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Software Equity Group is an investment bank and M&A advisory serving the software andtechnology sectors. Since 1992, our firm has represented and guided private companiesthroughout the United States and Canada, as well as Europe, Asia Pacific, Africa and Israel.We have advised public companies listed on the NASDAQ, NYSE, Toronto, London andEuronext exchanges. Software Equity Group also represents several of the world's leadingprivate equity firms.

Our value proposition is unique and compelling. We are skilled and accomplishedinvestment bankers with extraordinary software, internet and technology domain expertise.Our software industry experience spans virtually every product category, technology andmarket. We have profound understanding of software company finances, operations andvaluation. We monitor and analyze every publicly disclosed software M&A transaction, aswell as the market, economy and technology trends that impact these deals. We'reformidable negotiators and savvy dealmakers who facilitate strategic combinations thatenhance shareholder value.

Perhaps most important are the relationships we've built, and the industry reputation weenjoy. Software Equity Group is known and respected by publicly traded and privatelyowned software and technology companies worldwide, and we speak with them often.

Our Quarterly and Annual Software Industry Equity Reports are read andrelied upon by more than fifteen thousand industry executives,entrepreneurs and equity investors in twenty-six countries, and we havebeen quoted widely in such leading publications as Information Week,The Daily Deal, Barrons, U.S. News & World Report, Reuters, Mergers &

Acquisitions, USA Today, Arizona Republic, Detroit Free Press, Entrepreneur Magazine,Softletter, Software Success, Software CEO Online and Software Business Magazine.Software Equity Group’s senior bankers have keynoted and spoken at more than onehundred software industry conferences and seminars, including Software Business,SoftExpo, Culpepper, VAR Conference, ACETECH, and the Arizona, Colorado, Chicago,Southern California, Denver, San Diego, Washington State and Boulder SoftwareAssociations.

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1| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

Contents U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS .............................................................. 2

PUBLIC MARKETS AND PUBLIC SOFTWARE & INTERNET COMPANY PERFORMANCE ..................... 3

SOFTWARE INDUSTRY GROWTH & IT SPENDING PROJECTIONS ........................................................................ 3 PUBLIC SOFTWARE COMPANY PERFORMANCE ................................................................................................. 3 PUBLIC SAAS COMPANY PERFORMANCE ......................................................................................................... 6 U.S. SOFTWARE IPOS ................................................................................................................................... 6 PUBLIC INTERNET COMPANY PERFORMANCE ................................................................................................... 7

MERGERS AND ACQUISITIONS: THE NUMBERS ...................................................................................... 8

TOTAL M&A SPENDING AND DEAL VOLUME: .................................................................................................... 8 SOFTWARE M&A SPENDING AND DEAL VOLUME: ............................................................................................. 8 DEAL CURRENCY: .......................................................................................................................................... 9 PRIVATE VS. PUBLIC BUYERS: ........................................................................................................................ 9 M&A VALUATIONS: ...................................................................................................................................... 10 M&A EXIT VALUATIONS BY SOFTWARE CATEGORY: ....................................................................................... 11 SAAS M&A: ................................................................................................................................................. 11

MERGERS AND ACQUISITIONS: BUYER MOTIVES ................................................................................. 11

PRODUCT ENHANCEMENT: ........................................................................................................................... 11 NEW MARKET/SUBSECTOR/TERRITORY: ........................................................................................................ 13 VERTICAL MARKETS: .................................................................................................................................... 13 PRODUCT CATEGORY CONSOLIDATION: ........................................................................................................ 14 INVESTMENT ACQUISITIONS: ......................................................................................................................... 14

SOFTWARE INDUSTRY PRIVATE EQUITY ................................................................................................ 14

APPENDIX A: 2Q07 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY .. 16

APPENDIX B: 2Q07 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS ......... 19

APPENDIX C: MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS .............................................. 20

APPENDIX D: SELECTED MERGERS AND ACQUISITIONS ..................................................................... 22

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2| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS The U.S. economy stumbled in the first quarter, with real gross domestic product increasing an anemic 0.7 percent in 1Q07 – the slowest in 14 quarters, and well below the 2.5% advance chalked up in 4Q06 (Figure 1). Economists believe GDP rebounded in the second quarter, with initial results to be released at the end of July. Residential fixed investment, the GDP component that includes spending on housing, plunged 15.8% in 1Q07 and 19.8% in 4Q06. The housing market continues to struggle as it adjusts to a supply glut and more cautious mortgage lenders, taking almost a full percentage point out of GDP. Conversely, consumer spending, which accounts for about 70% of economic activity, surged 4.2% in 1Q07, adding 2.9 percentage points to GDP. A mid-year survey of 60 economic forecasters by The Wall Street Journal cautiously projects GDP to grow at 2.6% in the latter half of 2007, and 2.9% in 2008. Economists disagreed about the inflationary impact of this anticipated growth, particularly escalating food and energy prices. The Conference Board’s Index of Leading Economic Indicators, an important short-term forecasting guide, increased 0.3% in May, with five of the ten components advancing. The positive indicators, beginning with the largest positive, were average weekly initial claims for unemployment insurance (inverted), stock prices, building permits, index of consumer expectations, and vendor performance. The negative contributors, beginning with the largest negative, were real money supply, average weekly manufacturing hours and interest rate spread. Manufacturers’ new orders for consumer goods and materials, and manufacturer’s new orders for non-defense capital goods, both remained steady in May.

Figure 1: U.S. Gross Domestic Product

4.3%

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2004 2005 2006 2007Note: 2Q07 is an estimate

Despite sluggish growth and continuing weakness in the housing market, the jobless rate remains near six-year lows at 4.5%, down from 4.6% a year earlier. The economy added 190,000 non-farm jobs in May and 132,000 in June, and has averaged 145,000 per month for the year. The U.S. IT labor market showed impressive strength in April and May, growing 436 basis points faster than non-farm employment. According to Bank of America, IT services employment now stands at approximately 2.87 million, 5.3% above the prior peak in March 2001. While jobless claims appeared to hold steady in May and June, some economists believe construction unemployment is understated by some 500,000 jobs previously held by undocumented workers. Abroad, China is poised to pass Germany and become the world’s third largest national economy. According to International Monetary Fund data, China’s 2006 GDP is estimated at $2.8 trillion, slightly below Germany’s $2.9 trillion for the same period, and within striking distance of Japan’s $4.4 trillion GDP. Analysts estimate China’s 2Q07 GDP to increase 11% and continue its torrid pace for the remainder of the year. Since 1999, China’s economy has leapfrogged that of Italy, France and the United Kingdom.

