Tech Sentiment Survey April 2016

TECH SENTIMENT SURVEY APRIL 22, 2016

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QUARTERLY TECH SECTOR SENTIMENT SURVEY – KEY FINDINGS Finding #1: #1: Management Tone Described As Neutral To Bullish; Investors A Lot More Leery − Investors largely exhibit a neutral stance toward tech as bears slowly creep in; bulls more than cut in half since June 2015

Inside The Buy Side®

− 76% looking for in line or worse than consensus results, down just slightly from 80% in December − Key performance metrics (revenue, EPS and margins) anticipated to be in line with last quarter Finding #2: Pockets Of Strength Exist But Investors Largely In A Holding Pattern − Nearly 60% describe their recent buying activity as holding or rotating within Tech − Software garners virtually no sour sentiment with 74% bullish − Analytics remains the most attractive investment theme while investors see opportunity for growth in Security, SaaS and Payment systems Finding #3: #3: Despite Growth Concerns, Tech Remains Best House On Bad Block − Expectations for IPOs muted; views split between 2H16 and a 2017 revival − Nearly 50% point to slowing growth; still, more are cautiously optimistic about 2016 performance www.corbinperception.com

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Inside The Buy Side速

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BULLS CONTINUE TO RECEDE WHILE BEARS CREEP IN What Is Your General Sentiment Towards The Tech Sector?

52% 50% 51%

48%

Inside The Buy Side®

29%

58%

35% 21%

21%

14%

21%

0% Bullish

Neutral Jun '15

Sep '15

Dec '15

Bearish Mar '16

Bullish

Neutral

Bearish

“There is potential for U.S. strength.” Sell Side | N.A.

“Nothing has really changed!”

Buy Side | N.A.

“Well positioned companies in growth areas should do well.”

“Relative winners and losers into shrinking global GDP.” Sell Side |

“There is slowing enterprise investment, cloud cannibalization.” Buy Side | N.A.

Sell Side | Europe

N.A.

“There is better consumer sentiment.” Sell Side | N.A.

“Volumes up, move toward value, margins down.” Buy Side |

“Good margins and (strong) balance sheets.” Buy Side | N.A. www.corbinperception.com

N.A.

“Focus on cost cutting versus growth, poor spending trends.”

Sell Side | N.A.

“Economies are sluggish, nothing left for central banks to do.

Election is an easy excuse.” Buy Side | N.A. Follow us @CorbinResearch

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INVESTORS REMAIN WARY OF MARKET VOLATILITY “Macro forecast was for better sentiment; I have not changed that view.”

“Valuations

Has Your Sentiment Improved From The Beginning Of 2016?

lower.” Buy Side | N.A. “Was expecting the sell off. Got it then a quick, powerful recovery.

Impressed by the resilience.” Buy Side | N.A.

Inside The Buy Side®

Buy Side | N.A.

“Still too many unknowns but I still see opportunities with selected companies.” Sell

are now

No 43% Yes 57%

Side | Europe

“Fed more supportive, lower rates fuel buybacks.” Sell Side | N.A. N.A.

“Environment still difficult.” Sell Side | Europe

How Would You Describe Management Tone?

71%

0% Bearish

www.corbinperception.com

11%

14%

Neutral to Bearish

Neutral

4% Neutral to Bullish

Bullish

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VIEWS ARE MUTED DESPITE MANAGEMENT’S CAUTIOUSLY OPTIMISTIC TONE What Are Your Expectations For 1Q16 Earnings Relative To Consensus?

50% Better Than

Inside The Buy Side®

In Line Worse Than

40% 40%

35% 20%

15%

Sep '15

Dec '15

38% 38% 24%

Mar '16

Better Than

In Line

Worse Than

“I think analysts are too bearish given volatility.” Buy Side | N.A.

“Oil prices.” Buy Side | N.A.

“There is a modest spending slowdown.” Buy Side | N.A.

“Less currency headwinds.”

Sell

“Sluggish economy but strong ad.” Buy Side | N.A.

Side | N.A.

“Steady online spending trends.” Sell Side | N.A.

