APRIL 2009

ISSUE HIGHLIGHTS:

• A Tale of Two Quarters: Negative sentiment in January and February isreplaced by cautious optimism in March

• Current Trends in TMT New Issue Activity:

– IPO activity gains momentum

– Convertible Markets re-open

– Structured Equity activity remains strong

Jefferies TMT Equity Capital Markets

Alex LehmannManaging DirectorTMT Equity Origination212.323.3946alehmann@Jefferies.com

Jefferies & Company, Inc.520 Madison AvenueNew York, NY 10022

www.jefferies.com

Jefferies TMT Equity Capital Markets Update2009 First Quarter Review

We entered 2009 in the cliché of a “new world order”. Afterthe so-called “bulge bracket” had been acquired, bankrupted,or converted into bank holding companies during the lastfour months of 2008, the entire sell- and buy-side landscapehad changed. As one example, Jefferies entered the year asthe largest independent full-service U.S. investment bank.

This “new world order” applied to the Technology, Media,and Telecom (“TMT”) sector as well. While most companies –private and public – seemed to be doing well and continuingto grow, very few were immune to the impact of the broadereconomic slowdown. Moreover, dislocations in the equity andfixed income markets resulted in public and private valuationsthat were substantially lower than they were just six monthsearlier and often didn’t take into account the growthprospects of their relevant companies or industries.

This attitude prevailed for much of the first quarter of 2009.As Q4 results – and projections – were as dismal (or perceivedto be dismal) as expected, the sector traded down with therest of the broader markets. Moreover, as credit marketscontinued to remain unstable and financial servicescompanies were deemed to be increasingly questionable,those conditions carried over to virtually every other verticalof the economy, impacting stocks, bonds, consumerconfidence, and enterprise-level conditions. In short, thefinancial services industry – and the lack of resolution to itsmany troubles – dragged the rest of the economy down.

A Tale of Two Markets

This sentiment – and its impact – prevailed through earlyMarch. At that point, a combination of the Federalgovernment’s statement regarding a detailed plan to dealwith “toxic” loans on many banks’ balance sheets, along withincreased levels of M&A activity, managed to turn around

1Jefferies TMT Equity Capital Markets Update | APRIL 2009

Source: Dealogic

US QUARTERLY DEBT ISSUANCES SINCE 2006

FIRST QUARTER TMT SNAPSHOT

Quarter in Review: The 2009 “New World Order”

investor sentiment towards equities. As a result, March wasthe strongest month performance-wise in six years, and TMTstocks benefited particularly well.

The level of M&A activity has been particularly pertinent witha strong ‘barbell’ shape to the activity. The first quarter saw31 U.S. deals in the TMT sector valued at less than $250million in size coupled with the select, speculated largertransactions like IBM’s potential acquisition of Sun and Cisco’spotential purchase of EMC. This level of activity has multipleimpacts on the financing markets. First and foremost, some of these deals will likely require funding, which could lead to debt, equity and convertible activity. Second, as somecompanies are speculated to be potential acquisition targets,investors will likely move into those stocks. Third, it re-focusesinvestors on the fundamentals of the TMT sector rather than

Source: Capital IQ

TMT STOCKS PERFORMED SIGNIFICANTLY BETTER IN MARCH

Percent

1/7/09

1/14/09

1/21/09

1/28/09

2/4/09

2/11/09

2/18/09

2/25/09

3/4/09

3/11/09

3/18/09

3/25/09

4/1/0970

75

80

85

90

95

100

105

110

115

120

S&P 500 Index

NASDAQ Composite Index

PHLX Semiconductor Index

S&P 500 Computers & Peripherals Index

S&P 500 Diversified Telecommunication Services Index

S&P 500 Internet Software & Services Index

6782

4977 83

99

2042

14

62

14 424

466 459

399 390

507486

264

219 217

289

11093

173

US High Yield Corporate DebtNumber of Offerings

US Investment Grade Corporate Debt

0

100

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09

200

300

400

500

600

the broader emotion around the equity markets – and for themost part that is a positive for TMT companies. Fourth, itappears that private equity firms are cautiously wading backinto the M&A markets, which adds to the overall tension ofM&A processes and thus to equity valuations.

Additionally, the attitude towards Q1 earnings has becomeincreasingly benign. First, there is a belief that earnings fromfinancial services companies could come in much strongerthan reported – due primarily to two factors: one, many ofthe assets that they wrote down were written down to levelswhere they may need to be written up; and two, their corebusinesses have been profitable due to fewer active banks inthe traditional investment banking activities of trading,financing, and advisory work. For TMT companies, visibilityseems to have improved and there is a growing belief amongmany buy-side investors that the current stock prices take intoaccount the uncertainty of how the next three quarters willfare for these companies.

