.6 2.3x 2.1x 1.6x 9.2x 9.0x 8.0x
Google Inc. GOOG $533.5 14.9% $170,879.4 $148,885.0 $21,994.4 $0.0 8.9x 8.3x 7.2x 14.2x 14.0x 11.8x
Margins Analysis
LTM CapEx
Company Name FYE '06-08 FYE '08-10 FYE '06-08 FYE '08-10 FYE '06-08 FYE '08-10 % Revenue LTM FYE +1 FYE +2 LTM FYE +1 FYE +2
Amazon.com, Inc. 33.8% 26.7% 42.1% 34.7% 51.0% 25.7% 2.0% 5.7% 4.6% 5.7% 7.3% 7.5% 8.3%
eBay Inc. 19.6% 3.2% 18.3% 3.8% 19.3% 8.2% 6.6% 26.3% 29.6% 31.9% 35.9% 35.4% 37.9%
Yahoo Inc. 8.8% (4.9%) (2.5%) (0.9%) (13.5%) (20.8%) 9.5% 20.1% 8.8% 13.2% 35.9% 36.6% 36.5%
Microsoft Corp. 6.9% 6.3% 7.9% 3.3% 5.9% 3.0% 4.9% 37.1% 35.4% 36.0% 41.8% 39.8% 40.4%
Maximum 33.8% 26.7% 42.1% 34.7% 51.0% 25.7% 9.5% 37.1% 35.4% 36.0% 41.8% 39.8% 40.4%
75th Percentile 23.2% 11.4% 24.3% 11.5% 27.2% 12.6% 7.3% 29.0% 31.0% 32.9% 37.4% 37.4% 38.5%
Median 14.2% 4.7% 13.1% 3.5% 12.6% 5.6% 5.8% 23.2% 19.2% 22.5% 35.9% 36.0% 37.2%
Mean 17.3% 7.8% 16.5% 10.2% 15.7% 4.0% 5.8% 22.3% 19.6% 21.7% 30.2% 29.8% 30.7%
25th Percentile 8.3% 1.2% 5.3% 2.3% 1.0% (2.9%) 4.2% 16.5% 7.7% 11.3% 28.7% 28.4% 29.4%
Minimum 6.9% (4.9%) (2.5%) (0.9%) (13.5%) (20.8%) 2.0% 5.7% 4.6% 5.7% 7.3% 7.5% 8.3%
Google Inc. 47.4% 13.9% 49.0% 16.1% 46.9% 12.3% 5.7% 53.5% 46.1% 48.1% 62.7% 59.4% 61.3%
EV/Revenue EV/EBITDA
Revenue Growth (CAGR) EBITDA Growth (CAGR) EBIT Growth (CAGR) EBITDA Margin EBIT Margin
($ in millions, except per share data )
Comparable Public Companies (1)
1) Based on selected comparable companies for the “Internet Software & Services” sector. 12
Sample Valuation
1) Source: “Yahoo to buy rest of Right Media for $680mln.” (Reuters, 04/30/2007)
Note: Includes 20% stake (~$200MM) Yahoo! acquired in October, 2006.
