research report - october 16, 2007 rating: micros...

Please see important disclosures at the end of this report

Company Description MICROS Systems, Inc. designs, manufactures, markets, and services enterprise information solutions for the hospitality and specialty retail industries. Its enterprise solutions comprise hotel information systems, restaurant information systems, and specialty retail information systems. The hotel information systems include property based management systems, sales and catering systems, central reservation systems, customer information systems, revenue management systems, and an Internet/global distribution system based hotel reservation service called myfidelio.net., as well as installation and support services. The restaurant information systems consist of point of sale applications, hardware, and support services, as well as a suite of back office applications, including inventory, product forecasting, labor management, financial management, gift cards, and enterprise data management. The specialty retail information systems comprise retail store software automation systems and business intelligence applications for loss prevention, customer relationship management, gift cards, and audit control. The company also provides system installation, operator and manager training, on-site hardware maintenance, customized software development, application software support, credit card software support, systems configuration, network support, and professional consulting services, as well as software-hosting capabilities. In addition, it sells spare parts, printer ribbons, paper, printer cartridges, other consumable media supplies, network products, and printers through direct sales offices, dealers, and distributors, as well as telephone and POS depot. MICROS Systems operates in the United States, Europe, the Pacific Rim, and Latin America. The company was founded in 1977. It was formerly known as Picos Manufacturing, Inc. and changed its name to MICROS Systems, Inc. in 1978. MICROS Systems is headquartered in Columbia, Maryland. (Source: Yahoo!)

Key Investment Considerations

• Global Growth Cycle. Besides Micros’ vast opportunity in North America, they operate in 33 countries at the same time the emerging market economies are growing high single digits in GDP. Every time Yum Brands opens a Pizza Hut in China or a Burger King franchisee decides to go to efficient software versus human inefficiency, Micros generates revenue. There is a global growth machine and Micros is the best hospitality technology vendor to help large customers fuel their growth.

• Micros dominates an extremely fragmented industry. Oracle and SAP are busy fighting over business intelligence and middleware companies. They may actually own some good technology in this space, but customers can’t count on them to support a mission critical product 24/7 around the world. That is the unique service you get from Micros.

• Bolt-on acquisitions help further growth. Micros has done 7 accretive acquisitions in 2006 and 2007. The largest sector that was improved was retail with Red Sky IT, eOne and CommercialWare. They also purchased 3 of their dealers and distributors. Micros still has plenty of cash and is buying stock while looking for more small companies that would fit.

• Strong Management Team. This is one of the least promotional groups I have ever seen, but each senior member together at least 10 years, some for over 20. CEO Tom Giannopoulos has recruited a world class management team who is very focused and differentiated in their global expertise and experience.

Valuation We are initiating coverage of MICROS, Inc (MCRS), and have arrived at a one-year price target of $80 per share. Using industry averages, we see a 28% 3 to 5 year growth rate for Micros, a discount to the 36 multiple for fast growing application software companies. We are giving Micros a big discount versus the group on C2008 estimates despite its strong execution over many years, as well as their new initiatives, new organic and acquisition related business, and their time tested management. Using a 28 multiple, and our forecasted EPS of $2.85 for Calendar Year 2008, we are left with our price target of $80.00 per share.

1290 Reckson Plaza Uniondale, NY 11556 (800) 753-8688 Toll Free (516) 794-5520 Main (516) 794-6207 Fax

Member NASD/MSRB/SIPC

Research Report - October 16, 2007 Rating: MICROS Systems Inc. (MCRS) Buy Industry: Technology

Analyst: Alan Weinfeld (212) 675-4100 [email protected]

Price (As of Close 10/15) $63.91 Cash 329.65M Revenue Q1 07 $785,727.00Shrs Outstanding(M) 40.75M Cash per Share (MM) $8.09 Gross Profit $411,511.00Market Cap 2.61B Debt (D) 3.22M EBITDA 131.70MAvg. Volume 328,157 Equity (E) $551,133.00 Net Income 79.99M52 week High $67.36 Inst. % Ownership 97.50%52 week Low $48.10Beta 0.99

Key Data

Henley & Company LLC · 1290 Reckson Plaza · Uniondale, NY 11556 Toll Free 800-753-8688 · Phone 516-794-5520 · Fax 516-794-6207

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Basic Background MICROS provides restaurant information systems comprising of hardware and software for point-of-sale (POS) and operational applications, as well as a suite of back office applications that include inventory, labor and financial management, and other centrally hosted enterprise applications. Through its global markets subsidiary, MICROS-Fidelio International, MICROS provides enterprise-wide integrated information technologies for the hotel industry including multi-property, fully integrated hotel systems encompassing property management systems (PMS), sales and catering systems, central reservation systems, customer information systems, and revenue management systems. This global network consists of over 4,200 employees, 45 subsidiaries in major markets and 111 distributors in 45 countries. MICROS Systems, Inc. provides enterprise applications for the hospitality and retail industries worldwide. Over 220,000 MICROS systems are currently installed in table and quick service restaurants, hotels, motels, casinos, leisure and entertainment, and retail operations in more than 130 countries, and on all seven continents. In addition, MICROS provides property management systems, central reservation and customer information solutions under the brand MICROS-Fidelio for more than 20,000 hotels worldwide, as well as point-of-sale and loss prevention products through its subsidiary Datavantage for more than 50,000 specialty retail stores worldwide. The company has consistently shown the ability to grow revenue over time through solid execution, entering new segments of existing markets and making accretive acquisitions. Only once in the last ten years have they suffered negative growth year over year and this was during the tragic World Trade Center terrorist attack. In this ten year period they have achieved a compound annual growth rate of 17%.