Finally, the markets have turned as investors have re-focusedon their desire to have growth assets in their portfolios. In 2009, it is very likely that up to 70% of publicly-tradedcompanies will not grow; as a result “growth” companies are now those that may grow 5-10% this year and “hyper”-growth companies are those that may grow more than 20%,certainly bars that have been re-set relative to where theywere just 12 months ago. As investors start to re-invest ingrowth assets, this will undoubtedly help feed the equityfunding markets, particularly in the TMT sector: those whowill benefit will include private companies raising capital

2Jefferies TMT Equity Capital Markets Update | APRIL 2009

Source: Bloomberg

Source: Dealogic

MONTHLY EQUITY MUTUAL FUND FLOW DATA

Quarter in Review: Drivers of the Equity Markets

TMT ANNOUNCED M&A TRANSACTIONS 2009 US YTD

through IPOs and public companies looking to groworganically or through acquisitions through equity funding.

Equity New Issue Activity

The TMT equity markets look like they will be led by four tofive products for the remainder of the year:

• IPOs: we are seeing a re-opening of companies coming tomarket and others accelerating their IPO preparation

• PIPE and Registered Direct (“RD”) activity: this has beensomewhat strong to-date and should get stronger

ANNOUNCEMENTDATE ACQUIROR TARGET INDUSTRY

DEAL VALUE($ MM)

04/01/09 Fidelity National Information Services Metavante Technologies Software 2,978.3

04/01/09 Rockwell Collins DataPath Software 129.6

03/25/09 Hearst Corporation Hearst-Argyle Television Media 67.5

03/23/09 Cox Enterprises Cox Radio Media 65.2

03/23/09 Deloitte & Touche BearingPoint Services 350.0

03/19/09 Cisco Systems Pure Digital Technologies Hardware 590.0

03/12/09 Carl Icahn Lions Gate Entertainment Media 175.0

03/05/09 TriNet Group Gevity HR Services 98.8

03/02/09 TNS VeriSign Services 230.0

02/27/09 Kudelski OpenTV Services 87.2

02/09/09 CSR PLC SiRF Technology Software 128.6

01/15/09 Nuance Communications Zi Corporation Software 175.0

$ in Billions

($10.0)

($20.0)

($30.0)

($40.0)

($50.0)

($60.0)

$0.0

$10.0

Sept Oct Nov

2008 2009

Dec Jan Feb Mar

($47.4)

($18.3)

($24.4) ($25.1)

$4.9

($18.3)

($25.2)

• Reverse enquiry PIPEs by private equity firms: a growingtrend that has seen some activity and should see more incoming months

• Public accelerated follow-on and convertible financings: a recent trend in the past month

• Potential rights offerings: a lot of discussion on this topicbut there has been a minimal amount of activity in the TMT space thus far

IPOs

There are currently 19 TMT companies on file for IPOs, with total proceeds of approximately $3.5 billion expected. The mix of companies on file is reasonably well distributedbetween Software, Internet, Telecom Services, IT Services, and Hardware companies. We have not seen manysemiconductor or traditional media filings.

After a lull in pricing activity (the last TMT IPO to price wasthe Grand Canyon IPO in November 2008), we have seenone IPO price recently (Changyou, a Chinese mobile gamingcompany); two others that have launched and should price in mid-April (Rosetta Stone and Bridgepoint Education); andmany others that we expect to be priced between now andthe end of the second quarter. In total, we may see as many

3Jefferies TMT Equity Capital Markets Update | APRIL 2009

Dealogic, transactions below $5 million not included.N/A - Not available or undisclosed.

Quarter in Review: Equity New Issuance Activity

TMT FIRST QUARTER PIPE TRANSACTIONS

COMPANY NAME AT CLOSING

CLOSING DATE

GROSS PROCEEDS

($MM)

FIXED CONVERSIONPREMIUM/DISCOUNT AT ANNOUNCEMENT

INTEREST OR DIVIDEND RATE

WARRANT COVERAGE SECURITY SOLD

LoopNet, Inc. 3/30/09 50.0 10.0% N/A N/A Convertible Preferred Stock

Lecere Corporation 3/30/09 7.1 N/A N/A N/A Common Stock

CommScope, Inc. 3/19/09 100.0 10.0% 3.5% N/A Convertible Senior Subordinated Debentures

China Tel Group Inc. 3/9/09 300.0 N/A N/A 0.0% Common Stock

ParkerVision, Inc. 3/3/09 6.2 N/A N/A 0.0% Registered Direct

Paradigm Holdings, Inc. 3/3/09 6.2 N/A 12.5% 167.7% Non-Convertible Preferred Stock