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3| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

Figure 2: Major Market Indices Compared to the SEG Software and SEG Internet Indices

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S&P 500 Nasdaq Dow SEG Sofware Index SEG Internet Index

January February March April May June

PUBLIC MARKETS AND PUBLIC SOFTWARE & INTERNET COMPANY PERFORMANCE The major stock market indexes advanced relentlessly in 2Q07, more than compensating for a sluggish first quarter. During the past year, stock prices have surpassed the forecasts of all but the most optimistic analysts, with the Dow, S&P 500, and NASDAQ increasing in value 20.3%, 18.4% and 19.8%, respectively. Comparing the first trading day of 2007 to the last trading day of 1H07, the Dow, S&P 500 and NASDAQ, are up 7.6%, 6.0% and 7.8%, respectively (Figure 2). With most publicly traded companies already reporting record profit margins, and analysts forecasting continued expansion, there is widespread belief stock market values will increase for the remainder of 2007. We see some possibility, however, for a sell-off and correction in the third quarter, and subsequent rebound by year end. Software Industry Growth & IT Spending Projections According to IDC Corporation, the software market is expected to grow to $306 billion in 2010, a 45% increase over 2005’s $211 billion software spending tally (Figure 3). Within the software sector, desktop applications are projected to show greatest spending growth (+9.6%), compared to more modest growth in database software spending (+5.9%). According to Goldman Sachs’

Figure 3: Software Market Growth Projections ($ billions) Category 2005 2010 CAGR (2005 - 2010)Application Development and Deployment 29$ 41$ 7.2%Enterprise Applications 65 101 9.2%Database 18 24 5.9%Desktop Applications 24 38 9.6%Systems Infrastructure 75 101 6.1%Total: $ 211 $ 305 7.6%

Source: IDC Corporation

May 2007 IT Spending Survey which forecasts IT investments by large enterprises over the next twelve months, server consolidation and ERP software ranked as the highest priorities (Figure 4), while open source software and software-as-a-service ranked lowest on the list. As we’ve reported in each of the past three quarters, SaaS has yet to gain traction among very large enterprises, at least for enterprise-wide deployment. The IT spending categories showing greatest advance since Goldman’s January Spending Survey were LAN upgrades, PCs (including laptops), server consolidation, server virtualization and VOIP. Categories that have maintained a high spending priority ranking include business intelligence, data center consolidation and ERP software. Public Software Company Performance The SEG Software Index, our index of 263 publicly traded software companies, closely tracked the NASDAQ during 1H07 (Figure 2). The equity valuation of the SEG Software Index ended 1H07 up 7.8% compared to the beginning of

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4| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

1H07, after reaching a high of 8.0% and dipping to a negative 1.4% low. One of the big winners was aQuantive, which was acquired by Microsoft at a per share price 158.7% greater than its January 2, 2007 closing price.

Public software company financial performance, with few exceptions, exceeded expectations, further demonstrating to investors that software is not yet a maturing industry with limited upside as some had feared. Median trailing-twelve-month (TTM) revenue of companies listed in the SEG Software Index grew 11.7%, and median TTM EBITDA grew 18.9% (Figure 5). TTM earnings of SEG Software Index companies gained 3.5%, while cash & cash equivalents posted a 3.7% increase in 2Q07 compared to 2Q06. With investors once again warming to the software sector, the median enterprise value (valuation) of

the SEG Software Index posted an impressive gain of 18.3% in 2Q07 compared to 2Q06. Over the same time period, cash as a percent of market cap decreased to 15.9% in 2Q07 from 18.4% in 2Q06, reflecting the higher valuations and for some, recent acquisitions. Composite financial performance data for the public SEG Software Index are enumerated in Figure 6. Figure 5: SEG Software Index Historical Growth Metrics

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Cash & EquivalentsTTM RevenueTTM EBITDATTM Net IncomeEnterprise Value

Size continues to play a role in software company valuations. SEG Software Index companies with revenues greater than $1 billion posted a median EV/Revenue ratio of 3.4x in 2Q07, compared to a median ratio of 2.6x for software companies with revenue between $200 million and $1 billion (Figure 7 & 8). While the EV/Revenue ratios were greater for larger software companies, the same did not hold true for EV/EBITDA ratios. Companies with revenue less than $100 million were valued at 17.3x EV/EBITDA, while software companies with revenue greater than $1 billion posted a 15.6x EV/EBITDA multiple. The differential is unsurprising and historically consistent. Investors expect smaller companies to

Figure 6: SEG Software Key Statistics

Measure 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07EV/Revenue 2.2x 2.1x 1.9x 2.2x 2.4x 2.4xEV/EBITDA 15.2x 13.7x 12.8x 14.6x 14.8x 15.6xEV/Earnings 25.4x 28.1x 25.7x 28.4x 26.2x 27.4xCurrent Ratio 2.1 2.1 2.0 1.9 1.9 1.8Gross Profit Margin 62.9% 63.4% 62.1% 61.6% 64.8% 62.7%EBITDA Margin 12.8% 13.5% 14.3% 13.7% 13.8% 13.6%Net Income Margin 5.0% 4.7% 4.2% 4.3% 4.6% 4.1%TTM Revenue Growth 10.4% 12.5% 13.4% 13.8% 11.6% 11.7%TTM Earnings Growth 25.3% 8.7% 2.8% 11.5% 7.3% 3.5%

SEG - Software

Data Source: Goldman Sachs May 2007 IT Spending Survey

• Server consolidation • ERP software • Server virtualization • Business intelligence • Voice-over-IP • Data center consolidation • Application integration • LAN/network upgrades • Disk storage • Disaster recovery/business

continuance • Security • IT consulting services • New PCs or PC upgrades • Business process / IT outsourcing • Web application development • Business process management /

workflow • Compliance/risk management • Cost cutting • Identity and access management • Storage virtualization • Customer relationship management • IT operations management software • Mobile computing / remote access • Outsourced software development • Collaboration software • Wireless networking • Service-oriented-architecture • Storage management software • Microsoft Vista upgrades • Managed services • Thin client computing • Utility/grid/on-demand computing • Desktop virtualization • Open source software • Software-as-a-service/remote hosted

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Figure 4: CTO Tech Spending Priorities

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5| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

Figure 7 & Figure 8: SEG Software Enterprise Value / Revenue and Enterprise Value / EBITDA by Size of Buyer (TTM Revenue)

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Figure 9: SEG Software Categories

Category Revenue Growth Earnings Growth1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 2Q07 (TTM) 2Q07 (TTM)