Historical Revenue

$228.0

$335.0

$405.0

$597.2

$679.0

$785.8

$280.0

$369.0

$487.0

$372.0$332.0

$-

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

$900.0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Micros


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High Profile Customers

Restaurants Hotels Airport Food Sites Specialty Retail StoresMajor Chains Four Seasons Reagan National Airport TalbotsTGI Friday's Hyatt O'Hare International Osh Kosh B'GoshPerkins Interstate DFW BarneysWhitbread Fairmont LAX Hugo BossPizza Hut Marriott JFK StarbucksIHOP Wyndham BWI FlorsheimRuby Tuesday Hilton St. Louis International GuessBuffalo Wild Wings Societe Du Louvre Logan Limited TooBurger King The Peninsula Newark Finish Line

Kempinski The Athlete's FootSpecialized Concepts Accor Hotels Theme ParksSubway Shangri-La Hotel Seaworld ResortsPanera Bread Le Meridien Busch GardensAtlanta Bread Starwood Six Flags GreenbrierBen & Jerry's Lake Las Vegas ResortKrispy Kreme InterContinental Hotels Boca Raton ResortFriendly's Indigo Sports Arenas PGA National Resort

Staybridge Suites Lincoln Financial Field K Club IrelandFamily Owned Holiday Inn Turner Field Sea Pines IrelandThe Palm Holiday Inn Express Wembley Stadium Poseidon Hotel ResortSmith & Wollensky Crowne Plaza Citizens Bank Park Grand WaileaRuth's Steak House Reliant Stadium Kiawah Island ResortB.R. Guest Casinos Petco ParkLegal Seafood Bellagio Stadium AustraliaCharile Trotter's MGM Grand Camden Yards

Treasure Island Safeco FieldFood & Fun Concepts New York New York Fairmont ParksESPNZone Mirage TD BanknorthDave & Buster's Beau Rivage Emirates StadiumCracker Barrel Wynn CasinoJiilian's FoxwoodsHard Rock Café Mohegan SunAMF Bowling Harrah's CasinoChevy's Boyd GamingBusch Gardens Atlantis ResortSix Flags Hard RockSea World

Source: Company Data


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Over the same time period, the company has maintained sustainable and repeatable profits. The chart below shows the pretax profit over the last ten years. The company has shown an estimated 29% compound annual growth rate over the last five years.

Historical Pretax Income

$36.3

$4.0

$18.7

$38.3

$56.8

$78.8

$124.5

$48.6

$27.8

$109.3

$29.5

$-

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Micros

The profits have been maintainable due to management's superior execution of maintaining gross margins around 53%. This, in turn, helped the cash position grow quarter over quarter for the last eight quarters. We also believe that there is room for the margins to grow as more of MICROS' business becomes software related.

Sept-06 Dec-06 Mar-07 Jun-07 Sept-07 Dec-07 Mar-08 Jun-08

CASH 141.5$ 167.6$ 183.0$ 237.2$ 236.2$ 285.3$ 301.1$ 242.7$

DSO'S 79 71 84 63 74 70 81 73

DEBT 2.2$ 2.1$ 2.4$ 2.6$ 4.5$ 4.0$ 3.7$ 3.2$

GM 51.4% 50.1% 52.6% 49.9% 51.0% 52.1% 52.4% 53.7%Source: Company data


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Still Plenty of Market Opportunity Left Even though MICROS has an installed base of 200,000 units in the restaurant industry, out of the approximately 1.5 million restaurants worldwide, there is still room to grow. As the graph on below shows, only 10% to 40% of the independent restaurants have an advanced information technology infrastructure in place. MICROS sells to restaurateurs as small as $450,000 in revenue a year, with most of its customers having revenue in the range of $1.5 million to $3 million. MICROS' software helps the restaurant control operations by monitoring and forecasting labor and inventory costs, and improving their customer's experiences.

Global Restaurant Market Global Restaurant Market –– 3.0M+ Units3.0M+ Units

ChainsChains(70 to 95% Served)(70 to 95% Served)

IndependentsIndependents(25 to 50% Served)(25 to 50% Served)

2.5M+ Units2.5M+ Units

500K Units500K Units

2007 Served Market 2007 Served Market -- $1.2B $1.2B 2010 Served Market 2010 Served Market -- $1.7B$1.7B

Source: Micros The Global Hotel Market is another opportunity for MICROS to grow. It currently has 20,000 units installed, with an over 20% market share in 2006. We expect the company to increase that market share to the mid 20s in a market that will grow dramatically to $1.7 billion by 2010. Opera, the company's core product solution for the hotel industry has matured well over the last couple of years and has accounted for 70% of the software growth over the past year. Its flexible architecture allows for the customer to run in it on thick or thin client terminals. Its tight integration and compatibility with in house systems differentiates itself from the competition. The rollout of the complete enterprise solution can take up to 5 years, with the life cycle of the product approximately 10 years. Additionally, 100% of the hotel clients sign up for maintenance which includes 24/7 support.

Global Hotel Market Global Hotel Market –– 400,000 Hotels400,000 Hotels

IndependentsIndependents(20 to 30% Served)(20 to 30% Served)

260,000260,000

30,00030,000

Full ServiceFull Service(100% Served)(100% Served)

Limited ServiceLimited Service(50 (50 -- 60% Served)60% Served)

50,00050,000

60,00060,000

2007 Served Market 2007 Served Market -- $1.0B $1.0B 2010 Served Market 2010 Served Market -- $1.5B$1.5B

EconomyEconomy(30 to 40% Served)(30 to 40% Served)

Source: Micros


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OPERA/POS Resort CustomersOPERA/POS Resort Customers

Grand WaileaGrand Wailea Greenbrier Greenbrier Kiawah Island ResortKiawah Island Resort

Lake Las Vegas ResortLake Las Vegas Resort Sea Pines ResortsSea Pines Resorts

K Club IrelandK Club IrelandPGA National ResortPGA National ResortBoca Raton ResortBoca Raton Resort

Poseidon Hotel ResortPoseidon Hotel Resort

Source: Micros

Micros entered the retail business earlier this decade with acquisitions of Datavantage, CommercialWare and then eOne Group. Micros retail product provides best in class retail solutions worldwide, enabling retailers and direct marketers to deliver an exceptional customer experience. From any transaction point, merchants can easily provide superior customer service while optimizing operational efficiency across all channels. Working with over 450 brands, and leveraging open standards and Java powered technology, Datavantage/CommercialWare retailers can employ cutting-edge analytics, reduce shrink, eliminate bottlenecks, manage data, and maximize customer value. This is obviously a big opportunity as this chart shows.