Advanced Micro Devices, Inc. 3/2/09 124.7 N/A N/A 60.3% Common Stock

Clearwire Corporation 2/27/09 10.0 N/A N/A N/A Common Stock

Genius Products, Inc. 2/24/09 5.0 N/A 5.0% 776.4% Promissory Notes

ImageWare Systems, Inc. 2/12/09 5.0 N/A 5.0% 17.1% Non-Convertible Secured Promissory Notes

Pipeline Data Inc. 2/2/09 15.0 103.3% 16.0% 0.0% Convertible Preferred Stock

Omniture, Inc. 1/27/09 25.0 N/A N/A 0.0% Common Stock

Nuance Communications, Inc. 1/13/09 175.2 N/A N/A 22.2% Common Stock

TMT IPO BACKLOG

ISSUER FILING DATEAMT. FILED

($MM) SECTOR

OpenTable Inc 01/30/09 40.0 Internet

Medidata Solutions 01/26/09 75.0 HCIT

FriendFinder Networks 12/23/08 460.0 Internet

Bridgepoint Education 12/22/08 230.0 Internet

Rosetta Stone 09/23/08 115.0 Software

Avago Technologies 08/21/08 400.0 Semiconductors

NextG Networks 06/05/08 150.0 Telecom Services

Open Link 05/12/08 200.0 Software

Gomez 05/07/08 80.5 New Media

Digitalglobe 04/14/08 250.0 Software

Solarwinds 03/21/08 250.0 Software

LogMeIn 01/11/08 86.3 Software

Intelius Inc 01/10/08 143.8 IT Services

Source Photonics 12/26/07 130.0 Semiconductors

Education Management 12/21/07 500.0 Internet

ExactTarget 12/14/07 86.3 Software

Broadview Networks 11/30/07 250.0 Telecom Services

Intcomex Inc 07/27/07 125.0 Computer Equipment

Vitacost.com 06/20/07 57.3 Internet

Source: Dealogic

as 4-6 TMT IPOs price in Q2 2009. While for the most partthese offerings are coming at relatively cheap pricing levels(Grand Canyon was priced at a 30% discount to itscomparables, and Changyou priced at 8x PE, a 40% discountto its comparables), we believe there is an increasing level of reconciliation between the buyside and boards andmanagement teams around valuation expectations.

PIPEs and RDs

Non-traditional PIPE and RD activity has remained strongdespite the market turmoil since last September. Someexamples include another investment by Warburg Pincus inNuance Communications and a second funding by ElevationPartners in Palm.

However, more recently we have seen more traditional PIPEsand RDs be marketed (e.g. to multiple buyers) and while thishas been less prevalent among TMT companies we do expectthat activity to pick up as issuers continue to try to avoidmarket exposure and risk.

Reverse enquiry PIPEs by private equity sponsors

As private equity investors continue to have reasonably stronglevels of cash, they are increasingly approaching companiesdirectly about making investments in those companies. Thestructures are usually convertible preferreds and they areusually a 3-5 year maturity based on a cash-on-cash return of 2.0 – 3.0x or roughly a 20-30% IRR. Depending on thecompany and its relative need for capital, some of thesesuggested structures are gaining traction with corporates.

Public follow-on and convertible offerings

After a period in January and early February in which therewere no marketed follow-on offerings and no convertibletransactions pricing since the demise of Lehman Brothers inSeptember of 2008, the market for both products began tothaw in late February. In the TMT sector, Teradyne (a test and measurement company) raised $150 million with termsof a 4.5% coupon and 25% conversion premium. In the follow-on market, there have been very few transactions butwe do expect that overnight or 1-2 day marketed offeringswill pick up.

Rights offerings

Finally, rights offerings have become more visible. A staple of European and some Asian countries for years, there have been very few rights offerings of any size in the U.S., as investors typically prefer to take their chances with amarketed follow-on. Additionally, the regulatory environmentin Europe and Asia is more conducive to rights offering asopposed to the more stringent U.S. environment.

That said, we are hearing more discussion among corporatesand advisors regarding rights offerings, and have seen oneoffering marketed within the TMT industry. This could be abellwether for future offerings.

In sum, it does feel as if the market tone has improved andactivity can pick up for at least a month or two beforepotentially slowing down, depending on market conditions.Fund flows for mutual funds have stabilized and based onanecdotal conversations, many hedge funds are doing verywell so far this year. As a result, they are looking for newinvestment ideas.

We would encourage almost every public company that canto get on file with a shelf to take advantage of this windowand for those with IPO aspirations to consult their advisorsabout the viability and timing of a potential public exit fortheir companies.

As always, please feel free to contact us if you would like todiscuss any of these topics further.