Database & File Management 2.5x 2.3x 2.0x 2.3x 2.6x 3.1x 12.5x 9.9x 9.5x 9.5x 9.3x 12.0x 2.3% 21.6%Development Tools, Operating Systems & Application Testing Software 1.8x 2.1x 1.6x 1.2x 2.0x 2.5x 27.8x 26.7x 14.0x 14.0x 22.1x 26.3x 11.3% -0.6%

eCommerce Enablement Software 1.3x 0.9x 0.7x 1.1x 1.0x 2.3x 16.6x 14.8x 11.4x 11.4x 13.3x 14.6x -5.2% 3.4%Enterprise Application Integration 1.5x 1.7x 1.4x 1.8x 2.0x 2.2x 11.5x 15.7x 13.9x 13.9x 13.7x 11.4x 12.2% 8.9%Messaging, Conferencing & Communications 1.5x 1.3x 1.3x 1.8x 1.8x 1.3x 11.2x 15.9x 14.1x 14.1x 15.5x 14.1x 16.7% 9.0%Networking & Connectivity 2.2x 2.0x 1.8x 1.5x 1.6x 1.5x 22.6x 18.7x 18.1x 18.1x 16.2x 13.8x 4.5% -135.9%Security 3.0x 3.0x 2.4x 3.1x 3.2x 3.2x 13.8x 13.9x 11.7x 11.7x 15.4x 14.6x 16.2% -3.0%Storage & Systems Management Software 3.1x 3.2x 3.5x 3.6x 3.7x 3.6x 14.6x 13.1x 13.0x 13.0x 14.4x 14.0x 20.9% 11.2%Wireless 2.0x 2.0x 1.7x 1.4x 1.8x 1.6x 9.9x 14.1x 7.2x 7.2x 10.6x 12.9x 11.9% -54.0%

Accounting & Finance 4.6x 3.5x 4.0x 4.4x 3.8x 4.3x 14.2x 17.3x 17.7x 17.7x 14.4x 16.9x 17.9% 16.6%Billing & Service Provisioning 2.4x 2.2x 1.2x 1.6x 1.8x 1.7x 11.5x 11.1x 9.0x 9.0x 7.4x 9.4x 6.7% 19.7%Business Intelligence 2.2x 2.1x 1.8x 2.3x 2.0x 2.3x 11.7x 11.7x 10.8x 10.8x 15.8x 15.6x 13.9% 1.6%Content/Document Management 1.3x 1.3x 1.4x 1.3x 1.7x 1.7x 11.6x 13.2x 15.9x 15.9x 17.5x 15.3x 7.5% -9.7%Customer Relationship Management, Marketing & Sales Software 2.7x 2.4x 2.1x 2.3x 2.4x 3.2x 16.6x 18.6x 18.3x 18.3x 17.7x 33.2x 19.3% -20.1%

Education & Computer Based Training 2.0x 2.6x 1.9x 2.0x 2.2x 2.5x 13.3x 24.0x 24.5x 24.5x 34.4x 27.9x 10.8% -54.8%Electronic Design Automation 2.4x 2.7x 2.5x 2.8x 3.0x 3.2x 17.6x 14.2x 11.3x 11.3x 13.9x 24.2x 9.6% 39.8%Engineering, PLM & CAD/CAM Software 2.2x 2.2x 1.9x 2.4x 2.9x 3.2x 17.3x 14.6x 12.5x 12.5x 14.2x 17.5x 11.5% 5.4%Enterprise Resource Planning 1.6x 1.6x 1.4x 2.3x 2.2x 2.1x 13.1x 9.4x 15.4x 15.4x 16.3x 13.9x 14.8% -65.7%Entertainment 1.5x 1.4x 1.6x 1.8x 1.6x 1.6x 12.0x 11.7x 11.5x 11.5x 13.3x 13.1x 3.7% 48.8%Financial Services Software 2.5x 2.4x 2.4x 2.5x 2.6x 2.7x 13.8x 14.3x 10.8x 10.8x 13.5x 13.1x 11.7% 34.4%Healthcare 3.0x 2.6x 2.7x 2.8x 2.6x 2.8x 18.4x 15.8x 12.3x 12.3x 14.7x 14.3x 13.2% 65.1%HR & Workforce Management 3.1x 2.3x 2.0x 2.2x 2.7x 3.5x 19.2x 15.0x 10.8x 10.8x 20.9x 25.8x 31.4% 51.2%Multimedia, Graphics, Digital Media 2.3x 2.7x 2.3x 2.7x 2.5x 2.6x 26.9x 20.7x 18.1x 18.1x 21.6x 20.3x 18.8% -1.2%Supply Chain Management & Logistics 1.6x 1.7x 1.5x 1.5x 1.6x 1.9x 17.6x 12.3x 12.6x 12.6x 13.0x 13.3x 7.2% 3.2%Web Analytics 4.4x 5.0x 4.5x 4.5x 4.2x 4.1x 19.7x 16.5x 14.2x 14.2x 16.7x 19.3x 46.8% -0.3%

SEG - Software Index

Application Software

Infrastructure Software

EV/Rev. EV/EBITDA

be less profitable as they pump money into R&D and sales, but they also expect much faster growth. Larger companies, however, are generally expected to grow more slowly, but generate significant – and ever increasing – profitability.

While median software industry multiples are a benchmark, EV/Revenue multiples for specific software product categories provide greater insight and guidance about market trends, IT spending priorities, and areas ripe for near-term consolidation.

In quarters past, median trailing twelve month revenue and earnings varied widely by product category, and 2Q07 was no exception (Figure 9). Year-over-year, public company providers of web analytics and human resource management software led all other software categories in public company revenue growth (+46.8% and +31.4%, respectively), while public software companies providing solutions for ecommerce enablement (negative 1.4%) and database and file management (+2.3%) lagged far behind. As for earnings performance, healthcare led all other software industry product categories over the same year-over-year time period, reporting an

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Figure 10: Pure Play Software as a Service (SaaS) Public Software Companies

Company Sector Company Sector Company Sector Company Sector

Concur (NASDAQ: CNQR) Accounting & Finance 6.4x 4.3x 16.9x 14.4x 43.2% 17.9% 23.3% 26.3%DealerTrack (NASDAQ: TRAK)* Vertical - Automotive 6.3x 2.7x 18.8x 14.3x 38.7% 11.7% 33.7% 17.4%Kenexa (NASDAQ: KNXA) Human Resource Management 5.9x 3.5x 26.0x 25.8x 76.7% 31.4% 22.7% 14.6%Kintera (NASDAQ: KNTA) Accounting & Finance 1.3x 4.3x - 14.4x -2.6% 17.9% N/A 26.3%RightNow (NASDAQ: RNOW) CRM, Sales & Marketing Software 4.0x 3.2x N/A 33.2x 19.3% 19.3% N/A 10.1%Salesforce.com (NYSE: CRM) CRM, Sales & Marketing Software 8.6x 3.2x 86.7x 33.2x 58.4% 19.3% 10.0% 10.1%Taleo (NASDAQ: TLEO) Human Resource Management 3.5x 3.5x 54.3x 25.8x 25.7% 31.4% 6.4% 14.6%LivePerson (NASDAQ: LPSN) CRM, Sales & Marketing Software 6.9x 3.2x 42.1x 33.2x 55.4% 19.3% 16.4% 10.1%Vocus (NASDAQ: VOCS) CRM, Sales & Marketing Software 8.6x 3.2x 70.4x 33.2x 47.8% 19.3% 12.2% 10.1%Salary.com (NASDAQ: SLRY) Human Resource Management 5.5x 3.5x - 25.8x 50.6% 31.4% - 14.6%Omniture (NASDAQ: OMTR) Web Analytics 9.4x 4.1x 74.0x 19.3x 86.3% 46.8% 12.7% 23.9%Visual Sciences (NASDAQ: VSCN) Web Analytics 4.0x 4.1x 24.8x 19.3x 55.9% 46.8% 16.3% 23.9%