MICROS Cruise Ship and Theme Park CustomersMICROS Cruise Ship and Theme Park Customers

American WestAmerican WestCruiseWestCruiseWest

Holland AmericaHolland America Radisson Seven SeasRadisson Seven SeasBusch GardensBusch Gardens

Six FlagsSix Flags

Sea WorldSea World

Princess CruisesPrincess Cruises

Royal CaribbeanRoyal Caribbean


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North American Retail MarketNorth American Retail Market560,000+ Stores560,000+ Stores

DiscountDiscount

2007 Served Market 2007 Served Market -- $1.0B+ $1.0B+

208,000Department 140,000

Apparel

85,000

Home Centers

Drugs HBA

75,00052,000

Source: Micros

Competitors

To look at the competitors of MICROS, we break them down by vertical because no one competitor competes with them in all three of its main verticals. In restaurants, the competitors are IBM and NCR mostly on a hardware basis and also Radiant and Par Technologies, with their products. MICROS mostly replaces legacy IBM hardware in restaurants with their POS system. In the low end of hotel management, MICROS competes most often with Japanese vendors like Panasonic and Sharp, who offer primarily cash registers only. In the high-end hotels, internal solutions that are usually five to 10 years old are its biggest competition. In retail, the company competes with Oracle (through its acquisition of Retek and 360 Commerce), JDA Systems, SAP (through its acquisition of Triversity), and other small players. MICROS has a double digit market share in retail, which is higher than any of their four most recognizable competitors.

Restaurants Hotel RetailIBM Internal Solutions OracleNCR Par Technologies JDADell Panasonic SAPWincor Nixdorf SharpRadiant


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Great Product OfferingsGreat Product Offerings

TSR/QSRTSR/QSR L&EL&E HotelsHotels

PMS VOSCRS MFFS&C SPASFA KioskRMS WEB

Travel

RetailRetail

Retail

Inka

Products 9700 Hospitality Management System (HMS) Customer Type: Food & Fun Concepts, Hotels, Casinos, Theme Parks, and Sports Arenas The 9700 HMS is the company’s newest point-of-sale system for the large enterprise, designed to integrate all functions of both front-end and back-office restaurant service, retail service, and more. The MICROS 9700 HMS utilizes the industry’s most advanced POS technology to deliver maximum flexibility and scalability. The system has been built as native Microsoft Windows© NT application to leverage the expanded power and built-in security of this world-proven operating system. The 9700 HMS can produce up-to-the minute customized reports in real-time, and allows multiple users to operate other software programs while the system is in use. The system can also automate specific utilities, so reports and other functions can run unattended at the same time every day. These features provide outstanding savings of time and effort for restaurant management personnel. The MICROS 9700 HMS interfaces to virtually any system or software, so users can easily integrate POS with PMS, credit authorization, and back-office software. The system employs Structured Query Language (SQL), an industry-standard method for accessing database information, so data can be stored with most software packages. RES 4.0 Customer Type: Food & Fun Concepts, Restaurants, Hotels, MICROS RES 4.0 offers fully integrated POS tools that work for the back office, restaurant operations, and guest services. It provides end-to-end communication throughout company operations to increase efficiency, speed service, security, data integrity, and easy software deployment. MICROS e7 Customer Type: Restaurants (Specialized Concepts, Major Chains, Family Owned) MICROS e7 Series Point of Sale (POS) system combines the reputation and reliability of MICROS hospitality technology with a price suitable for table service and quick service restaurants, delis, sandwich shops, nightclub/bar establishments, and more. MICROS e7 combines an all-in-one MICROS Workstation 4 (WS4) with a powerful embedded software application based on the Microsoft Windows© CE .NET operating system.


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Simphony™ Customer Type: Food & Fun Concepts, Hotels, Casinos, Theme Parks, and Sports Arenas Simphony™ is MICROS’ enterprise, service-oriented architecture (SOA) point-of-sale (POS) hospitality product. SOA allows organizations to deploy the system using a design that allows for flexibility, resiliency and streamlines integration of applications. Simphony™ is designed for deployment into diverse environments to deliver complex, mission-critical functions- even through an upstream failure. SOA also allows for the deployment of local services such as property management and credit card interfaces, reporting, and the paperless kitchen display system at the individual property or revenue center to ensure continuous system operation. The Enterprise Management Console in Simphony™ allows for the management of the entire system from within a single application. Users are able to create and define the parameters of the enterprise, properties, and revenue centers from any PC that has access to its central server. In addition to this, Simphony™ also provides sales and cost reporting capabilities, mymicros.net solution, and interfaces to third-party peripheral equipment and software. JTECH Customer Type: Restaurants JTECH is a hospitality wireless communications system that is the leading supplier of solutions such as silent server paging, guest paging, and manager/staff paging. This system streamlines business communications within the restaurant, club, hotel, or other hospitality environment. With three main areas, JTECH’s ServAlert© allows chefs to page servers when orders are ready, GuestAlert© manages customer flow in full service and fast casual dining environments, and HostAlert© coordinates various aspects of restaurant operations to maximize guest flow. mymicros.net Customer Type: Restaurants (Specialized Concepts, Major Chains, Family Owned) mymicros.net is a content rich Internet portal for the restaurant industry that includes access to hosted applications for point-of-sale, back office, data warehousing, business intelligence and other business applications and content, creating the next-generation model of restaurant enterprise systems and extending the capability for existing MICROS customers. Features include:

• EIP- a powerful data warehouse controlled by a single browser. • iCare - helps setup and manage gift cards and customer loyalty programs. • myinventory - an inventory application to be used at single properties or multiple outlets. • EMS- Automates all store data uploads to the point-of-sale for on the fly changes to menu items, prices, discounts,

taxes and other POS-specific data. • XBR Loss Prevention- allows operations to monitor and report problematic POS entries immediately.

Tangent POS Customer Type: Food & Fun Concepts and Sports Arenas TangentPOS is a leader in even point-of-sale and accounting systems for food service and retail operations at sports and entertainment facilities. This product delivers hardware and software designed to maximize profitability at concessions, premium seats, bars and restaurants, and venting. TangentPOS comes in a number of combinable models.

• AllStar Model- Designed for facilities of any size, AllStar optimized performance and profitability, building loyalty and reward programs, and personalizing fan participation.

• Mobile- the TangentPOS Mobile POS uses wireless technology to give wait staff the capability of performing all order functions from where they are standing.

• Skybox- TangentPOS Skybox allows orders to be placed conveniently and efficiently, the kitchen has timely and accurate information for se in preparing and delivering orders, and guest checks are ready for presentation before the close of the event.