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“Deteriorating macroeconomic environment.” Sell Side | Europe

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COMPANIES BECOMING MORE FOCUSED ON COST CUTTING AS REVENUE GROWTH BECOMES ELUSIVE Revenue

EPS 56%

51% 48%

Inside The Buy Side®

16%

33% 30%

22%

Improving

42%

Staying the Same

Worsening

Improving

53%

Staying the Same

40% 40% 37%

30%

33% 19%

14%

Improving

18%

Staying the Same

Worsening

Operating Margins

Free Cash Flow

44%

30%

28% 26%

Worsening Dec ‘15

40% 30%

20%

Improving

Staying the Same

Worsening

Mar ‘16

Free Cash Flow Improving Given Lower Working Capital Requirements (Not A Good Thing) www.corbinperception.com

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SENTIMENT ON SOFTWARE STEAMS ALONG WHILE OFFICE EQUIPMENT PUT-PUTS Software

Dec '15

68%

Mar '16

74%

Inside The Buy Side速

Communications Dec '15 Equipment Mar '16

Office Equipment

25%

26%

23%

29%

38%

24%

38%

24%

29%

6%

Mar '16

81%

12%

Dec '15 3%

65% 38%

5%

58%

Bullish www.corbinperception.com

15%

33%

Mar '16

Mar '16

29%

41%

Dec '15

Dec '15

38% 38%

Semiconductor Dec '15 Equipment & Testing Mar '16

Computer Hardware

4%

26%

IT Services & Dec '15 Consulting Mar '16 Semiconductors

8%

Bearish Follow us @CorbinResearch

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Inside The Buy Side®

INDUSTRY INSIGHTS Software

Communications Equipment

IT Services

Bullish

Bullish

Bullish

“Many good growth companies beaten down excessively and now trade at attractive valuations.” Buy Side | N.A

“Everybody hates it.” Buy Side |

“Projects still getting funded.” Buy

N.A.

Side | N.A

“Growth in networks.” Sell Side |

Bearish

“More IT spend allocated to software and general increase in software for everything.” Sell Side | Europe

“It gets better all the time.” Sell Side | N.A.

N.A.

Bearish

“Low investment activity.” Sell Side | Europe

Neutral

“Stocks reflect a strong spending environment which we are not in.” Buy Side | N.A. “If macro deteriorates, consultants are quick and easy to cut.” Sell Side | Europe

“Some worries short term with U.S. and China spending patterns; longer term, more benign industry structure with fewer players.” Sell Side | Europe “Lack of compelling new technology impacting customer buying/upgrade cycles.” Buy Side | N.A. www.corbinperception.com

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Inside The Buy Side®

INDUSTRY INSIGHTS Semiconductors

Semi Equipment & Testing

Computer Hardware

Bullish

Bullish

Bearish

“Healthy margins and little new capital.” Buy Side | N.A.

“Components.” Sell Side | Europe

“Capex weakness.” Sell Side | Europe

Neutral N.A.

“More IT spend being allocated to software and end demand issues.” Sell Side | Europe

“Evolution.” Sell Side | N.A.

“Turning replacement cycle.” Sell

Bearish

“Steady as she goes.” Buy Side | “They never perform well going into summer.” Buy Side | N.A. Neutral

“Mixed: Good for auto applications, more worrying for consumers.” Sell Side | Europe “Sensors, declining PC market.”

Sell Side | Europe

www.corbinperception.com

Side | Europe

Neutral

“Commoditization has occurred but largely priced in.” Buy Side | N.A.

“Price erosion.” Buy Side | N.A.

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OPINIONS DIVERGE ON MARKET-CAP THEMES; MICRO A NO-GO What Investment Theme Is Currently Most Appealing?

53% 31%

Inside The Buy Side®

9%

7%

Micro-Cap

22%

16%

Small-Cap Sep '15

SmallSmall-Cap

31%

Mid-Cap

31%

Large-Cap

Mar '16

MidMid-Cap

LargeLarge-Cap

“Ignore large funds.” Buy Side |

“Best value, lower risk than.” Sell

“Safety, low valuation.” Buy Side |

N.A.

Side | N.A.

N.A.

“Best valuations.” Sell Side | N.A.

“Interesting opportunities in some cases where potential overlooked.” Sell Side | Europe

“Dominance of Google and Facebook.” Buy Side | N.A.

“Low valuation in traditional sectors.” Sell Side | Europe

N.A.

“Can still find some value.” Sell Side | N.A.

“New markets.” Sell Side | Europe “Large caps still impacted by forex, low growth.” Sell Side | N.A.

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“Safer, more cash flow.” Buy Side | “Stable, proven business model.”

Buy Side | N.A.