Median: 6.1x 42.1x 49.2% 16.3%

CategoryCompany

EBITDA Margin

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EV/EBITDA

average earnings increase of 65.1%, while software companies providing networking and connectivity solutions posted a median decline in earnings of 135.9% (See Appendix A). Public SaaS Company Performance To enable our clients and subscribers to better assess SaaS market adoption and SaaS provider financial performance, we began in our 1Q06 Report to separately track the financial performance of pure play, enterprise-focused SaaS providers. The SEG SaaS Index has expanded from 10 to 12 public companies (Figure 10), and will continue to expand as additional SaaS pure plays enter the public market. In 2Q07, SaaS providers reported median revenue growth of 49.2% over the same quarter a year ago, markedly outpacing the overall software industry (+11.7%). Despite higher infrastructure costs and more deferred revenue than their perpetual license counterparts, the median EBITDA margin for SaaS Index companies was 2.7% greater than

that of the SEG Software Index in 2Q07. As a result, SaaS providers continued to be favored by investors, with markedly higher valuations on an enterprise value to revenue basis (6.1x vs. 2.4x) and enterprise value to EBITDA basis (42.1x vs. 15.6x). U.S. Software IPOs The software IPO market showed renewed signs of life in 1H07, as six newly listed software companies raised an aggregate $739 million (Figure 11). While the Street is demanding consistent earnings growth from established public software companies, investors are less discerning when it comes to new entrants. Although five of the six companies were unprofitable, only Veraz Networks failed to post a first day closing share price higher than its offering price. Anxiously seeking the next Google or Salesforce, investors focused squarely (some would argue solely) on revenue growth. The median next-fiscal-year (NFY) revenue growth estimate of the six newly public companies is a

Figure 11: 1H07 Software IPOs

Company Fiscal Year

End CategoryDate Went

PublicOffering Amount

First Day Return

EV / Rev.

EV / EBITDA Enterprise Value

NFY Revenue Growth

EstimatesComverge [NASDAQ: COMV]

DecemberVertical - Utilities 4/13/07 $95,400,000 23.9% 13.9x N/A $470,402,400 50.4%

PROS Holdings [NYSE: PRO]

December Financial Analytics Software 6/28/07 $75,000,000 16.8% 6.8x 35.6x $339,641,900 N/A

Salary.com [NASDAQ: SLRY] March Human Resource

Management Software 2/15/07 $59,850,000 19.0% 5.5x N/A $126,585,000 43.8%

Solera Holdings [NYSE: SLH] June Vertical - Automotive

Insurance 5/11/07 $350,000,000 15.0% 3.5x 12.1x $1,560,261,900 390.0%

Sourcefire [NASDAQ: FIRE] March Security 3/9/07 $86,550,000 3.3% 4.5x N/A $212,850,000 25.9%

Veraz Networks [NASDAQ: VRAZ] December Networking Software 4/5/07 $72,000,000 -2.5% 2.4x N/A $257,801,400 20.7%

MEDIAN: $80,775,000 15.9% 5.0x 23.8x $298,721,650 43.8%Average: $123,133,333 12.6% 6.1x 23.8x $494,590,433 106.2%

NOTE: First day return compares listed offering price to first day close

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very impressive 43.8%. Time will tell. But with the word out, other unprofitable software companies are lining up to go public. Of the eleven software IPOs that filed S1s in 1H07, only five are profitable (Figure 12). Several noteworthy software IPO trends are emerging in 2007. First, SaaS companies are coming to market in greater numbers. Although Salary.com was the only SaaS IPO in the first half, companies poised for public listing in 2H07 include SaaS providers athenahealth, Constant Contact, HireRight and NetSuite. Second, several public companies previously taken private by leveraged buyout firms are now poised for reentry. While only two such private equity owned companies are currently in the IPO pipeline (Deltek, a New Mountain Capital portfolio company, and SS&C, a Carlyle Group company), we expect as many as a half-dozen more to file S1s in the next twelve months, as private equity firms look to cash in, provide returns to patient

limited partners, and allay debt repayment concerns that could stymie future buyouts. The largest software IPO on deck for 2H07 is EMC’s spinout of VMware, which will likely be a blockbuster. EMC is planning to sell approximately 10% of VMware for close to $800 million dollars. Analysts are projecting VMware to grow by 60% in CY07. While VMware is unquestionably the biggest IPO in the pipeline, Netsuite, a Larry Ellison backed company, is the most hyped. If listed, Netsuite will be the first publicly traded SaaS ERP company and a competitor to Oracle. Ellison is listed as owning 74% of Netsuite’s common stock. Public Internet Company Performance Though the software and internet/ecommerce/Web 2.0 sectors are rapidly converging, clear distinctions remain between the two in terms of business model, revenue model, solution deployment and end user requirements. We've opted for the time being to track these major categories separately to enable a more

Figure 12: U.S. Software IPO Pipeline Company Category Filing Date Offering

AmountAnnual

Revenue Net Income

athenahealth (NASDAQ: ATHN Proposed)

Vertical - Healthcare Software

6/22/07 $86,250,000 $75,800,000 -$9,200,000

BladeLogic (NASDAQ: BLOG Proposed)

Data Management Software

4/5/07 $82,500,000 $24,600,000 -$7,200,000

Constant Contact (NASDAQ: CTCT Proposed)

Customer Relationship Management, Marketing & Sales Software

6/25/06 $86,250,000 $27,600,000 -$7,800,000

Deltek (NASDAQ: PROJ Proposed)

Project Management Software

5/8/07 N/A $228,000,000 $15,000,000

DemandTec (NASDAQ: DMAN Proposed)

Demand Chain Management Software

5/24/07 $60,000,000 $43,000,000 -$2,000,000

HireRight (NASDAQ: HIRE Proposed)

Human Resources Management Software

2/12/07 $66,000,000 $55,000,000 $11,000,000

Monotype Imaging Holdings (NASDAQ: TYPE Proposed)

Graphics & Publishing Software

1/26/07 $154,000,000 $86,200,000 $7,100,000

Netsuite (NASDAQ: NETS Proposed)

Enterprise Resource Planning

7/2/07 N/A $77,000,000 -$20,000,000

SoundBite (NASDAQ: SDBT Proposed)

Messaging, Conferencing & Communications

4/16/07 N/A $29,000,000 $0

SS&C Technologies Holdings (NASDAQ: SSNC Proposed)

Financial Services Software

6/13/07 $200,000,000 $205,000,000 $1,100,000

VMware (NYSE: VMW Proposed)

Virtualization Software 4/26/07 $792,000,000 $703,900,000 $86,900,000

MEDIAN: $86,250,000 $75,800,000 $0Average: $190,875,000 $141,372,727 $6,809,091

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8| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