• Fine Dining- Includes efficient tools that come equip with high caliber management functions. • Retail- TangentPOS Retail has the technology to move high dollar items from the stores to the portables and

temporary stands without losing accountability or functionality.


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OPERA Enterprise Solution (OES) Customer Type: Hotels and Casinos The OPERA Enterprise Solution is a fully integrated suite of products consisting of modules that can be easily added or expanded allowing effective and easy deployment from small operations to global, multi-branded hotel chain environments. OES can be deployed in any size environment, from a single property with just Front Office to a large, full service hotel with Sales & Marketing, Catering, Revenue Management, Quality Management, Back Office, and Materials Management. In addition, the OPERA Enterprise Solution offers products for a hotel chain’s corporate office, including our Central Reservations Systems for both centralized guestroom and function space sales, and Enterprise Information System, the Customer Relationship Management (CRM) package specifically designed for the hotel industry. OPERA Property Management System (PMS) Customer Type: Hotels MICROS Property Management System (PMS) brings operation to high levels of productivity while cutting costs and raising profitability for hotels and hotel chains of any varying size. Configured for each individual customer, the customization feature allows customers to chose been handling reservations, checking guests in and out, assigning rooms and managing room inventory, accommodating in-house guest needs, and handling accounting and billing. OPERA PMS is fully integrated with OPERA Sales and Catering, OPERA Gaming and Comp Accounting, OPERA Vacation Ownership System, OPERA Quality Management System, and the OPERA central systems- ORS, the OPERA Reservation System; and OCIS, the OPERA Customer Information System. Red Sky IT A principal IT application software company out of the UK, Red Sky IT is a leader in all of its sectors. Red Sky IT provides focused on-demand solutions designed to meet market-specific challenges including financial and operational management software for construction, contracting, and professional services, as well as management solutions for the hospitality industry, Red Sky IT covers front and back office, central reservations, POS, conference, and banqueting and online reservation systems. Datavantage/CommercialWare Another leading company, Datavantage and CommercialWare are developers of award-winning software solutions for retailers and direct marketers. CommercialWare offers cross-channel functionality that optimizes transactions from all customer touch points. Offered as a fully integrated suite or as an individual product, the CommercialWare suite includes cross-channel infrastructures linking transaction lifecycles through POS, back-office, order management, fulfillment, customer service, and collaboration and analytics applications. Datavantage takes point of service technologies further with Store21, which features new Chatterbox—the state-of-the-art connectivity retail store management package that delivers new communication features to every point of your enterprise. Similarly, Tradewind provides business intelligence technology to manage higher volume with increased efficiencies and reduced costs. And finally, the Datavantage X-Store allows the building of custom implementations of business logic and integration into applications without additional code. This allows customers to seamlessly stay current with new releases.

Other: MICROS also covers many other products and solutions. Their wide range of Hardware Solutions includes point-of-sale peripherals to wireless workstations. MICROS was also announced in March 2007, that Visa U.S.A. has approved a number of products with its CISP (Card Information Security Program) Payment Application Best Practices validation, which assists software vendors in creating secure payment applications that comply with Visa’s CISP program. Lastly, MICROS-Retail is the leading provider of comprehensive, best in class solutions specifically created to serve the needs of the retail market. Enabling retailers to deliver on the customer experience while optimizing operational efficiency across all channels, MICROS-Retail offers a full suite of solutions in a choice of deployment options.


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Valuation We are initiating coverage of Micros, Inc (MCRS), and have arrived at a one-year price target of $80 per share. Using industry averages, we see a 28% 3 to 5 year growth rate for Micros, a discount to the 36 multiple for fast growing application software companies. We are giving Micros a big discount versus the group on C2008 estimates despite its strong execution over many years, as well as their new initiatives, new organic and acquisition related business, and their time tested management. Using a 28 multiple, and our forecasted EPS of $2.85 for Calendar Year 2008, we are left with our price target of $80.00 per share.

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19.09

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of 16

Henley and CompanyMicros Systems (MCRS)Quarterly Income Statement(millions of dollars, except per share items; fiscal year ends June)

Sept-05 Dec-05 Mar-06 June-06 Sept-06 Dec-06 Mar-07 June-07 Sept-E Dec-E Mar-E June-E Sept-E Dec-E Mar-E June-E 2006 2007 2008E 2009E 2005 2006 2007 2008E

RevenueHardware 44.1 52.4 56.1 65.7 54.1 55.5 58.5 65.7 57.4 62.8 65.7 75.7 64.3 67.7 69.7 79.6 218.3 233.8 261.6 281.4 206.4 231.4 244.4 273.4 Software 27.9 28.4 28.8 38.3 27.8 32.8 34.0 38.3 35.5 38.8 41.0 46.5 40.9 46.1 50.4 60.3 123.3 132.9 161.8 197.6 116.2 127.7 146.6 174.5 Service 80.1 83.2 75.7 98.5 91.8 101.7 108.0 117.6 110.0 118.8 123.8 136.1 122.0 135.2 138.2 157.1 337.4 419.1 488.7 552.5 318.8 367.7 454.4 517.2 Total Revenue 152.0 164.0 160.6 202.4 173.7 190.0 200.5 221.6 202.9 220.4 230.6 258.3 227.2 249.1 258.2 297.0 679.0 785.8 912.1 1,031.5 641.3 726.7 845.4 965.1

Cost of RevenueHardware 29.6 35.6 38.2 41.1 34.0 36.3 37.7 41.1 37.7 40.8 42.1 47.4 42.4 44.4 45.0 50.1 144.5 149.1 167.9 181.9 136.9 149.6 157.3 176.2 Software 5.8 6.6 6.1 7.9 7.4 6.6 7.6 7.9 8.3 8.5 8.6 8.8 9.2 9.2 10.3 11.5 26.4 29.5 34.3 40.2 24.0 28.0 32.3 35.9 Service 38.5 39.7 31.8 52.3 43.7 48.1 50.2 53.6 52.2 55.8 58.2 62.1 57.5 63.3 65.1 72.3 162.3 195.6 228.3 258.1 154.7 175.9 211.9 241.0 Total Cost of Revenue 73.8 81.9 76.1 101.3 85.1 91.0 95.5 102.6 98.2 105.2 108.9 118.3 109.1 116.9 120.4 133.9 333.2 374.2 430.6 480.2 315.6 353.6 401.5 414.9