4Jefferies TMT Equity Capital Markets Update | APRIL 2009

PRECURSORS TO A RETURN OF THE IPO MARKET

Quarter in Review: Equity New Issuance Activity

ImprovedOverallMarketSentiment

ImprovedSectorValuations

IncreasedM&AActivity

More ActiveFollow Onand ConvertActivity

More ActiveMid/Large-Cap IPOMarket

ImprovedEarly StageIPO Market

Steps to “Recovery”

About Jefferies

Jefferies, an independent, full-service global securities and investment banking firm, has served companies and their investors for more than 45 years. Headquartered in New York City, with offices in more than 25 cities around the world, Jefferies providesclients with capital markets and financial advisory services, institutional brokerage, securities research and asset management.The firm provides investors with fundamental research and trade execution in equity, equity-linked, and fixed income securities,including corporate bonds, high yield bonds, US government and agency securities, repo finance, mortgage- and asset-backedsecurities, municipal bonds, whole loans and emerging markets debt, as well as commodities and derivatives. Jefferies offerscompanies capital markets, merger and acquisition, restructuring and other financial advisory services. Jefferies & Company, Inc.is the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF: www.jefferies.com). Jefferies International Limited, a UK-incorporated, wholly owned subsidiary of Jefferies Group, Inc., was established in London in 1985 and is authorised andregulated by the UK Financial Services Authority.

For corporate clients, the Firm is a top M&A and restructuring advisor and underwriter of high yield and equity new issues.Serving institutional investors and high net worth individuals, the Firm is a leading provider of trade execution in equity,convertible, and high yield securities and a market maker of investment grade fixed income and commodity-linked products.Jefferies also offers top-tier private client services, prime brokerage, securities lending, correspondent clearing and NYSEbrokerage services. The Firm has an award-winning research practice, covering equity, high yield and convertible securities, as well as a growing asset management practice utilizing a variety of asset strategies.

Jefferies was founded in the capital markets as a third-market equity trading firm and has flourished over the past five decades. The Firm’s reputation has been built on a high level of client attention and service, and the ability to execute large block tradeswith minimal market impact. Today, Jefferies is seen by many as the investment bank of choice for companies and their investors.A creative, hands-on approach, combined with experience, expertise and widespread relationships, distinguishes the firm.

Important Disclosures

This communication is being provided strictly for informational purposes only and is not intended as a recommendation or anoffer or solicitation for the purchase or sale of any security referenced herein. The information upon which this material is basedwas obtained from sources believed to be reliable, but has not been independently verified, therefore, we do not guarantee itsaccuracy. Any opinion or estimates constitute our best judgment as of this date, and are subject to change without notice, andany views expressed herein may not be supported by independent analysis. Jefferies & Company, Inc. and Jefferies InternationalLimited and their affiliates and their respective directors, officers and employees may buy or sell securities mentioned herein asagent or principal for their own account. This report was created by members of the Jefferies investment banking division ofJefferies & Company, Inc. (“Jefferies”), employing appropriate expertise, and in the belief that it is fair and not misleading. The report has not been reviewed by, or discussed with, any member of Jefferies’ research department. This report is notintended to be, and in no way constitutes a “research report”, as such term is defined in Rule 137 promulgated under the US Securities Act of 1933, as amended, nor should it be considered the same under the Conduct of Business Rules of theFinancial Services Authority (“FSA”). Jefferies’ investment banking department has done, and may continue to do business with,companies included in this report. This document is a marketing communication; it is not and should not be construed asinvestment research.

Additional Information

In the UK, this material is intended for use only by persons who have professional experience in matters relating to investmentsfalling within Articles 19(5) and 49(2)(a) to (d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005(as amended), or by persons to whom it can be otherwise lawfully distributed. For Canadian investors, this material is intendedfor use only by professional or institutional investors. None of the investments or investment services mentioned or describedherein is available to other persons or to anyone in Canada who is not a "Designated Institution" as defined by the Securities Act(Ontario). Recipients of this document in any other jurisdiction should inform themselves about and observe any applicable legalrequirements in relation to the receipt of this document. Jefferies International Limited is authorised and regulated in the UnitedKingdom by the Financial Services Authority. Its registered office is at Vintners Place, 68 Upper Thames Street, London EC4V 3BJ;telephone +44 (0)20 7029 8000; facsimile +44 (0)20 7029 8010.

Reproduction of this document without written permission of Jefferies is expressly forbidden. All logos, trademarks and service marks appearing herein are property of Jefferies & Company, Inc.Member SIPC • © 4/2009 Jefferies & Company, Inc.

Jefferies & Company, Inc.520 Madison AvenueNew York, NY 10022

www.jefferies.com

Investment Banking

Sales & Trading

Research

Asset Management