2) Source: “Microsoft to Acquire aQuantive, Inc.” (Microsoft, 05/18/2007)
3) Source : “Google to Acquire DoubleClick.” (Google, 04/13/2007)
4) Source :”WPP has agreed to acquire 24/7 Real Media for $11.75 per share.” (WPP, 05/17/2007)
5) Source: “CISCO Announces Agreement to Acquire WebEx.”(CISCO, 03/15/2007)
6) Source: “CBS to buy CNET Networks.” (05/15/2008)
7) Source : “Adobe to Acquire Omniture.” (Adobe, 10/23/2009)
Announce Transaction
Date Acquiror Target Revenue EBITDA Value LTM FYE+1 LTM FYE+1
04/29/07 Yahoo Inc. Right Media $70.0 $18.0 $850.0 12.1x N/A 47.2x N/A
05/18/07 Microsoft Corp. aQuantive Inc., $492.6 $129.5 $6,376.9 12.3x 9.9x 46.7x 39.3x
04/13/07 Google Inc. DoubleClick $232.0 $72.0 $3,100.0 13.4x 10.4x 46.7x 31.6x
05/17/07 WPP Group 24/7 Real Media $215.0 $20.8 $668.6 2.8x 2.2x 29.0x 22.3x
03/15/07 CISCO Systems WebEX Com. Inc. $380.0 $124.1 $3,090.5 7.2x 6.0x 22.1x 18.6x
05/15/08 CBS Corp. CNET Networks $408.2 $73.3 $1,794.3 4.3x 4.0x 23.8x 20.1x
10/23/09 Adobe Systems Omniture, Inc. $335.5 $68.8 $1,771.0 4.9x 3.6x 24.1x 11.2x
Maximum $492.6 $129.5 $6,376.9 13.4x 10.4x 47.2x 39.3x
75% Percentile $394.1 $98.7 $3,095.3 12.2x 8.9x 46.7x 29.3x
Median $335.5 $72.0 $1,794.3 7.2x 5.0x 29.0x 21.2x
Mean $304.8 $72.4 $2,521.6 8.1x 6.0x 34.2x 23.9x
25th Percentile $223.5 $44.8 $1,310.5 4.6x 3.7x 23.9x 19.0x
Minimum $70.0 $18.0 $668.6 2.8x 2.2x 22.1x 11.2x
DoubleClick is a provider of digital marketing technology
and services with a focus on ad serving, media, video,
search and affiliate marketing.
24/7 Real Media provides multi-platform internet marketing
strategies including behavioral targeting, ad serving and
Web advertising.
WebEx Communications Inc. provides on-demand
collaboration, online meeting, web conferencing and video
conferencing applications.
CNET is an interactive media company providing tech
product reviews, news and price comparisons, free
software downloads, daily videos, and podcasts.
Omniture is a provider of online business optimization
products and services including integrated set of
optimization applications for online analytics, channel
analytics, visitor acquisition and conversion.
aQuantive is a digital marketing company with three
distinct business segments: digital marketing services;
digital marketing technologies; and digital performance
media.
Target LTM EV/Revenue EV/EBITDA
Target description
Right Media, Inc. is an online advertising company that
operates the Right Media Exchange (RMX), a marketplace
that enables advertisers, publishers, and ad networks to
trade digital media.
Precedent Transactions
($ in millions)
Financial Overview Project Google
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Sample Valuation
Financial Overview Project Google
Fiscal Year Ending 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 DCF Assumptions
Discount Rate 12.1%
Revenue (excl. TAC) $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9 Tax Rate 35.0%