Figure 13: SEG Internet Key Statistics

Measure 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07EV/Revenue 1.8x 1.6x 2.2x 2.2x 2.4x 2.2xEV/EBITDA 17.9x 20.0x 17.6x 17.8x 18.9x 17.8xEV/Earnings 23.7x 28.9x 26.7x 30.3x 35.8x 39.9xCurrent Ratio 2.7x 2.5x 2.6x 2.2 2.5 2.3Gross Profit Margin 43.4% 40.8% 48.3% 42.9% 55.1% 53.1%EBITDA Margin 16.8% 14.2% 14.6% 15.2% 15.5% 13.0%Net Income Margin 43.4% 8.3% 10.4% 5.9% 5.5% 3.0%Revenue Growth 29.1% 28.4% 22.0% 21.6% 9.8% 24.1%Earnings Growth 27.4% -31.8% 1.1% 10.2% -7.7% 19.7%

SEG - Internet

granular analysis of each. Broadly defined, internet companies are primarily internet based and their solutions are primarily – often exclusively – web deployed. Our Internet Index is comprised of companies whose principal business models fall within one or more of the following categories: • Advertisers – Companies that provide key elements in the internet advertising arena, such as search marketing services, software to host and manage ads, and a network of websites that run ads. Representative companies include 24/7 Real Media, aQuantive and SINA.

• New media – Companies that provide online information and content. Representative companies include CNET, Jupiter Media, Napster and WebMD.

• Search engines – Companies include Baidu.com, Google, Infospace, LookSmart, MIVA, Sohu.com and Yahoo!

• eCommerce & portals – Companies whose main line of business is conducted over the web. Representative companies include 1-800 FLOWERS.COM, Amazon.com, Bluefly, eBay and Expedia.

The 27 companies comprising the SEG Internet Index have had a much more volatile 1H07 than companies comprising the NASDAQ, S&P 500 and SEG Software indices (Figure 2). Composite financial performance measures for the companies comprising the SEG Internet Index are enumerated in Figure 13.

The median trailing-twelve-month revenue multiple for public internet companies was 2.2x, while median EV/EBITDA and EV/Earnings were 17.8x and 39.9x, respectively. The median current ratio, measured as current assets divided by current liabilities, an indication of a company’s liquidity, was a healthy 2.3. While internet companies continued to reap the benefits of growing numbers and usage, they were required to invest heavily in marketing and infrastructure: Median 2Q07 revenue for SEG Internet Index companies increased 24.1% from 2Q06, while median earnings decreased 19.7% over the same period. Enterprise valuations of companies comprising the SEG Internet Index varied widely by internet category in 2Q07, (Figure 14), with Internet Search Engine companies posting an impressive 6.0x EV/Revenue median valuation, and eCommerce & Portals companies posting a rather anemic 1.5x multiple. Internet Advertising companies posted the highest year-over-same quarter revenue growth in 2Q07 (+39.9%). MERGERS AND ACQUISITIONS: THE NUMBERS Total M&A Spending and Deal Volume: The law of supply and demand forced buyers to dig deeper in 2Q07. The second quarter tally of 2,464 transactions across all industry sectors was in line with prior quarters, but the aggregate price tag increased sharply to $470.3 billion, setting the stage for total M&A dollar volume in 2007 to surpass 2006 by 30% or more (Figure 15). While some buyers and pundits might regard the trend as M&A inflation, the better explanation is companies exiting today have greater value than many of the underperforming companies acquired two and three years ago for modest premiums. Software M&A Spending and Deal Volume: The North American software and IT services sector was largely consistent with the activity and spending levels of the overall M&A market, posting 408 M&A transactions in 2Q07, slightly below the 431 software and services deals reported for 2Q06 (Figure 16). Aggregate M&A

Figure 14: SEG Internet Categories

Category Revenue Growth Earnings Growth1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 2Q07 (TTM) 2Q07 (TTM)

Advertising 5.3x 5.1x 4.5x 4.2x 4.2x 4.4x 21.0x 22.8x 20.2x 22.6x 22.4x 19.3x 39.9% 66.5%eCommerce & Portals 1.8x 1.4x 1.3x 1.5x 1.6x 1.5x 27.8x 18.7x 15.9x 17.4x 14.9x 13.1x 24.1% -3.9%New Media 5.5x 4.3x 3.2x 3.4x 3.5x 2.2x 26.5x 22.7x 19.4x 18.6x 19.2x 27.0x 17.3% -52.4%Search Engine 4.2x 7.6x 6.1x 5.8x 6.1x 6.0x 16.1x 25.2x 20.7x 29.2x 29.0x 22.7x 23.4% 32.7%

EV/Rev. EV/EBITDASEG - Internet Index

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9| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

Figure 16:U.S. Software Sector Specific M&A Activity

438 431 425 408

92 101 83 10168 61 64 50

Q3 2006 Q4 2006 Q1 2007 Q2 2007

Software Life Science Comm.

Source: Mergerstat

spending, however, increased a remarkable 108% over the same quarter last year. Software deals fetched $25.4 billion in 2Q07, compared to a total of $12.2 billion in 2Q06 (Figure 17). Looking at the trailing twelve months, software M&A spending is up 67% year-over-year due, in part, to several mega-deals (equity value greater than $1 billion) in 1H07, including aQuantive, DoubleClick, WebEx, Talx and Kronos (See Appendix B). Deal Currency: Cash has long been favored over stock as software M&A deal currency, and 2Q07 showed an even greater preference for hard cash (Figure 18). All-cash deals represented 82% of software transactions in 2Q07, compared to 71% of software M&A transactions in 2Q06 and 68% in 1Q07. Only 19% of software M&A deals used all-stock or cash and stock in 2Q07, a marked change from the 32% of deals that used stock as

currency in 1Q07. We believe several factors are at play. Sellers have grown uncomfortable with the current valuations of public buyers following the run-up in software stock prices; and buyers are aggressively buying back their stock to boost earnings per share and avoid investor criticism for retaining excessive cash on their balance sheets. Private vs. Public Buyers: Despite ongoing software industry consolidation and the resulting diminution in the number of public software company buyers, M&A deal volume has not dramatically declined, in large part because private buyers took up the slack and have remained active. Privately held acquirers accounted for only 24% of all software industry mergers and acquisitions in 2003, but represented 32% of all such buyers in 2006. 2Q07 showed further increase, with private buyers, consisting Figure 17: U.S. Software M&A by Dollar Volume

$30.5B

$25.5B $26.3B $25.4B

Q3 2006 Q4 2006 Q1 2007 Q2 2007

Source: Mergerstat

Figure 15: U.S. Merger and Acquisition Activity

9,278 11,123 9,5148,281 8,554

10,19810,884 10,884 10,808

Q2: 2892

$1,426B$1,326B

$654B $452B

$526B

$820B

$1,223B

$1,223B

$1,827BQ2: $470.3B

$0

$300

$600

$900

$1,200

$1,500

$1,800

0

4,000

8,000

12,000

16,000

1999 2000 2001 2002 2003 2004 2005 2006 2007

Deals Value

Num

ber o

f Dea

ls Value ($ billions)

