Crossing the desert

November 2008

“Crossing The Desert” Semis Market Perspective

ENGLISH TECH

TOUR

Bruce B. Huber Chairman of European Technology Investment Banking

Pptname 2 01/07/98

The Global Investment Bank Of Choice For Growth Companies Publicly-held (NYSE:JEF) Over 2,300 employees in 28 offices worldwide(1) Employee ownership: Over 50%(1)



The largest independent institutional brokerage and investment banking firm



Highly respected growth equities research



Wall Street’s fastest growing equity underwriting platform



Global sector-focused banking approach, with top-ranked M&A and advisory



The leading sales and trading platform for NASDAQ, and highly ranked for growth stocks globally

Thomson Financial’s Buyout Magazine

2006 Middle Market Bank of the Year

San Francisco Silicon Valley

Boston Waltham Stamford New York Jersey City Short Hills Washington Atlanta Richmond Covington

Charlotte Chicago Nashville

Los Angeles Dallas Houston

Frankfurt London Paris Zurich Tokyo

Israel*

Shanghai

New Orleans

“The Bulge Bracket of MidMarket”

New Delhi Hong Kong*

Goldman Sachs - 2007

Cities in red indicate locations with TMT bankers, * Affiliates (1) Includes approximately 10% of retired employees still acting as consultants.

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Pptname 3 01/07/98

Semis Is Still A Massive Market Global Semis Revenues

2008 Segmentation by Application (% growth relative to 2007)

$274bn

Military / Aerospace 1%

$285bn

+7% growth

$264bn

+16% growth $238bn

Industrial 11%

$220bn

Automotive 8%

$178bn

Data Processing (PC's / Peripherals) 37%

+1% growth

Communications (Wired / Wireless) 25%

+4% growth

Consumer Electronics 18%

+3% growth 2003

2004

2005

2006

2007

2008E

 At ca. $285 billion for 2008, the semis industry continues to be a critical enabler of the IT economy  An installed base of some 3.3 billion mobile devices is more than the combined number of PC’s, credit cards, and vehicles world-wide!!!

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Pptname 4 01/07/98

However, Stresses Are Acute As The Industry Has Underperformed 5 Year Share Price Comparison 160

140

120

100 NASDAQ LTM (65%)

80 Philadelphia SOXX LTM Decline (54%) 60

40 Oct-03

Mar-04

Aug-04

Jan-05

Jun-05

Nov-05

Apr-06

Sep-06

Feb-07

Jul-07

Dec-07

May-08

Oct-08

Equity and credit market contractions impacting consumer spending suggest a pessimistic outlook

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Pptname 5 01/07/98

Growth Is Definitely Going To Be Lower, And The ‘Bright Spots’ Are Expected To Be Different Large, Mature Markets Generally Experience Lower Growth Rates

Semiconductor Segments Size Vs. Growth

Semiconductor Device Category Size Vs. Growth $250

General Purpose

$140

Data Processing (PC’s / Peripherals)

2012E Market Size

$100

$200

Communications (Wired / Wireless)

$80

Industrial $60

Consumer Electronics

$40

Military / Aerospace

Automotive

2012E Market Size

$120

ASSP ASSP

$100

Micro $50

$20

3%

6%

2007 – 2012E CAGR

9%

12%

$0 0%

2%

Opto Discrete Analog Logic

ASIC ASIC

$0 0%

ApplicationSpecific

$150

4%

6%

8%

Non-Optical Sensor 10%

12%

14%

16%

2007 – 2012E CAGR

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Pptname 6 01/07/98

Grim Realities Of The New Environment 

With valuations at a 5-year low and global capital markets in turmoil, business models need to adjust to new economic and industrial realities – Long term industry growth in mid-single digits (although selected pockets will outperform, some will shrink) – Significant margin compression in most high volume markets, especially consumer – Current valuation multiples approximately 50% of historical figures



Given the high semis end-market exposure to consumer spending, the current economic crisis will have a particularly severe impact over the next 12 – 24 months



The global IPO market is closed - and unlikely to open for the next 12-18 months (it will be extremely selective when it does open!)

Capital Preservation is Paramount!