EBIT $8,246.3 $9,888.8 $11,470.0 $13,300.2 $14,998.1 Mid-Year Conversion (Y/N)? Y
Less: Taxes $3,074.4 $3,694.7 $4,304.0 $5,010.6 $5,680.3 Terminal Multiple 14.5x
Debt-Free Earnings $5,171.9 $6,194.1 $7,166.1 $8,289.6 $9,317.8 Gordon Growth Approach (Y/N)? N
Less: Capital Expenditures ($1,984.6) ($1,871.1) ($1,657.9) ($1,865.6) ($2,082.2) Gordon Growth Rate 8.0%
Less: Working Capital Requirements ($328.6) ($515.8) ($525.0) ($577.4) ($581.3)
Add: Depreciation and Amortization $1,302.2 $1,557.4 $1,775.0 $1,973.7 $2,216.0 Terminal Multiple Increment 1.0x
Add: Stock-Based Compensation $1,073.5 $1,155.1 $1,184.4 $1,267.9 $1,326.0 Discount Rate Increment 1.0%
Total Net Investment $62.4 $325.6 $776.6 $798.6 $878.6
Terminal Value Assumptions
Net Debt-Free Cash Flows: $5,234.3 $6,519.7 $7,942.6 $9,088.2 $10,196.4 Terminal EBITDA $18,540.1
Projection Year 1.0 2.0 3.0 4.0 5.0 Terminal Multiple 14.50
Discount period 0.5 1.5 2.5 3.5 4.5 Terminal Value $268,831.6
Discount Factor @ 12.1% 0.94 0.84 0.75 0.67 0.60 Discount Period 4.50
PV of Net Debt-Free Cash Flows: $4,944.8 $5,496.5 $5,975.8 $6,102.1 $6,109.7 Discount Factor @ 0.60
PV of Terminal Value $161,084.2
Free Cash Flow Growth Rate: % of Enterprise Value
Enterprise Value $189,713.0
Sensitivity Analysis Implied Equity Value and Share Price
Enterprise Value $189,713.0
Enterprise Value 12.5x 13.5x 14.5x 15.5x 16.5x Less: Net Debt ($21,994.4)
10.1% $180,286.2 $192,310.8 $204,335.4 $216,359.9 $228,384.5
11.1% $173,589.4 $185,134.6 $196,679.7 $208,224.9 $219,770.0 Implied Equity Value $211,707.4
12.1% $167,209.2 $178,298.1 $189,386.9 $200,475.8 $211,564.7 F.D. Shares Outstanding 320.3
13.1% $161,127.8 $171,782.2 $182,436.7 $193,091.1 $203,745.6 Implied Share Price $660.9
14.1% $155,328.7 $165,569.3 $175,809.9 $186,050.6 $196,291.2
Distribution of Value
Period Cash Flow 15.1%
Terminal Cash Flow 84.9%
Implied Share price 12.5x 13.5x 14.5x 15.5x 16.5x Total 100.0%
10.1% $631.5 $669.0 $706.6 $744.1 $781.7
11.1% $610.6 $646.6 $682.7 $718.7 $754.8 Implied Analyses
12.1% $590.7 $625.3 $659.9 $694.5 $729.2 LTM EBITDA Multiple 18.1x
13.1% $571.7 $605.0 $638.2 $671.5 $704.7 NFY EBITDA Multiple 17.9x
14.1% $553.6 $585.6 $617.5 $649.5 $681.5 Implied Gordon Growth Rate 13.4%
Dis
cou
nt
Rate
D
iscou
nt
Ra
te
Exit Multiple
Exit Multiple
($ in millions, except per share data)
Discounted Cash Flow Analysis
14
Sample Valuation
($ in millions)
WACC Analysis
Source: Company filings, Yahoo! Finance and equity research.
Weighted Average Cost of Capital (WACC) = (Cost of Debt*(1- Tax Rate) * Debt to Enterprise Value) +
(Cost of Equity * Equity to Enterprise Value) + (Cost of Preferred *Preferred to Enterprise Value )
Cost of Equity = Risk Free + (Levered Beta * Equity Risk Premium)
Risk Free Rate is based on the 30-year treasury rate of 4.375%.
Equity Risk Premium (average) is sourced from equity research and press-releases.