Source: Mergerstat

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Figure 18: Software M&A – Form of Payment

82%

67%68%

81%

16%

20% 27%11%

2% 13% 5% 8%

Q3 2006 Q4 2006 Q1 2007 Q2 2007

Cash Cash & Stock Stock

primarily of venture backed and private equity owned companies, accounting for a whopping 37% of all software M&A transactions (Figure 19). We fully expect the volume and percentage of private buyer transactions in 2007, led by private equity/buyout firms, will surpass 2006. M&A Valuations: Software industry M&A valuations in 1H07 held few surprises. Across all software product categories, the median exit valuation (based on TTM revenue and the seller’s equity value) was 2.3x in 2Q07, on par with 1Q07 (2.3x) and 2Q06 (2.3x) (Figure 20). We expect no valuation surprises for the remainder of 2007, and predict median software industry M&A valuations will be consistent with the past two years. Once again, however, we caution our readers about using the median deal multiple to assess the fair market or prospective exit valuation of a particular software company. Size, status and subsector continue to be key determinants of software company exit valuations (Figure 22). For software M&A transactions during the last twelve months with ascertainable revenue multiples, we separately analyzed the effect on valuation of equity structure (private vs. public company), size (revenue) of buyer and seller, and software product category. The exercise proved highly instructive. As a first step, we separated public and private software company sellers to ascertain any difference in selling price. As in past years, the disparity between the two in terms of median exit valuation was significant, but it was more

Figure 19: U.S. Public vs Private Software M&A Buyers and Sellers

72%65% 63% 63%

28%35% 37% 37%

Q3 2006 Q4 2006 Q1 2007 Q2 2007Private Public

Perc

enta

ge o

fSof

twar

e Buy

ers

11% 11% 11% 10%

89% 89% 89% 90%

Q3 2006 Q4 2006 Q1 2007 Q2 2007Private Public

Perc

enta

ge o

fSof

twar

e Sel

lers

significant that public and private sellers traded places in 1H07. Public company sellers, accounting for 37% of all software M&A transactions over 1H07, had a median exit valuation of 3.0x TTM revenue. During the same time period, private company sellers accounted for 63% of all transactions and commanded a substantially lower median selling price of 2.1x TTM revenue. In our 2006 Annual Report we observed quite the opposite phenomenon: public sellers garnered a modest 2.1x TTM revenue multiple while private sellers received a far more impressive 2.7x multiple during 2006. What changed? Undervalued public software companies with stagnant growth and significant recurring revenue have been picked clean, forcing acquirers of publicly traded software companies to loosen their purse strings in 2007 as they bid for companies with higher CAGRs and market caps. Increased debt leverage also helped jack-up public software company prices in 1H07.

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Figure 20: U.S. Software M&A Valuation as a Multiple of Revenue (Quarterly)

2.7x

1.9x2.3x 2.3x

Q3 2006 Q4 2006 Q1 2007 Q2 2007

Additionally, we sliced 1H07’s TTM median software M&A multiple horizontally and vertically, segregating vertical market software company sellers (e.g. retail, financial services, telecom, manufacturing, etc.) from sellers with horizontal software solutions (infrastructure, enterprise applications, etc.). Vertical market solution providers received a median 2.1x TTM revenue exit valuation, while horizontal solution providers commanded a median 2.4x valuation. Historically, median exit valuations have been 25% to 33% higher for horizontal solution providers than vertical solution providers. Clearly, 2007 continues to be a banner M&A year for vertical market software companies, another recent trend we expect to continue. We also separated public and private software company buyers to ascertain any difference in exit valuation paid. In transactions where an exit valuation multiple was ascertainable, private buyers (both strategic and private equity), comprised 16% of all software company acquirers and paid a median M&A price of 2.2x TTM. By contrast, public companies comprised 84% of all software company buyers and paid a median purchase price of 2.5x TTM. Finally, we analyzed TTM exit valuations based upon the size (revenue) of buyer and seller. As in prior years, buyer size was a key determinant of exit valuation. Buyers with revenue greater than $200 million paid a median purchase price of 2.6x seller’s TTM revenue over the last twelve months; while buyers with less than $200 million revenue paid a median 1.7x TTM revenue.

M&A Exit Valuations by Software Category: Despite these myriad exit valuation variables, Figure 23 reminds us the seller’s software product category is the single most important M&A valuation driver. Exit valuations over the last twelve months ranged from 4.6x for messaging software sellers to 1.3x for supply chain management providers. Security still ranks near the top of the exit valuation chart, along with web analytics, database tools and file management. SaaS M&A: In today’s software M&A market, no discussion of exit valuation would be complete without an analysis of pure play SaaS company exits. Buyers today are placing inordinately high value on the recurring revenue streams, bookings, and profitability potential of SaaS providers. Figure 24 lists 1H07’s most notable SaaS M&A transactions. MERGERS AND ACQUISITIONS: BUYER MOTIVES Product Enhancement: While software industry buyouts and mega deals have grabbed the lion’s share of the press, the data reveals most software M&A transactions in 1H07 were far more strategic than financial. An analysis of some 185 software transactions in 2Q07 indicates six out of ten buyers acquired “tuck-ins.” Their appetites whetted by an insatiable appetite for growth, market leverage and competitive differentiation, they purchased smaller companies with complementary solutions and enabling technologies in an attempt to complete and extend the functionality of their product suites. Buyers of every type aggressively pursued these strategic transactions, which we characterize as “Product Enhancements,” including the largest public software companies; mid-cap public software companies taken private by buyout firms; and smaller VC-backed or small-cap software companies seek greater viability and growth. Product Enhancement deals, as a percentage of total software M&A transactions, have grown steadily over the past two years, comprising 56% in 2H06 (Figure 25), 57% in 1Q07 and 59% of 2Q07 software transactions. A typical example in 2Q07 is Microsoft’s acquisition of aQuantive (12.2x TTM revnue) to stave off fierce competition and gain a better foothold in the high growth internet advertising category. Other Product

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Figure 22 Cont.: 1H07 Median Valuations

Public Sellers 2.0x Median Multiple (Equity Value)

Private Sellers 3.0x Median Multiple (Equity Value)

22%

78%

Vertical Seller 2.5x Median Multiple (Equity Value)

Horizontal Seller 2.7x Median Multiple (Equity Value)

26%

74%

Private Buyers 2.1x Median Multiple (Equity Value)

Public Buyers 2.8x Median Multiple (Equity Value)

Buyer Greater Than $200 million 3.2x Median Multiple (Equity Value)

Buyer Less Than $200 million 1.6x Median Multiple (Equity Value)

Seller Greater Than $20 Million*: 2.7x

Seller Greater Than $20 Million*: 1.1x

Seller Less Than $20 Million*: 4.5x

Seller Less Than $20 Million*: 1.7x

*: Revenue

Public Sellers 3.0x Median Multiple (Equity Value)

Private Sellers 2.1x Median Multiple (Equity Value)