“Solid financial positions should limit downside risk.” Sell Side | N.A. N.A. Follow us @CorbinResearch

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ANALYTICS ON CLOUD 9, IOT FEELING OUTTA LOVE AND SOCIAL ON THE REBOUND Analytics

Inside The Buy Side速

Cloud

Mobile

Social

Internet Of Things

Dec '15

39%

Mar '16

43%

Dec '15

22%

Mar '16

Dec '15

5%

9%

Dec '15

13%

19%

47%

11%

Dec '15

28%

22% 9%

19% 30%

Most Attractive

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5%

18% 14%

Mar '16

9%

29%

Mar '16

Mar '16

5%

Least Attractive

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TECH INVESTORS TAKING A WAIT-AND-SEE APPROACH Better Than 2015

What Are Your Expectations for 2016 Tech Performances?

“IPO recovery, fewer currency headwinds and end of election cycle attention drain.”

39% 32%

Inside The Buy Side®

29%

Better Than

Buy Side | N.A.

“Mainly cost cutting where demand soft but revenue driven otherwise. Very mixed picture, depending on which part of tech each company active in.” Sell Side | Europe

In Line

Worse Than

“Improving 2H16 results on significant product launches and buybacks.” Sell Side | N.A.

What Has Been Your Recent Activity In Tech?

33% 33% 23%

28% 26%

26% 14%

11% 2% 4%

Net Buyer

Net Seller

Holding

Dec '15 www.corbinperception.com

Rotating

Mar '16

Liquidating

In Line

“The election is a major overhang until Q4. It's an excuse for companies to be careful with budgets and spending. When there is no boogeyman, they will spend what they have left.” Buy Side | N.A. Worse Than 2015 “Macro

headwinds, more hesitant enterprise spending.” Sell Side | N.A. Follow us @CorbinResearch

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CHALLENGING MARKET FOR IPOS; GOOG & FB FAVORITES When Do You Expect The Tech IPO Market To Show Signs Of Life?

Inside The Buy Side®

46%

46%

2H16

Will Not Improve in 2016

“The window is currently closed.” Buy Side | N.A. “Only if the market stabilizes.” Buy Side | N.A. “It probably won’t improve until market behavior/volatility settle down.” Buy Side | Europe

www.corbinperception.com

Google

23%

Facebook

23%

Microsoft

8% 1H16

Which Tech Heavyweight Do You Expect To Outperform In 2016?

19%

Apple

15%

Intel

8%

Amazon

4%

Cisco

4%

Netflix

4%

IBM

0%

Twitter

0%

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DESPITE GROWTH CONCERNS, TECH REMAINS BEST HOUSE ON BAD BLOCK Where Do You See Opportunities For Growth In 2016? (unaided)

Top Concerns

35%

46% | Slowing Demand /

22%

Inside The Buy Side®

17%

17%

17%

Growth

25% | Valuations Security

SaaS

Payments

Cloud

Mobile

Final Thoughts “Generally mixed picture and selectivity is key. Some attractive pockets and laggards in those areas could well outperform. Overall, however, plenty of risks and little certainty around the world.” Sell Side | Europe

“Need to pick spots and be nimble in a volatile tape. M&A will make year if you are long the targets. Shorts, unprofitable and poorly positioned, will continue to work well.” Buy Side | N.A. “For large-cap tech firms with significant competitive advantages and real growth prospects, it seems there are some good opportunities following the early sell-off.” Sell Side | N.A. www.corbinperception.com

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TECH SENTIMENT SURVEY

ISSUE

• Every quarter, we survey institutional investors on topics pertaining to the upcoming earnings season, global economy and market drivers

Inside The Buy Side®

• We share our research broadly with executives/investor relations (IR) professionals and investors

DATE:

APRIL 22, 2016

Market Performance 1Q16

OneOne-Year1

S&P 500

0.8%

(0.4%)

S&P Technology

3.6%

7.0% 1

• Survey scope: 28 investors globally managing over $647 billion in assets

As of 3’31’16

• Survey timeframe: March 22 to April 8, 2016 Sector Focus 11%

Region

Role

25% 46% 54% 75%

89% Tech

Generalist

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N. America

Europe

Buy Side

Sell Side

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Inside The Buy Side速

ABOUT US

We are Corbin Perception, a leading investor research and investor relations advisory firm that specializes in shareholder value creation.

We leverage our broad company and industry experience, knowledge of best practices and benchmarking capabilities to provide research-driven counsel that enables our clients, publicly-traded companies across diverse industries, to positively differentiate their company in the market. We bring a unique perspective to our engagements, one that is based on a proven methodology and customized approach.

Our industry-leading research, Inside The Buy-side速, is covered globally and regularly featured on CNBC. To learn more, visit our website at CorbinPerception.com www.corbinperception.com

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