Financial Overview Project Google
Market Debt to Preferred to Equity to
Preferred Value of Total Debt to Total Total Total
Ticker Debt Stock Equity Capitalization Equity Capitalization Capitalization Capitalization
Amazon.com, Inc. AMZN $116.0 $0.0 $52,915.0 $53,031.0 0.2% 0.2% 0.0% 99.8%
eBay Inc. EBAY $200.0 $0.0 $30,630.3 $30,830.3 0.7% 0.6% 0.0% 99.4%
Yahoo Inc. YHOO $83.6 $0.0 $22,220.8 $22,304.4 0.4% 0.4% 0.0% 99.6%
Microsoft Corp. MSFT $5,996.0 $0.0 $260,494.6 $266,490.6 2.3% 2.2% 0.0% 97.8%
Median $158.0 $0.0 $41,772.6 $41,930.6 0.5% 0.5% 0.0% 99.5%
Mean $1,598.9 $0.0 $91,565.1 $93,164.1 0.9% 0.9% 0.0% 99.1%
Google Inc. GOOG $0.0 $0.0 $170,879.4 $170,879.4 0.0% 0.0% 0.0% 100.0%
Equity
Levered Unlevered Risk Cost of Cost of Cost of
Ticker Beta Beta Premium Equity Debt Preferred WACC
Amazon.com, Inc. AMZN 1.25 1.25 7.0% 13.1% 0.0% 0.0% 13.1%
eBay Inc. EBAY 1.92 1.91 7.0% 17.8% 0.5% 0.0% 17.7%
Yahoo Inc. YHOO 0.76 0.76 7.0% 9.7% 0.0% 0.0% 9.7%
Microsoft Corp. MSFT 0.96 0.95 7.0% 11.1% 2.4% 0.0% 10.9%
Median 1.11 1.10 7.0% 12.1% 0.2% 0.0% 12.0%
Mean 1.22 1.22 7.0% 12.9% 0.7% 0.0% 12.8%
Google Inc. GOOG 1.10 1.10 7.0% 12.1% 0.0% 0.0% 12.1%
15
Sample Valuation
($ in millions)
Premiums Analysis – Technology M&A Deals Over $1 Billion with Public,
U.S.-Based Sellers Since 01/01/2007
Financial Overview Project Google
1) Source: “Microsoft to Acquire aQuantive, Inc.” (Microsoft, 05/18/2007)
2) Source: “CISCO Announces Agreement to Acquire WebEx.”(CISCO, 03/15/2007)
3) Source: “CBS to buy CNET Networks.” (05/15/2008)
4) Source : “Adobe to Acquire Omniture.” (Adobe, 10/23/2009)
5) Source: “HP to Acquire EDS for $13.9 Billion.” (HP, 05/13/2008)
6) Source: “Sun and Oracle.” (Sun, 04/20/2009)
7) Source: “Dell to Acquire Perot Systems for $3.9Billion.” (Dell, 09/21/09)
8) Source: “CISCO Announces Agreement to Acquire Starent Networks.” (CISCO,10/13/2009)
9) Source: “HP to Acquire 3Com for $2.7 Billion.” (HP, 11/11/2009)
10) Source: “IBM to Acquire SPSS Inc. to Provide Clients Predictive Analytics Capabilities.” (IBM, 07/28/2009)
(1)
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Date Equity Offer Share Price History Premium/(Discounts)
Acquirer Target Announced Value Price 1-Day 20-Day 1-Day 20-Day
Microsoft Corp. aQuantive Inc., 05/18/07 $6,376.93 $66.50 $35.87 $31.90 85.4% 108.5%
CISCO Systems, Inc. WebEX Com. Inc. 03/15/07 $3,090.52 $57.00 $25.98 $26.18 119.4% 117.7%
CBS Corp. CNET Networks 05/15/08 $1,794.35 $11.50 $7.95 $7.95 44.7% 44.7%
Adobe Systems, Inc. Omniture, Inc. 10/23/09 $1,771.04 $21.50 $21.48 $21.51 0.1% (0.05%)
Hewlett-Packard EDS 05/13/08 $13,900.00 $25.00 $24.13 $17.17 3.6% 45.6%
Oracle Corp. Sun Microsystems 04/20/09 $7,400.00 $9.50 $6.69 $7.94 42.0% 19.6%
Dell Inc. Perot Systems 09/21/09 $3,900.00 $30.00 $17.91 $17.00 67.5% 76.5%
CISCO Systems, Inc. Starent Systems 10/13/09 $2,900.00 $35.00 $34.97 $34.39 0.1% 1.8%
Hewlett-Packard 3Com 11/11/09 $2,700.00 $7.90 $5.41 $5.84 46.0% 35.3%
IBM SPSS 07/28/09 $1,200.00 $50.00 $35.09 $33.37 42.5% 49.8%
Max $66.50 $35.87 $34.39 119.4% 117.7%
75th Percentile $46.25 $32.72 $30.47 62.1% 69.8%