Gross ProfitHardware 14.5 16.9 17.9 24.6 20.1 19.2 20.8 24.6 19.8 22.0 23.7 28.3 21.9 23.4 24.8 29.4 73.8 84.7 93.7 99.4 69.5 81.7 87.1 97.2

Margin 33% 32% 32% 37% 37% 35% 36% 37% 34% 35% 36% 37% 34% 35% 36% 37% 34% 36% 36% 35% 34% 35% 36% 36%Software 22.1 21.8 22.7 30.3 20.4 26.2 26.4 30.5 27.2 30.3 32.4 37.7 31.7 36.9 40.0 48.8 96.9 103.4 127.5 157.4 92.2 99.6 114.3 138.6

Margin 79% 77% 79% 79% 73% 80% 78% 80% 77% 78% 79% 81% 78% 80% 80% 81% 79% 78% 79% 80% 79% 78% 78% 79%Service 41.6 43.4 43.9 46.2 48.1 53.6 57.8 64.0 57.7 63.0 65.6 74.0 64.5 71.9 73.1 84.8 175.1 223.5 260.4 294.4 164.1 191.8 242.5 276.2

Margin 52% 52% 58% 47% 52% 53% 54% 54% 53% 53% 53% 54% 53% 53% 53% 54% 52% 53% 53% 53% 51% 52% 53% 53%Total Gross Profit 78.2 82.1 84.5 101.1 88.6 99.0 105.0 119.1 104.6 115.2 121.7 140.0 118.1 132.2 137.9 163.1 345.8 411.6 481.5 551.3 325.8 373.1 443.9 512.0

Margin 51% 50% 53% 50% 51% 52% 52% 54% 52% 52% 53% 54% 52% 53% 53% 55% 51% 52% 53% 53% 51% 51% 53% 53%

S,G, & A 49.4 50.3 49.5 56.0 55.6 59.9 62.3 63.3 64.9 69.4 72.2 76.2 72.7 77.0 79.0 90.0 205.2 241.1 282.7 318.7 199.2 221.0 260.0 298.0 R&D 6.3 6.5 6.6 7.5 7.0 7.8 8.8 9.7 8.8 9.3 10.1 11.4 10.2 11.5 11.6 14.0 26.9 33.3 39.7 47.3 26.6 28.9 36.6 43.2

EBITDA 22.5 25.3 28.4 37.6 26.0 31.3 33.9 46.0 30.9 36.4 39.4 52.4 35.2 43.8 47.2 59.2 113.7 137.3 159.2 185.3 100.0 123.3 147.3 170.8 Margin 15% 15% 18% 19% 15% 16% 17% 21% 15% 17% 17% 20% 15% 18% 18% 20% 17% 17% 17% 18% 16% 17% 17% 18%

Total Depreciation and Amorti 1.1 0.7 1.1 1.5 2.8 3.3 3.0 3.6 3.1 3.3 3.6 4.0 4.0 4.3 4.7 5.0 4.4 12.7 14.0 17.9 7.0 8.8 13.0 15.9 Operating Income 23.6 26.0 29.5 39.1 23.2 28.0 31.0 42.4 27.8 33.1 35.8 48.4 31.2 39.5 42.6 54.2 109.3 124.5 145.1 167.4 93.0 114.5 134.3 154.9

Margin 16% 16% 18% 19% 13% 15% 15% 19% 14% 15% 16% 19% 14% 16% 16% 18% 16% 16% 16% 16% 15% 16% 16% 16%

Interest and Other Expense (I (0.4) (0.8) 0.1 (0.4) 2.2 2.4 2.7 3.7 3.7 4.2 4.7 5.2 4.3 4.7 5.2 5.6 (1.4) 11.1 17.8 19.8 (2.1) 4.4 14.3 18.9 Pretax Income 23.2 25.2 29.6 38.7 25.4 30.4 33.7 46.1 31.5 37.3 40.5 53.6 35.6 44.2 47.8 59.8 107.9 135.6 162.9 187.3 91.0 118.9 148.6 173.9

Income Tax Provision 7.3 8.5 9.0 12.4 8.2 9.6 11.0 14.8 10.2 12.1 13.1 17.3 11.5 14.3 15.4 19.3 37.2 43.6 52.6 60.5 31.3 39.3 48.0 56.2 Minority Interest and Equity in 0.1 0.3 (0.2) (0.2) (0.1) (0.4) (0.3) (0.1) (0.4) (0.4) (0.4) (0.4) (0.4) (0.4) (0.4) (0.4) 0.0 (0.9) (1.4) (1.4) 0.6 (0.8) (1.1) (1.4)

Net Income exc Nonrecurrin 15.8 16.4 20.8 26.5 17.1 20.4 22.3 31.3 21.7 25.6 27.8 36.7 24.4 30.2 32.7 40.8 70.7 91.1 108.9 128.2 59.1 78.8 101.7 119.1 Margin 10% 10% 13% 13% 10% 11% 11% 14% 11% 12% 12% 14% 11% 12% 13% 14% 10% 12% 12% 12% 9% 11% 12% 12%

Nonrecurring Items - - - - - - - - - - - - - - - - - - - - - - - -

GAAP Net Income 15.8 16.4 20.8 26.5 17.1 20.4 22.3 31.3 21.7 25.6 27.8 36.7 24.4 30.2 32.7 40.8 70.7 91.1 108.9 128.2 59.1 78.8 101.7 119.1 Margin 10% 10% 13% 13% 10% 11% 11% 14% 11% 12% 12% 14% 11% 12% 13% 14% 10% 12% 12% 12% 9% 11% 12% 12%

EPS exc Nonrecurring Items 0.39 0.40 0.51 0.65 0.42 0.49 0.54 0.75 0.52 0.61 0.66 0.88 0.58 0.73 0.78 0.98 1.74 2.21 2.68 3.08 1.46 1.93 2.44 2.85 Fully Diluted Shares 40.6 40.8 40.7 40.6 40.7 41.2 41.7 41.6 41.6 41.7 41.8 41.9 41.8 41.7 41.7 41.6 40.7 41.3 41.7 41.7 40.5 40.8 41.6 41.8

GAAP EPS 0.39 0.40 0.51 0.65 0.42 0.49 0.54 0.75 0.52 0.61 0.66 0.88 0.58 0.73 0.78 0.98 1.74 2.21 2.61 3.07 1.46 1.93 2.44 2.85

