GOOG Presentation

8/9/2019 GOOG Presentation

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PRESENTATION TO INVESTORS | VALUATION ANALYSIS

Project Google

CONFIDENTIAL | 25JANUARY2010


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Table of Contents

I. INDUSTRYOVERVIEW. 3

II. COMPANY OVERVIEW 6

III. FINANCIAL OVERVIEW.. 10

IV. APPENDIX.. 18

Confidential Project Google


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Project Google

INDUSTRYOVERVIEW | INTERNET SOFTWARE & SERVICES


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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 statisticrepresents:

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 searchesconducted by people age 15 or older.

0

5,000

10,000

15,000

20,000

25,000

UnitedStates

China Japan UnitedKingdom

Germany France SouthKorea

Brazi l Canada RussianFederation

December-08

December-09

92%28%53%44%61%38%

35%

48%

13%

GlobalSear

ches(MM)

Top 10 Countries by Number of Searches Conducted22%

1) Source:comScore Reports Global Search Market Growth of 46 percent in 2009. (January 22, 2010)

2) Source:comScoreReports Global Search Market Growth of 46 percent in 2009 . (January 22, 2010)

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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%


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Project Google

COMPANYOVERVIEW | GOOGLE INC.


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Selected Company Data

Company Information

Company Name Google Inc.Ticker: GOOGFiscal Year Ending Dec-31-08Fiscal Year Ending + 1 Dec-31-09Fiscal Year Ending + 2 Dec-31-10Marginal Tax Rate 35.0%Beta 1.08

Selected Market DataStock Valuation Date Jan/25/10Share Price as of (01/25/10) $529.0F.D. Shares Outstanding 320.3Equity Value $169,435.4Net Debt ($21,994.4)Enterprise Value $147,441.0

Google NASDAQ

0 %

100 %

200 %

300 %

400 %

500 %

600 %

700 %

Google

Nasdaq

Company Overview Project Google

(1) (2)

1) Based on company filings.

2) Based on closing prices as of January 25, 2010.


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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

VolumeinThousands

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


1) Source: Yahoo! Finance.

Note: Price and volume data are based on closing prices and volumes.


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$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

12 Feb 09

GoogleExits RadioAdvertising

Business. -Reuters

26 Mar 09

Google Cut 200Jobs FromSales Force. -Reuters

03 May 09

Apple andGoogle Ties areInvestigated. -NYT

05 Aug 09

Google to acquire On2technologies.-Reuters

16 Sep 09

Google Acquires CarnegieMellon Spin-OffReCapture Inc. - Reuters

03 Apr 09

Google Could Be inTalks To BuyTwitter. - Reuters.

09 Nov 09

Google Signs AgreementTo Acquir e AdMob. -Reuters

23 Nov 09

Google To Buy DisplayAdvertising StartupTeracent. -DJ

06 Dec 09

Google Buys OnlineWord ProcessingStartup AppJet.-Reuters

13 Jan 2010

RejectingCensorship, GoogleThreatens To QuitChina. -Reuters

26 Oct 09

On2 Techn ologies Announced ProposedSettlement in Litigation. -Reuters


Google Stock Trading History (1)

1) Yahoo! Finance.

Note: Price and volume data are based on closing prices and volumes.


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Project Google

FINANCIAL OVERVIEW | GOOGLE INC.


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FinancialOverview 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 PRICETARGETS

$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

ValuationSummaryPREMIUM

TO 01/25/2010PRICE: $533.50

7.2x34.7x

7.9x50.8x

18.8x25.6x

18.4x42.7x

10.8x21.0x

20.2x21.2x

9.5x60.1x

10.8x90.0x

30.8x43.5x

30.1x75.0x

16.2x34.9x

33.4x35.3x

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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FinancialOverview Project Google

Multiples AnalysisShare

Price % of 52- Market EnterpriseCompany Name Ticker 1/11/2010 Week High Capitalization Value Cash Debt LTM FYE +1 FYE +2 LTM FYE +1 FYE +2Amazon.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 19.2xeBay 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 8.0xYahoo 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 10.0xMicrosoft 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 8.6xMaximum $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 19.2x75th 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 12.3xMedian $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 9.3xMean $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 11.5x25th 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 8.5xMinimum $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 8.0xGoogle 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 AnalysisLTM 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 +2Amazon.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 MarginEBIT Margin

($ in millions, except per share data )

Comparable Public Companies (1)

1) Based on selected comparable companies for the Internet Software & Services sector.