Median $27.50 $22.81 $19.34 43.6% 45.1%
Mean $31.39 $21.55 $20.33 45.1% 49.9%
25th Percentile $14.00 $10.44 $10.21 13.2% 23.6%
Min $7.90 $5.41 $5.84 0.1% (0.0%)
16
Sample Valuation
Financial Overview Project Google
Price
Firm Date Rating Target
Susquehanna Financial Group 10/16/2009 Positive $625.00 $22.72 - $25.69
Morgan Stanley 10/16/2009 Overweight $625.00 $20.17 - $22.87
Jefferies & Co. 10/16/2009 Buy $600.00 $23.02 - $26.54
Credit Suisse 10/16/2009 Outperform $600.00 $22.51 - $26.18
Collins Stewart 10/16/2009 Buy $635.00 $22.68 - $25.89
Median $625.00 $22.68 - $25.89
Mean $617.00 $22.22 - $25.43
Spencer Wang
Sundeep Aggarwal
Analyst
Name
Earnings Per Share
Marianne Wolk
Mary Meeker
Youssef H. Squali
Wall Street Analysts’ Price Targets
Source: Thomson Reuters One Banker and analysts‟ equity research reports on October 16, 2009. 17
Sample Valuation
Project Google
APPENDIX
18
Sample Valuation
Income Statement (Exc. TAC) - Google Inc.:
FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P
Net revenue (Exc.TAC): $7,296.1 $11,660.1 $15,856.6 $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9
Other cost of revenue: $916.2 $1,715.2 $2,682.5 $2,826.3 $2,976.0 $3,124.3 $3,258.5 $3,380.1
Research & development: $1,601.3 $2,120.0 $2,793.2 $3,071.7 $3,521.8 $3,920.0 $4,441.2 $4,942.4
Sales & marketing: $849.5 $1,461.3 $1,946.2 $2,071.5 $2,324.2 $2,692.3 $2,949.7 $3,358.1
General & sales: $751.8 $1,279.3 $1,802.6 $1,663.7 $1,850.5 $2,143.6 $2,326.2 $2,648.2
Total operating Expenses: $4,118.8 $6,575.7 $9,224.6 $9,633.2 $10,672.6 $11,880.2 $12,975.6 $14,328.9
Operating Income: $3,177.3 $5,084.4 $6,632.0 $8,246.3 $9,888.8 $11,470.0 $13,300.2 $14,998.1
4% 11% 11% 9% 10%
EBITDA: $4,207.3 $6,920.7 $9,251.7 $10,622.0 $12,601.3 $14,429.4 $16,541.8 $18,540.1
EBITDA margin: 57.7% 59.4% 58.3% 59.4% 61.3% 61.8% 63.0% 63.2%
EBITDA growth: N/A 64.5% 33.7% 14.8% 18.6% 14.5% 14.6% 12.1%
Interest & other, net: $461.0 $589.6 $316.4 $537.7 $667.4 $827.0 $1,015.9 $1,231.3
Impairment of equity investments: $0.0 $0.0 ($1,094.8) $0.0 $0.0 $0.0 $0.0 $0.0
Pre-tax income: $3,638.3 $5,674.0 $5,853.6 $8,784.0 $10,556.1 $12,297.1 $14,316.0 $16,229.3
Income tax provision $933.6 $1,470.3 $1,626.7 $3,074.4 $3,694.7 $4,304.0 $5,010.6 $5,680.3
Effective Income tax: 25.7% 25.9% 27.8% 35.0% 35.0% 35.0% 35.0% 35.0%
Net Income: $2,704.8 $4,203.7 $4,226.9 $5,709.6 $6,861.5 $7,993.1 $9,305.4 $10,549.1
Net income margin: 37.1% 36.1% 26.7% 31.9% 33.4% 34.2% 35.4% 36.0%
Net income growth: N/A 55.4% 0.6% 35.1% 20.2% 16.5% 16.4% 13.4%
Weighted average diluted shares outstanding: 309.5 316.2 317.5 317.5 317.5 317.5 317.5 317.5
Diluted EPS (GAAP): $8.74 $13.29 $13.31 $17.98 $21.61 $25.17 $29.31 $33.22
Depreciation: $494.4 $807.7 $1,212.2 $1,050.4 $1,336.5 $1,605.8 $1,844.0 $2,112.0
Amortization: $77.5 $159.9 $287.7 $251.8 $220.9 $169.2 $129.7 $104.0
Stock-based compensation: $458.1 $868.6 $1,119.8 $1,073.5 $1,155.1 $1,184.4 $1,267.9 $1,326.0
Historical Statement Projected Statements
($ in millions, except per share data)
Projected Income Statement
Appendix Project Google
1) Impairment of equity investments in AOL and Clearwire.