As a % of RevenueHardware 29.0% 32.0% 34.9% 32.5% 31.1% 29.2% 29.2% 29.6% 28.3% 28.5% 28.5% 29.3% 28.3% 27.2% 27.0% 26.8% 32.1% 29.8% 28.7% 27.3% 32.2% 31.8% 28.9% 28.3%Software 18.3% 17.3% 17.9% 18.9% 16.0% 17.3% 17.0% 17.3% 17.5% 17.6% 17.8% 18.0% 18.0% 18.5% 19.5% 20.3% 18.2% 16.9% 17.7% 19.2% 18.1% 17.6% 17.3% 18.1%Service 52.7% 50.7% 47.1% 48.6% 52.8% 53.5% 53.9% 53.1% 54.2% 53.9% 53.7% 52.7% 53.7% 54.3% 53.5% 52.9% 49.7% 53.3% 53.6% 53.6% 49.7% 50.6% 53.7% 53.6%S,G, & A 32.5% 30.7% 30.8% 27.7% 32.0% 31.5% 31.1% 28.6% 32.0% 31.5% 31.3% 29.5% 32.0% 30.9% 30.6% 30.3% 30.2% 30.7% 31.0% 30.9% 31.1% 30.4% 30.8% 30.9%R&D 4.2% 4.0% 4.1% 3.7% 4.0% 4.1% 4.4% 4.4% 4.3% 4.2% 4.4% 4.4% 4.5% 4.6% 4.5% 4.7% 4.0% 4.2% 4.3% 4.6% 4.1% 4.0% 4.3% 4.5%Operating Margin 15.5% 15.8% 18.4% 19.3% 13.3% 14.7% 15.4% 19.1% 13.7% 15.0% 15.5% 18.8% 13.7% 15.8% 16.5% 18.2% 16.1% 15.8% 15.9% 16.2% 14.5% 15.8% 15.9% 16.1%Tax Rate 31.5% 33.8% 30.4% 32.0% 32.4% 31.6% 32.7% 32.0% 32.3% 32.3% 32.3% 32.3% 32.3% 32.3% 32.3% 32.3% 34.5% 32.2% 32.3% 32.3% 34.4% 33.0% 32.3% 32.3%Net Margin exc Nonrecurring 10.4% 10.0% 12.9% 13.1% 9.8% 10.7% 11.1% 14.1% 10.7% 11.6% 12.0% 14.2% 10.7% 12.1% 12.7% 13.7% 10.4% 11.6% 11.9% 12.4% 9.2% 10.8% 12.0% 12.3%

YOY ChangeHardware 12.1% 23.1% 12.5% 9.5% 22.8% 5.8% 4.3% 0.0% 6.1% 13.2% 12.3% 15.2% 12.0% 18.0% 11.0% 21.1% 13.8% 7.1% 11.9% 7.6% 24.8% 12.1% 5.6% 11.9%Software 21.9% 20.8% 0.1% 22.7% -0.3% 15.6% 18.1% 0.1% 27.7% 18.3% 20.7% 21.4% 15.2% 29.8% 29.8% 46.9% 16.0% 7.8% 21.8% 22.1% 26.2% 9.9% 14.8% 19.0%Service 18.1% 9.7% 1.3% 21.8% 14.6% 22.3% 42.7% 19.5% 19.8% 16.8% 14.6% 15.7% 11.0% 23.0% 16.3% 26.9% 12.8% 24.2% 16.6% 13.1% 14.6% 15.3% 23.6% 13.8%Total Revenue 17.0% 14.6% 14.6% 6.7% 15.2% 14.8% 14.7% 16.4% 16.8% 16.0% 15.0% 16.5% 12.0% 13.0% 12.0% 15.0% 13.7% 15.7% 16.1% 13.1% 19.7% 13.3% 16.3% 14.2%S,G, & A 20.2% 12.3% 2.0% 9.8% 12.6% 19.0% 25.9% 13.0% 16.8% 16.0% 15.8% 20.4% 12.0% 18.5% 13.8% 24.7% 10.7% 17.5% 17.3% 12.7% 18.9% 10.9% 17.7% 14.6%R&D -5.5% -7.1% -8.3% 14.7% 10.4% 20.0% 32.7% 29.6% 25.8% 19.8% 15.8% 16.9% 16.1% 30.1% 24.4% 37.6% -1.9% 23.5% 19.2% 19.2% -3.7% 8.7% 26.8% 17.9%Operating Income 57.6% 55.5% 52.3% 40.9% -1.6% 7.6% 5.0% 8.6% 19.8% 18.5% 15.6% 14.2% 12.4% 42.1% 28.5% 51.4% 38.8% 13.9% 16.5% 15.4% 38.8% 23.1% 17.3% 15.4%Net Income exc Nonrecurring 63.9% 40.0% 46.5% 46.7% 7.9% 24.4% 7.6% 18.2% 26.8% 25.7% 24.3% 17.1% 12.8% 39.7% 27.6% 47.0% 31.9% 28.9% 19.6% 17.7% 43.2% 33.5% 29.0% 17.1%EPS exc Nonrecurring Items 56.0% 35.9% 44.0% 46.4% 7.4% 23.2% 5.2% 15.4% 24.3% 24.3% 23.9% 16.4% 12.1% 39.2% 27.6% 47.7% 28.7% 27.0% 21.3% 14.9% 37.7% 32.4% 26.6% 16.6%