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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+104/29/07 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, Inc. 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, Inc. 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 39.3x75% Percentile $394.1 $98.7 $3,095.3 12.2x 8.9x 46.7x 29.3xMedian $335.5 $72.0 $1,794.3 7.2x 5.0x 29.0x 21.2xMean $304.8 $72.4 $2,521.6 8.1x 6.0x 34.2x 23.9x25th Percentile $223.5 $44.8 $1,310.5 4.6x 3.7x 23.9x 19.0xMinimum $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/EBITDATarget 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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Fiscal Year Ending 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 DCF AssumptionsDiscount 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 14.5xDebt-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 1.0xAdd: 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 $878.6Terminal Value Assumptions

Net Debt-Free Cash Flows: $5,234.3 $6,519.7 $7,942.6 $9,088.2 $10,196.4 Terminal EBITDA $18,540.1Projection Year 1.0 2.0 3.0 4.0 5.0 Terminal Multiple 14.50Discount period 0.5 1.5 2.5 3.5 4.5 Terminal Value $268,831.6Discount 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 $161,084.2Free Cash Flow Growth Rate: % of Enterprise Value

Enterprise Value $189,713.0Sensitivity Analysis Implied Equity Value and Share Price

Enterprise Value $189,713.0Enterprise 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 $228,384.511.1% $173,589.4 $185,134.6 $196,679.7 $208,224.9 $219,770.0 Implied Equity Value $211,707.412.1% $167,209.2 $178,298.1 $189,386.9 $200,475.8 $211,564.7 F.D. Shares Outstanding 320.313.1% $161,127.8 $171,782.2 $182,436.7 $193,091.1 $203,745.6 Implied Share Price $660.914.1% $155,328.7 $165,569.3 $175,809.9 $186,050.6 $196,291.2

Distribution of ValuePeriod 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 $781.711.1% $610.6 $646.6 $682.7 $718.7 $754.8 Implied Analyses12.1% $590.7 $625.3 $659.9 $694.5 $729.2 LTM EBITDA Multiple 18.1x13.1% $571.7 $605.0 $638.2 $671.5 $704.7 NFY EBITDA Multiple 17.9x14.1% $553.6 $585.6 $617.5 $649.5 $681.5 Implied Gordon Growth Rate 13.4%

D

iscount

Rate

Discount

Rate

Exit Multiple

Exit Multiple

($ in millions, except per share data)

Discounted Cash Flow Analysis


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($ 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.


Market Debt to Preferred to Equity toPreferred Value of Total Debt to Total Total Total

Ticker Debt Stock Equity Capitalization Equity Capitalization Capitalization CapitalizationAmazon.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 ofTicker 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%


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($ in millions)

Premiums AnalysisTechnology M&A Deals Over $1 Billion with Public,

U.S.-Based Sellers Since 01/01/2007


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)

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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%)


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Sample Valuation


PriceFirm Date Rating TargetSusquehanna Financial Group 10/16/2009 Positive $625.00 $22.72 - $25.69Morgan Stanley 10/16/2009 Overweight $625.00 $20.17 - $22.87Jefferies & Co. 10/16/2009 Buy $600.00 $23.02 - $26.54Credit Suisse 10/16/2009 Outperform $600.00 $22.51 - $26.18Collins Stewart 10/16/2009 Buy $635.00 $22.68 - $25.89Median $625.00 $22.68 - $25.89Mean $617.00 $22.22 - $25.43

Spencer WangSundeep Aggarwal

AnalystName Earnings Per Share

Marianne WolkMary Meeker

Youssef H. Squali

Wall Street Analysts Price Targets

Source: Thomson Reuters One Banker and analysts equity research reports on October 16, 2009.


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Sample Valuation

Project Google

APPENDIX


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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 cos t 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% 3 5.1% 20.2% 16.5% 1 6.4% 13.4%

Weighted average diluted s hares outs tanding: 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.


20/20

Sample Valuation

Operating Expenses- Google Inc.:


Cos t 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% 1 4.7% 1 6.9% 1 5.8% 1 4.5% 1 3.4% 1 2.4% 1 1.5%

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% 1 8.2% 1 7.6% 1 7.2% 1 7.1% 1 6.8% 1 6.9% 1 6.9%

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% 1 2.5% 1 2.3% 1 1.6% 1 1.3% 1 1.5% 1 1.2% 1 1.5%

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) - Googl


Search/Paid click r evenue: $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 advertis ing 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

GOOG Presentation

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