2) Per 2008 10K - SBC was estimated to be ~ $1.0 billion in 2009 and ~$1.4 billion thereafter. 19
(1)
(2)
Sample Valuation
Operating Expenses- Google Inc.:
FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P
Cost of revenue: $916.2 $1,715.2 $2,682.5 $2,826.3 $2,976.0 $3,124.3 $3,258.5 $3,380.1
% of total revenue 12.6% 14.7% 16.9% 15.8% 14.5% 13.4% 12.4% 11.5%
Research and development: $1,228.6 $2,120.0 $2,793.2 $3,071.7 $3,521.8 $3,920.0 $4,441.2 $4,942.4
% of total revenue 16.8% 18.2% 17.6% 17.2% 17.1% 16.8% 16.9% 16.9%
Sales and marketing: $849.5 $1,461.3 $1,946.2 $2,071.5 $2,324.2 $2,692.3 $2,949.7 $3,358.1
% of total revenue 11.6% 12.5% 12.3% 11.6% 11.3% 11.5% 11.2% 11.5%
General and administrative: $751.8 $1,279.3 $1,802.6 $1,663.7 $1,850.5 $2,143.6 $2,326.2 $2,648.2
% of total revenue 10.3% 11.0% 11.4% 9.3% 9.0% 9.2% 8.9% 9.0%
Total operating expenses: $3,746.1 $6,575.7 $9,224.6 $9,633.2 $10,672.6 $11,880.2 $12,975.6 $14,328.9
% net revenue: 51.3% 56.4% 58.2% 53.9% 51.9% 50.9% 49.4% 48.9%
Historical Statements Projected Statements
Total Net Revenue (Exc. TAC) - Google Inc.:
FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P
Search/Paid click revenue: $7,173.9 $11,396.8 $14,919.6 $16,553.3 $18,829.8 $21,275.0 $23,814.5 $26,422.4
% of advertising revenue: 99.9% 99.3% 98.2% 97.3% 96.2% 95.4% 94.5% 93.6%
Display/YouTube revenue: $10.0 $82.0 $270.0 $459.0 $734.4 $1,028.2 $1,388.0 $1,804.4
% of advertising revenue: 0.1% 0.7% 1.8% 2.7% 3.8% 4.6% 5.5% 6.4%
Total advertising revenue: $7,183.9 $11,478.8 $15,189.6 $17,012.3 $19,564.2 $22,303.1 $25,202.5 $28,226.9
% of net revenue: 98.5% 98.4% 95.8% 95.2% 95.2% 95.5% 95.9% 96.2%
Licensing & other revenue: $112.3 $181.3 $667.0 $867.1 $997.2 $1,047.1 $1,073.3 $1,100.1
% of net revenue: 1.5% 1.6% 4.2% 4.8% 4.8% 4.5% 4.1% 3.8%
Net Revenue: $7,296.1 $11,660.1 $15,856.6 $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9
Growth: n/a 59.8% 36.0% 12.8% 15.0% 13.6% 12.5% 11.6%
Historical Statements Projected Statements
Appendix Project Google
Revenue And Operating Expenses Projections
20