37%

63%

Vertical Seller 2.1x Median Multiple (Equity Value)

Horizontal Seller 2.4x Median Multiple (Equity Value)

33%

67%

Private Buyers 2.2x Median Multiple (Equity Value)

Public Buyers 2.5x Median Multiple (Equity Value)

84%

16%

59%41%

Buyer Greater Than $200 million 2.6x Median Multiple (Equity Value)

Buyer Less Than $200 million 1.7x Median Multiple (Equity Value)

Seller Greater Than $20 Million*: 2.1x

Seller Greater Than $20 Million*: 1.5x

Seller Less Than $20 Million*: 3.3x

Seller Less Than $20 Million*: 1.7x

*: Revenue

Figure 22: 1H06 Median Valuations

Almost exact reversal in valuations

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13| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

Figure 23: U.S. Software M&A by Product Category

1.3x

1.7x

1.8x

1.9x

1.9x

2.0x

2.1x

2.1x

2.2x

2.2x

2.2x

2.5x

2.6x

2.7x

3.4x

3.8x

4.0x

4.6x

Supply Chain Management & Logistics

Multimedia, Graphics, Digital Media

Financial Services Software

Manufacturing & Asset Management

Content/Document Management

Wireless

Development Tools, IT Asset Management & Application Testing

Software

Healthcare

HR & Workforce Management

Other Verticals (A&D, Telco, Retail, etc.)

Engineering, PLM & CAD/CAM Software

Business Intelligence

Education & Computer Based Training

Networking & Connectivity

Database & File Management

Web Analytics

Security

Messaging, Conferencing & Communications

Enhancement transactions in 2Q07 include Tibco’s acquisition of Spotfire (4.3x), a business intelligence software provider; SAP’s acquisition of Outlook Corporation to enhance its business intelligence capabilities; and PTC’s purchase of NC Graphics for enhanced computer-aided manufacturing capabilities. We fully expect Product Extension deals will continue to dominate the software M&A landscape for the remainder of 2007. New Market/Subsector/Territory: The buyers in transactions we characterize as “Market Expansion” are primarily motivated by a perceived need to enter an entirely new product category or geographical territory. Market expansion transactions also include horizontal enterprise software company buyers seeking to enter a vertical market or bolster their vertical domain expertise through vertical acquisition. This M&A driver category is still a minor contributor to overall software M&A activity, accounting for 2% of transactions in 2Q07, down from 4% in 1Q07. A good example: Illinois Tool Works, a $14.5 billion provider of tools (nail guns, industrial adhesives, etc.), made its second foray into software by acquiring Kiwiplan. Another market expansion buyer was Constellation Software, a publicly traded Canadian software company that acquired Grampian, a software provider to the U.K. distillery industry. Vertical Markets: This category consists of vertical software companies that acquire other vertical software developers serving the same vertical markets. Seeking to gain market share and cross-sell opportunities, these vertical buyers accounted for 32% of all software M&A transactions in 2Q07, down slightly from 35% in 1Q07. Healthcare has historically been the most active M&A vertical market category, but 1H07 saw an uncharacteristic decline in healthcare deals. The financial services vertical, however, was especially active throughout the first-half of the year. Noteworthy financial services deals include Open Solution’s acquisition of IA Systems and Fincentric, Checkfree’s acquisition of Upstream, and JP Morgan’s acquisition of Xign. Other vertical market software transactions in 2Q07 included Pearson’s acquisition of eCollege (9.8x) in the education vertical, DealerTrak’s acquisition of automotive software provider Arkona (4.6x),

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and Premier’s acquisition of CareScience (2.3x) in the healthcare vertical. Product Category Consolidation: While certain industry pundits continue to hype the consolidation wave sweeping the software sector, acquisitions of competitors by their software company rivals to gain market share and eliminate direct competition accounted for only 3% of 2Q07 software deals, up from 1% in 1Q07 but down from a 4% average for 2H06. The most

notable consolidation play in 2Q07 was Websense’s $400 million acquisition of SurfControl in the content filtering space, and Microfocus’ acquisition of Acucorp in the application modernization tools category. Investment Acquisitions: Although some 37% of 1Q07’s total software M&A transactions were by private buyers, most were venture-backed private software companies spending VC and private equity investor cash. However, 4% of software M&A transactions in 2Q07 were direct buyouts by VCs and private equity firms that continue to have endless supplies of acquisition cash for companies they can heavily leverage. The most notable of these investment acquisitions in 2Q07 was Battery’s announced $137 million acquisition of Quovadx, developer of technology integration software predominantly for healthcare and financial services customers. SOFTWARE INDUSTRY PRIVATE EQUITY Private equity firms raised more than $260 billion dollars during the past two years, and are hard at work spending it. Private equity buyers accounted for approximately 25% of all M&A dollars in 2006,

Figure 24: 1H07 Select SaaS M&A Transactions

Buyer Seller Purchase Price Seller Revenue Revenue Multiple

Cisco Systems WebEx (Nasdaq: WEBX) 3,200,000,000$ 380,010,000$ 8.4xEquifax TALX (Nasdaq: TALX) 1,400,000,000$ 256,830,000$ 5.5xPearson eCollege {NASDAQ:ECLG] 538,000,000$ 54,880,000$ 9.8xWebsense Surfcontrol [LSE:SRF] 400,000,000$ 121,400,000$ 3.3xExperian Hitwise 240,000,000$ 40,000,000$ 6.0xInfor Workbrain [WB.TO] 199,980,000$ 96,509,000$ 2.1xDealertrak Holdings Arkona [OTC:ARKN] 58,900,000$ 12,760,000$ 4.6xOmniture Touch Clarity 51,500,000$ - - Dealertrak Holdings Curomax 35,700,000$ 10,200,000$ 3.5xUCN ScheduleQ 689,590$ 100,000$ 6.9xSungard Data Systems Aceva Technologies - 9,700,000$ - Adobe Scene7 - - - Cognos Celequest - - - Convio GetActive - - - IBM Watchfire - - - JP Morgan Xign - - - Omniture Instadia - - - Server Intellect ValiantHost - - - Streamezzo Kamayo - - - Sungard Data Systems Aspiren - - - TouchStone Software DriverMagic.com - - - Turning Technologies Totus - - - Vurv Technology People Business Network - - -

MEDIAN: 5.5x

Figure 25: U.S. Software M&A Drivers

59%

2%3%

32%

4%

Product Enhancement Market Expansion

Product Category Consolidation Vertical Consolidation

Investment Opportunity

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Figure 26: Private Equity’s Total Amount of Uninvested Cash on Hand ($ Billions)

$59$84

$136

$227

$302

2002 2003 2004 2005 2006Source: Goldman Sachs

and a whopping 40% in 1Q07 – a new record. According to Goldman Sachs, buyout shops have approximately $300 billion of unvested cash on hand (Figure 26), equating to $1.3 trillion of investing power assuming current debt leverage norms. Those norms, however, are about to change, and that does not portend well for private equity firms. Debt investors have recently begun to pull back after seeing a drastic decline in market demand for bonds backed by US sub prime-mortgages and the high yield bonds that fuel private equity. The result, risk-averse debt investors are demanding better terms and rates for high-yield loans and bonds, the fuel for leveraged buyouts. According to Standard & Poors, an estimated $235 billion in loans are waiting to be sold, nearly all for LBOs. First Data has delayed its sale of