Sequential ChangeHardware -26.6% 19.0% 6.9% 17.1% -17.6% 2.6% 5.4% 12.3% -12.6% 9.4% 14.5% 15.1% -15.0% 5.3% 8.4% 14.2%Software -10.6% 1.8% 1.4% 33.0% -27.4% 18.0% 3.7% 12.6% -7.3% 9.3% 15.6% 13.3% -12.0% 12.6% 23.1% 19.7%Service -1.0% 3.9% -9.0% 30.1% -6.8% 10.8% 6.2% 8.9% -6.5% 8.0% 12.6% 9.9% -10.3% 10.8% 13.2% 13.7%Total Revenue -11.6% 7.9% -2.1% 26.1% -14.2% 9.4% 5.5% 10.5% -8.4% 8.6% 13.7% 12.0% -12.0% 9.6% 13.7% 15.0%S,G, & A -3.2% 1.9% -1.6% 13.1% -0.7% 7.7% 4.1% 1.6% 2.6% 6.9% 11.2% 5.6% -4.6% 5.8% 8.7% 13.9%R&D -3.0% 2.5% 1.5% 13.6% -6.7% 11.4% 12.3% 10.9% -9.4% 6.1% 15.2% 12.0% -10.0% 12.0% 13.7% 20.1%Operating Income -15.1% 10.2% 13.5% 32.5% -40.7% 20.6% 10.8% 37.0% -34.5% 19.3% 28.9% 35.4% -35.5% 26.4% 36.4% 27.2%Net Income exc Nonrecurring -12.4% 3.5% 26.7% 27.7% -35.5% 19.3% 9.6% 40.2% -30.8% 18.3% 28.2% 32.1% -33.4% 23.8% 33.9% 24.8%EPS exc Nonrecurring Items -12.5% 2.8% 27.0% 28.1% -35.8% 17.9% 8.4% 40.5% -30.8% 17.9% 27.4% 31.9% -33.3% 24.1% 34.2% 25.1%

Source: Company data & Henley and company estimates

F2008-E Fiscal Years Calendar YearsF2009-EF2006 F2007


of 16

Henley and CompanyMicros Systems (MCRS)Quarterly Balance Sheet(millions of dollars, except per share items; fiscal year ends June)

F2004 F2005Sept-03 Dec-03 Mar-04 June-04 Sept-04 Dec-04 Mar-05 June-05 Sept-05 Dec-05 Mar-06 Jun-06 Sept-06 Dec-06 Mar-07 Jun-07

AssetsCash and Equivalents 52.3 61.3 81.5 91.5 99.0 106.7 115.9 153.5 141.5 167.6 183.0 237.2 236.2 285.3 301.1 242.7 Accounts Receivable, Net 97.6 91.9 99.4 101.4 102.2 108.7 124.8 131.4 133.3 128.7 150.1 141.2 142.1 148.6 180.2 180.2

Provision for Doubtful Accounts 11.0 12.2 12.4 11.9 12.7 14.9 Inventories 31.2 33.8 35.5 36.1 38.3 42.0 44.8 42.7 45.1 45.5 45.2 46.6 46.0 47.1 44.2 47.8 Prepaid Expenses & Other Current Assets 16.5 17.6 18.1 16.2 16.7 32.9 33.6 28.9 29.7 26.3 27.1 15.5 21.5 35.1 28.7 27.7 Deferred Income Taxes 8.3 9.2 9.1 9.4 9.9 10.5 8.0 10.9 10.5 10.7 13.1 16.6 20.4 22.2 18.7 16.7 Total Current Assets 205.9 213.8 243.7 254.6 266.0 300.7 327.1 367.4 - 360.1 378.9 418.4 457.2 466.2 538.4 572.9 515.0

Fixed Assets, Net 19.7 19.4 19.4 19.6 20.2 20.3 21.3 21.3 21.2 22.0 23.4 23.8 23.9 24.7 27.0 28.0 Deferred Income Taxes, Non-Current 31.3 30.9 30.3 24.3 24.4 24.9 25.9 18.2 18.2 19.3 13.7 16.2 16.2 17.6 11.6 23.1 Goodwill & Other Intangibles, Net 74.1 73.5 73.3 76.2 76.1 76.4 87.4 97.7 97.2 97.7 104.7 98.6 105.8 107.0 140.4 138.3 Software Development Costs, Net 37.7 36.7 36.0 41.1 41.2 42.2 40.6 40.2 39.5 37.1 37.1 38.3 37.0 36.0 37.8 36.3 Other Investments 0.5 - 0.5 0.4 0.4 0.4 0.4 0.4 - Other Assets 3.1 4.0 3.7 2.8 2.7 2.1 2.0 2.0 2.2 2.1 2.5 3.4 3.7 4.0 4.4 4.5 Total Assets 372.3 378.2 406.9 418.9 431.0 466.9 504.7 547.2 - 538.3 557.1 599.8 637.4 652.8 727.8 794.0 745.3

LiabilitiesAccounts Payable 22.2 25.5 27.6 29.7 24.5 26.5 29.9 38.3 35.4 35.3 37.4 36.0 37.4 37.2 34.1 43.1 Accrued Expenses and Other Current Liabilities 39.4 49.1 49.5 58.7 53.1 55.4 66.3 74.5 67.3 70.8 81.3 84.9 83.6 94.0 109.0 116.3 Income Taxes Payable 5.2 5.0 2.9 1.5 2.4 4.8 3.0 3.3 7.2 7.0 8.0 12.4 10.2 12.7 7.5 8.1 Deferred Service Revenue 47.5 35.9 52.3 43.0 53.6 44.5 61.1 58.0 63.5 49.7 74.1 68.2 82.4 62.7 92.4 86.7 Deferred Income Taxes 0.5 0.6 0.6 0.5 0.3 1.2 1.0 0.4 0.1 - 0.4 0.2 - 0.3 0.2 0.2 Bank Line of Credit 10.6 2.2 2.5 2.6 2.5 2.7 2.6 2.4 1.8 1.7 1.7 2.1 4.0 3.5 2.9 2.3 Current Portion of Capital Lease & LT Debt 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.2 0.1 0.4 0.7 Total Current Liablities 125.5 118.4 135.5 136.1 136.5 135.3 164.1 177.0 - 175.4 164.5 203.0 204.0 217.8 210.6 246.5 257.4

Deferred Income Taxes, Non-Current 11.5 11.5 11.5 15.5 15.5 15.5 16.5 16.1 16.1 16.2 14.7 15.0 15.7 16.8 15.5 15.9 Other Non-Current Liabilities 6.5 1.3 1.3 1.4 1.5 1.5 1.5 5.9 6.2 7.8 7.9 8.1 8.6 9.1 9.7 17.3 Capital Lease Obligations & LT Debt 0.2 0.2 0.2 0.2 0.2 0.1 0.2 0.3 0.3 0.3 0.5 0.4 0.3 0.4 0.4 0.3 Total Liabilities 143.7 131.4 148.5 153.2 153.7 152.5 182.3 199.3 - 198.0 188.9 226.0 227.6 242.5 236.9 272.1 290.9

