INFORMATION TECHNOLOGY COMPANY ANALYSIS

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INFORMATION TECHNOLOGY COMPANY ANALYSIS

• Anu Shultes
• David Ferguson

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Investment Recommendations

• Maintain current Microsoft (2.3) and IBM (1.4)
  positions
• Sell Oracle (-4.9)
• Buy Intel (4.9)

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Sector Recommendations

• Maintain Current Weighting of 9.54, which is
  4.8 under weighted compared to the SP 500
• Why? P/E, P/B, and P/S remain high compared to
  other SP 500 Sectors (as of 12/31/01)
• Projected flat to declining corporate spending in
  2003 on information technology may dampen returns

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Sector AnalysisSoftware
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Sector AnalysisSemiconductor Equipment
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Sector AnalysisCommunications Equipment
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Sector AnalysisComputers Peripherals
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Current Holdings MSFT IBM

• MSFT
• Maintaining very high margins
• Success in growing video game industry
• Legal issues are being resolved favorably
• IBM
• Reasonably priced
• Diverse product line and geographic sales
• Surpassed Accenture as 1 in Consulting revenue

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Business Analysis

• Oracle
• Software
• Segments
• License 36
• License updates 25
• Support 15
• Education 4
• Consulting 20

• Intel
• Semiconductors
• Segments
• Microcomputers
• Flash memory
• EPROMs
• Personal computer enhancement products

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Business Analysis

• Oracle
• Geographic segments
• U.S 48
• U.K 8
• Japan 7
• France 3
• Germany 4
• Canada 2
• Other 28

• Intel
• Geographic segments
• U.S 35
• Asia/Pacific 31
• Europe 25
• Japan 9

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Business Analysis

• Intel
• Value proposition
• Innovative products
• Strengths
• New wireless chip may be at the cusp of a new
  growth phase in technology
• Expect double digit growth in earnings in 2003
• Strong relationships with customers (Installed
  base of computer manufacturers)

• Oracle
• Value proposition
• Database software and services
• Strengths
• 1 market position
• New joint venture with Nokia to allow email
  access via cell phone
• Managing costs well in downturn
• Installed base of corporate customers

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Business Analysis

• Intel
• Weaknesses
• Acceptance of new chip may not occur quickly.
• Mild growth in corporate spending on IT may
  dampen future earnings
• Communication division is a drag on earnings

• Oracle
• Weaknesses
• Lost market share in relational database to MSFT
  and IBM
• No new products sales continue to drop
• Corporate spending on upgrades expected to be low

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Financial AnalysisProjected Earnings and Sales
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Financial AnalysisProjected Earnings and Sales
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Financial AnalysisProjected Earnings and Sales
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Financial AnalysisProjected Earnings and Sales
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Financial AnalysisDuPont Analytics
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Financial AnalysisDuPont Analytics
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Financial AnalysisCash Flow Analysis
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Financial AnalysisCash Flow Analysis
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Financial AnalysisHistory Future Projections

• ORCL
• Early mover in database and internet sector
• Maintains 1 market share in relational database
  space but MSFT and IBM are gaining share.
• Swims with sharks (40 market share)

• INTC
• WinTel partnerships remains dominant
• Expanding products to accommodate laptop and cell
  phone technologies
• Semiconductor sales in 01/03 were 12.2B, up 22
  for 01/02.
• Swims with tadpoles (80 market share)

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Valuation AnalysisP/B, P/CF, P/B, P/E
INTC CU 3.2
INTC CU 11.7
INTC CU 11.1
INTC CU 34.2
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Valuation AnalysisTechnical Analysis - Oracle
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Valuation AnalysisTechnical Analysis - Intel
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Valuation AnalysisValuations Relative to SP-45
INTC CU .68 FY1.98 FY2.94
INTC CU 1.44
INTC CU .57
INTC CU .74
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Valuation AnalysisValuations Relative to SP
INTC CU 1.87
INTC CU 3.27
INTC CU 1.19
INTC CU 1.21
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Valuation AnalysisWhat Time Is It?
At Oracle Its 3 oclock
At Intel Its 6 oclock
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Recommendation