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Pptname 7 01/07/98

With the IPO Market Closed, M&A Is The Only Path To Liquidity Semiconductor M&A - # Deals

Semiconductor M&A – Seller Distribution

(2003 – present)

(2003 – present)

33%

30%

28%

28 Deals 19 Deals 20 Deals

37%

36%

6%

11%

48%

36 Deals

6% 8%

20 Deals

10%

4 Deals

5 Deals

5 Deals 6 Deals

45 Deals

5 Deals

66%

17 Deals 43 Deals

7%

62%

57%

57%

40 Deals 5 Deals

34 Deals

34 Deals

53%

45%

25 Deals

2003

2004

2005

Private Sale

2006 Public Sale

2007 Divestiture

2008 YTD

2003

2004 Private Sale

2005

2006 Public Sale

2007

2008 YTD

Divestiture

 No surprise, M&A deal volumes are falling  While the data may not be stark, we are seeing a trend toward greater buyer focus on public (vs. private) targets

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Pptname 8 01/07/98

The M&A ‘Overhang’ - Today’s Public Market Is Cheaper Than Most VC-Backed Privates Global Semis Vendors With Enterprise Values <$250m $300m $200m

Emcore

Cirrus Logic

CSR

Imagination

Xyratex

Silicon Image

SMART

Omnivision

Mellanox

Wolfson

Intellon

Arc

Hifn

California

Dialog

AAT

Exar

Netlist

Tundra

Silicon Motion

AuthenTec

Adaptec

Ikanos

Leadis

ISS

SiRF

Zoran

Vimicro

Trident

Rackable Systems

($300m)

Actions Semi

($200m)

Micronas

($100m)

Qimonda

$0m

MEMSIC

$100m

($400m) ($500m) ($600m) ($700m) ($800m)

The Challenge With VC-Backed M&A Is That Public M&A Consolidation Must Get Done First

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Pptname 9 01/07/98

Even The Largest Caps Have Severely Reduced ‘Currency’ % 52 Week High

Equity Market Cap ($m)

Net Cash (Debt)

Enterprise Value ($m)

2008E EV/Sales

2008E P/E

Forward P/E’s 1 Year Ago

% Decrease

Intel

58%

90,908

10,152

80,756

2.0x

12.9x

22.4x

(42%)

Qualcomm

70%

65,179

11,058

54,121

4.9x

17.5x

20.6x

(15%)

Texas Instruments

55%

25,077

2,710

22,367

1.7x

11.4x

17.9x

(36%)

Broadcom

53%

9,051

2,288

6,764

1.4x

10.6x

NM

NA

AMD

26%

2,166

(3,799)

5,965

1.0x

NM

NM

NA

Linear Tech

60%

5,121

(678)

5,799

4.9x

13.4x

19.3x

(31%)

ST Micro

53%

7,118

490

6,628

0.7x

12.4x

22.6x

(45%)

Xilinx

66%

5,192

774

4,418

2.3x

12.8x

19.3x

(39%)

Infineon

25%

2,375

(593)

2,969

0.5x

NM

NM

NA

Median

1.7x

12.8x

20.0x

(36%)

Comparable data as of 30th October 2008

 Share ratings for the largest semi groups are being “hammered” by the markets  Median forward P/E’s are down 36% year-over-year 9

Pptname 10 01/07/98

There Has Been ‘Shuffling’ Of The Roster Of Active Semis Acquirers Now …

Ronda Group Xiam Tec Toy Open Interface SoftMax Firethorn TeleCIS (WiMAX)

Electro Module SEMICOA T.S.I. Microelectronics Microwave Device

AMD (Digital TV) Sunext Design Global Locate

Mobilygen Vitesse (Storage)

Octalica

Atmel (Wafer Fab)

Intel (Comm & Apps)

Agere Systems

K-Will Corporation ADI (Cellular Handset) NuCORE

Infineon (Hard Drive) Tarari SiliconStor

Primarion LSI (Mobility Products) TI (DSL Cust Premises)

Before …

RFMD (Bluetooth) nPhase Qualphone Berkana Wireless elata Limited Flarion Technologies Vesuvius

LVL7 Systems Sandburst Corporation Athena Semiconductors Siliquent Technologies Zeevo

Avago (Printer Semi) UTStarcom (Design) QLogic (HD/Tape Drive)

Metta Technology StoreAge Chelsio

Airoha Pollex Mobile

PowerDsine Adv. Power Tech

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Pptname 11 01/07/98

The Traditional Venture Model Of High Capital Commitment To SOC Companies Is Broken VC Investments in Semiconductor Companies

Top VC-Funded Business (>$100m To-Date)

16%

$ 5,000 $ 4,500

Company

Cumulative Funding

14%

Location

Major VC’s

Alien Tech

$281m

Advanced Equities, RHO Ventures, New Enterprise

Cortina / Imenstar

$220m

El Dorado, Morgenthaler, Jafco

Icera / Sirific

$200m

Benchmark, Amadeus, Atlas, 3i, Accel

Peregrine

$197m

Apax, Wasserstein, Morgenthaler, Roser

4%

Solarflare

$136m

Oak, Foundation, Anthem, Accel, Amadeus

2%

Ubicom

$136m

Mayfield, JatoTech, Investcorp, August

$ 4,000 12% $ 3,500 10%

$ 3,000

8%

$ 2,500 $ 2,000

6%

$ 1,500 $ 1,000 $ 500 $0

0% 2002

2003

2004

Global VC Funding

2005

2006

2007

2008YTD

% of Global VC Funding into Semis

 Today Analog, MEMS and RF companies require less capital and are more compelling for VCs  Low cost engineering in Asia is of critical importance