Minority Interest 2.3 2.4 2.6 2.7 2.9 2.9 2.9 2.8 2.8 2.8 3.0 3.1 3.5 3.8 4.0 4.7

Common Stock 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Addt'l Paid in Capital 69.3 73.2 77.5 71.5 70.5 87.1 86.5 100.0 80.9 97.1 94.4 100.7 114.0 141.5 155.1 149.1 Retained Earnings (Accumulated Deficit) 157.1 165.7 173.2 185.7 195.3 207.1 221.3 239.3 251.7 265.9 281.5 302.8 318.0 336.0 355.4 382.8 Other Equity (0.6) 4.9 4.6 5.3 8.1 16.9 11.3 5.4 4.5 2.1 5.3 13.1 12.0 20.6 22.9 18.8 Total Stockholders Equity 226.3 244.3 255.8 263.0 274.4 311.5 319.5 345.2 - 337.5 365.5 381.6 417.1 444.5 498.6 533.9 551.1

Total Liabilities and Equity 372.3 378.2 406.9 418.9 431.0 466.9 504.7 547.2 538.3 557.2 610.6 647.9 690.5 739.3 810.0 846.8

DSO's 83 71 74 64 71 69 73 69 79 71 84 63 74 70 81 73

Source: Company reports

F2006 F2007


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Management A.L. (Tom) Giannopoulos Chairman, President, and Chief Executive Officer Lamar University – B.S., Electrical Engineering Mr. Giannopoulos has been a Director since March 1992 and was elected President and Chief Executive Officer in May 1993. In April 2001, Mr. Giannopoulos was appointed Chairman of the Company’s Board of Directors. Effective as of June 1, 1995, Mr. Giannopoulos resigned as general manager of the Westinghouse Information and Security Systems Divisions, having been with Westinghouse for 30 years, and was hired by MICROS pursuant to an Employment Agreement to terminate December 31, 199, subsequently amended to terminate on June 30, 2009. In prior assignments at Westinghouse, Mr. Giannopoulos was general Manager of the Automation Division and National Industrial Systems Sales Force, Industries Group. Gary C. Kaufman Chief Financial Officer University of Dayton – B.S., Accounting Mr. Kaufman served as a Director off Micros from January 1991 until May 1994 when he was appointed to Vice President, finance and Administration and Chief Financial Officer. Subsequent to June 30, 1996, he was promoted to Senior Vice president, finance and Administration and Chief Financial officer. In September 1999, was promoted to Executive vice President, Finance and Administration and Chief Financial Officer. Previously, Mr. Kaufman was Division Controller for Westinghouse Security and Network Services Divisions, having been with Westinghouse for 20 years in various financial positions. Mr. Kaufman is also a Certified Public Accountant. Thomas L. Patz Executive Vice President, Strategic Initiatives Brown University University of Virginia – School of Law, JD Thomas L. Patz is currently the Executive Vice President, Strategic Initiatives, and General Counsel of MICROS Systems, Inc., and has held that position since January 2000. Previously, Mr. Patz was Vice President and General Counsel from 1996 to 1999 when he was promoted to Senior Vice President and General Counsel. Mr. Patz first joined the Company in August 1995. Mr. Patz is a member of the Maryland State Bar.


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Market Making and Investment Banking Disclosures At the time this report was published, Henley and Company, LLC did not make a market in MICROS Systems, Inc. (MCRS), or any other company mentioned in this report.

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Henley and Company’s stock rating system is designed to reflect the type of investment decisions customers make on a regular basis. The language of the rating system used is a specific action Henley and Company would take in regard to the specific stocks we cover. Below, are an overview and an explanation of each of the types of recommendations Henley and Company would assign to stocks covered. Please understand that the rating system and the assigned definitions are predicated purely based on the total return of the individual stock in absolute dollar terms and not based on a relative value to a specific index or industry group. Henley & Company’s Stock Rating system Buy: Indicates stocks we believe have a market capitalization that is comparably undervalued to its market peers and offers a greater relative performance to the market. We believe stocks in this category offer excellent risk reward potential and we recommend purchase based on its current relative value. Note, as with all equities there is always downside risk. Speculative Buy: Indicates stocks we believe should be purchased based on its growth potential and long term outlook of its industry. We believe stocks in this category offer excellent reward potential but have a greater specific investment risk and are subject to greater volatility then our normal buy recommendation. Neutral: Indicates stocks we will not advocate a buy or sell recommendation based on current conditions. Under-Perform: Indicates stocks we believe are currently fairly valued and offer limited upside reward relative to its specific investment risk. Sell: Indicates stocks we believe are currently overvalued relative to its market peers, and/or is experiencing major operational challenges. We believe stocks in this category should be avoided and the specific investment risk outweighs any potential reward.


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Public Companies Mentioned in this Report

IBM IBM-$118.03 NCR NCR-$26.53 DELL DELL-$28.18 Wincor Nexdorf WNXDF.PK-$92.00

Par Technologies PTC-$8.98 Oracle ORCL-$22.07 JDA JDAS-$21.21 SAP SAP-$55.31

Further Disclosures

The information and statistical data contained herein have been obtained from sources, which we believe to be reliable but in no way are warranted by us as to accuracy or completeness. We do no undertake to advise you as to changes in figures or our views. This is not a solicitation of any order to buy or sell. Henley and Company is fully disclosed with its clearing firm, Pershing LLC, is not a market maker and does not sell to or buy from customers on a principle basis. The above statement is the opinion of Henley and Company and is not a guarantee that the price target for the stock will be met or that the predicted business results of the company will occur. There may be situations when fundamentals, technically, and quantitative opinions are not met. We, our affiliates, any officer, director or stockholder or any other member of their family may from time to time purchase or sell any of the above mentioned or related securities. Analyst or members of the Research Department are prohibited from buying or selling securities issued by the companies that Henley and Company has a research relationship with, except if ownership of such securities was prior to the start of such relationship, then the analyst or member of the research Department may sell such securities after obtaining expressed written permission from the Director of Research. All research issued by Henley and Company is based on public information. Henley and Company does not currently have an Investment Banking relationship, and was not a manager or co-manager of any offering for the company within the last three years. I, Alan Weinfeld, the research analyst of this report, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities and issues, and that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in the report.

research report - october 16, 2007 rating: micros...

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