Tech Sector Bulls Contend with Slowing Growth Jitendra Waral July 2015

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Key Risks for 2H: Comparables, Currency, Catalysts

China Tech Boom Needs Fundamentals Consideration

BuyBacks, M&A may Rise as Market Saturating

Growth Opportunities in Emerging Products, Japan

AGENDA

3

Market cap weighted average returns graph for U.S., China, Japan, Hong Kong, Taiwan, South Korea, India

CHINA, JAPAN LEAD THE PACK

NSN NPG6N26S972L

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Pie chart of Global IT Spending {NSN NPG6N26S972O<Go>} Global IT Spending by Hardware, Software, Services

IT SPENDING SLOWS ON HARDWARE

Source: IDC

Total IT Spending: $2.1 trillion

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Russell 3000 Tech chart

RISK: TOUGHER 2H COMPS

Source: Bloomberg Consensus

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Growth forecasts for PCs, Smartphones, tablets, Wearables, Storage, Servers

RISK: LACK OF CATALYSTS WINDOWS 10 ALONE

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IDC Chart of IT spending constant currency and US Dollar

RISK: STRONGER DOLLAR

Source: IDC

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China IT Spending chart

CHINA IT SPENDING SLOWING

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China vs the World chart

CHINA TECH VALUED 2X US

NINTENDO

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SLOWING GROWTH SPURS M&A

Source: Bloomberg

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GROWTH SEGMENTS: EMERGING PRODUCTS HYPER GROWTH

Virtual Reality Drones Wearables Nvidia Sony

Facebook (Oculus) HTC

Samsung Leshi

DJI GoPro

Apple Fitbit

Garmin Xiaomi

LG Display

Source: Company Websites

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GROWTH SEGMENTS: JAPAN TECH AMID A TURNAROUND

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NINTENDO TAPS MOBILE GAMING

Source: Bloomberg

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CONSOLE GROWTH

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LOSS MAKING CONSOLE HISTORY

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SONY NETWORK SALES AID MARGINS

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SONY’S ACTIVISION DEAL MAY BOOST MARGINS

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VALUATION Segment Company Forward P/S 5 Yr Average

Virtual Reality

Nvidia 2.42 2.16

Facebook 14.1 11.8

HTC 0.37 0.9

Samsung 0.89 0.85

Drones DJI Technology Not Listed Not Listed

GoPro 3.99 4.4

Wearables

Apple 3.17 2.9

Fitbit 5.8 5.3 (Since IPO)

Garmin 2.8 3.0

Xiaomi Not Listed Not Listed

Japan Nintendo 5.2 2.7

Panasonic 0.49 0.31

Sony 0.51 0.28

Source: Bloomberg Consensus

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Key Risks for 2H: Comparables, Currency, Catalysts

China Tech Boom Needs Fundamentals Consideration

BuyBacks, M&A may Rise as Market Saturating

Growth Opportunities in Emerging Products, Japan

SUMMARY