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Pptname 12 01/07/98

‘Best’ And ‘Challenging’ Exits Tell The Story Of Capital Efficiency Best Exits (2007 – 2008YTD) Announce Date

Company

May 08

Location

Challenging Exits (2007 – 2008YTD) Announce Date

Company

$278

Oct 08

Silicon Optix

$16

$110

Aug 08

Aristos

MIPS

$28

$150

Aug 08

SiRF

$48

$283

Broadcom

$62

Silicon Motion

$13

Location

Funding

Exit

IDT

$110

~$25

Adaptec

$109

$41

NetEffect

Intel

$119

$8

Apr 08

Primarion

Infineon

$120

$50

$146

Apr 08

Vativ

Entropic

$38

$7

$108

Apr 07

Teja

Arc

$34

$5

Buyer

Funding

Exit

PA Semi

Apple

$126

Dec 07

GloNav

NXP B.V.

Aug 07

ChipIdea

Jun 07

Centrality

Jun 07

Global Locate

Apr 07

FCI

Buyer

 The US-based, VC-backed semiconductor company model is severely challenged  Fewer early stage investments expected, with focus on later stage opportunities, often where recap has occurred

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Pptname 13 01/07/98

Semi Innovation Is Not Yet Over GROWTH DRIVERS

High Performance Analog • Power Management • Comms Analog • Signal Conditioning ICs

MEMS / Sensors GROWTH DRIVERS

• Home Connectivity • High Speed Video Transfers • Personal Area Networking

• 10Gb Ethernet Penetration • “Virtualization” • Data / Telcom market growth • 40Gb deployments

• Accelerometers & Gyroscopes • Biometric Touch Sensors • MEMS resonators / oscillators

Wireless Mobile GROWTH DRIVERS

Enterprise / Datacenter GROWTH DRIVERS

GROWTH DRIVERS

Consumer Connectivity

• Power Management • RF Infrastructure • WiMax • 3.5 – 4G

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Pptname 14 01/07/98

Looking Ahead… Keys To Success 

Capital conservation is paramount – Cost of capital is going up, not down – Private company M&A is reduced until public buyer currency recovers – The IPO “window” closed for near/medium term



A lean cost base may mean shifting more development to Asia or India – Buyers are concerned about headcount in high cost geographies



Raise money when you can - not necessarily when you need it!



Stay “connected” to the market – it can change quickly – Relationships with “best buyers” – Get to know good bankers!



Europe needs a new generation of public middle market companies – Jefferies will certainly be ready to support those IPOs!

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Pptname 15 01/07/98

Selected M&A Transactions May 2008

May 2008

has been acquired by

has been acquired by

January 2008

has been acquired by

August 2007

May 2007

has acquired

has been acquired by

April 2007

has been acquired by

December 2006

has been acquired by

ÂŁ27,740,000

Undisclosed

$76,000,000

$147,000,000

$115,000,000

$93,000,000

$107,500,000

Financial Advisor to the Seller

Financial Advisor to the Seller

Financial Advisor to the Seller

Financial Advisor to the Buyer

Financial Advisor to the Seller

Financial Advisor to the Seller

Financial Advisor to the Seller

July 2006

February 2006

January 2006

October 2005

July 2005 The Software Business Of

The Broadband Business Unit Of

has been acquired by

May 2005 The SPG Test And Measurement Division Of

September 2004

has been acquired by

has been acquired by

has been acquired by

has been acquired by

has been acquired by

$127,000,000

$30,000,000

$200,000,000

$ Confidential

$48,000,000

$88,000,000

$123,000,000

Financial Advisor to the Seller

Financial Advisor to the Seller

Financial Advisor to the Seller

Financial Advisor to the Seller

Financial Advisor to Seller

Financial Advisor to the Seller

Financial Advisor to the Seller

Bruce Huber

has been acquired by

Chairman European Technology Tel: +44 20 7029 8020 email: bhuber@jefferies.com

Selected IPO/Equity Transactions Pending

February 2008

December 2007

December 2007

September, 2007

March 2007

August 2007

$500,000,000

$100,000,000

$60,000,000

$51,750,000

$30,000,000

$35,000,000

$105,656,250

Initial Public Offering Co-Manager

Private Investment in Public Equity Lead Placement Agent

Initial Public Offering Co-Manager

Initial Public Offering Co-Manager

1,600,000 Share Bought Block Deal Sole Manager

Senior Secured Credit Facility Sole Placement Agent

Follow-on Offering Co-Manager

David Creamer Head of Global Semiconductor Investment Banking Tel: +1 650 576 4280 email: dcreamer@jefferies.com

Andres Pieczanski Managing Director Tel: +44 20 7029 8038 email: apieczanski@jefferies.com

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