$22 billion in loans and bonds until September. Kohlberg Kravis, one of the largest private equity firms, has seen at least six deals delayed, modified or canceled in the past month due to fluctuating credit markets. Since 2002, private equity software buyouts of software companies have increased 1,940 percent, dwarfing traditional venture capital (Figure 27). These LBOs have been driven, in large part, by banks’ willingness to regard recurring maintenance and support revenue as adequate collateral, enabling private equity firms to obtain the necessary leverage to aggressively pursue software company buy-outs and recapitalizations. The degree of debt leverage for these software transactions has continually increased, rising from 3.9x trailing twelve months EBITDA in 2002 to 5.1x TTM EBITDA in 2006 (Figure 28). Recently, we’ve encountered LBO transactions with debt leverage at greater than 7.0x TTM EBITDA. Should the recent changes in the debt markets continue, we expect to see a significant decline in highly leveraged software industry mega-deals in 2H07. Figure 28: Lending Amounts as a Multiple of EBITDA

3.9x 4.1x4.6x

5.0x 5.1x

0.0x

2.0x

4.0x

6.0x

2002 2003 2004 2005 2006

Lending Amounts as a Multiple of EBITDA

Source: Standard & Poors LCD; Data as of 4Q06

Figure 27: Dollars Invested by Private Equity Buyout Firms in Software Compared to Other Venture Capital

Priv

ate

Equi

ty D

olla

rs B

y St

age

of D

evel

opm

ent

Source: PWC/NVCA, SEG

-100%

175%

450%

725%

1000%

1275%

1550%

1825%

2100%

2002 2003 2004 2005 2006Startup/Seed Early Stage ExpansionLater Stage Buyout

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APPENDIX A: 2Q07 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Accounting & Finance 2Q07 1Q07Current Ratio 1.2 1.2EBITDA Margin 26.3% 30.4%Gross Profit Margin 65.9% 60.5%Net Income Margin 16.6% 15.9%TTM Earnings Growth (YoY) 16.6% -1.9%TTM Revenue Growth (YoY) 17.9% 15.4%TTM EBITDA Growth (YoY) 16.0% 21.5%Cash as Percent of Market Cap 13.8% 11.1%Enterprise Value Growth (YoY) 19.1% 10.8%EV/Revenue 4.3x 3.8xEV/EBITDA 16.9x 14.4xEV/Earnings 21.8x 21.2x

Billing & Service Provisioning 2Q07 1Q07Current Ratio 3.0 2.8EBITDA Margin 20.0% 21.5%Gross Profit Margin 47.9% 45.7%Net Income Margin 7.9% 7.7%TTM Earnings Growth (YoY) 19.7% 16.6%TTM Revenue Growth (YoY) 6.7% 18.1%TTM EBITDA Growth (YoY) -2.2% 4.0%Cash as Percent of Market Cap 43.2% 40.3%Enterprise Value Growth (YoY) 8.3% -16.2%EV/Revenue 1.7x 1.8xEV/EBITDA 9.4x 7.4xEV/Earnings 19.0x 15.2x

Business Intelligence 2Q07 1Q07Current Ratio 1.7 1.6EBITDA Margin 16.5% 13.6%Gross Profit Margin 75.7% 76.6%Net Income Margin 6.4% 5.9%TTM Earnings Growth (YoY) 1.6% -18.3%TTM Revenue Growth (YoY) 13.9% 10.8%TTM EBITDA Growth (YoY) 19.8% -2.1%Cash as Percent of Market Cap 18.7% 18.4%Enterprise Value Growth (YoY) 16.1% 3.2%EV/Revenue 2.3x 2.0xEV/EBITDA 15.6x 15.8xEV/Earnings 25.6x 21.1x

Content & Document Management 2Q07 1Q07Current Ratio 2.0 2.0EBITDA Margin 12.4% 10.3%Gross Profit Margin 67.3% 69.9%Net Income Margin 3.9% 3.6%TTM Earnings Growth (YoY) -9.7% 88.6%TTM Revenue Growth (YoY) 7.5% 8.9%TTM EBITDA Growth (YoY) 21.9% 31.6%Cash as Percent of Market Cap 23.9% 23.2%Enterprise Value Growth (YoY) 31.5% 8.9%EV/Revenue 1.7x 1.7xEV/EBITDA 15.3x 17.5xEV/Earnings 30.0x 32.8x

Customer Relationship Management 2Q07 1Q07Current Ratio 1.5 1.6EBITDA Margin 10.1% 10.1%Gross Profit Margin 66.7% 66.0%Net Income Margin 0.8% -1.0%TTM Earnings Growth (YoY) -20.1% -46.6%TTM Revenue Growth (YoY) 19.3% 19.6%TTM EBITDA Growth (YoY) 14.9% 9.5%Cash as Percent of Market Cap 13.1% 14.7%Enterprise Value Growth (YoY) 41.0% 14.6%EV/Revenue 3.2x 2.4xEV/EBITDA 33.2x 17.7xEV/Earnings 47.9x 105.0x

Database & File Management 2Q07 1Q07Current Ratio 2.0 2.2EBITDA Margin 24.5% 21.3%Gross Profit Margin 74.5% 81.8%Net Income Margin 12.4% 11.0%TTM Earnings Growth (YoY) 21.6% 21.0%TTM Revenue Growth (YoY) 2.3% 4.6%TTM EBITDA Growth (YoY) 14.4% 26.3%Cash as Percent of Market Cap 19.2% 24.5%Enterprise Value Growth (YoY) 17.8% -6.4%EV/Revenue 3.1x 2.6xEV/EBITDA 12.0x 9.3xEV/Earnings 24.4x 20.3x

Development Tools, Operating Systems & App Testing 2Q07 1Q07Current Ratio 2.0 1.7EBITDA Margin 4.1% 2.2%Gross Profit Margin 73.9% 73.2%Net Income Margin 0.6% -2.9%TTM Earnings Growth (YoY) -0.6% -8.7%TTM Revenue Growth (YoY) 11.3% 10.1%TTM EBITDA Growth (YoY) -0.1% -0.6%Cash as Percent of Market Cap 20.4% 20.2%Enterprise Value Growth (YoY) 20.8% 6.0%EV/Revenue 2.5x 2.0xEV/EBITDA 26.3x 22.1xEV/Earnings 32.6x 31.3x

eCommerce - Software 2Q07 1Q07Current Ratio 2.2 2.1EBITDA Margin 11.9% 12.2%Gross Profit Margin 68.2% 67.2%Net Income Margin 11.6% 14.8%TTM Earnings Growth (YoY) 3.4% 61.9%TTM Revenue Growth (YoY) -5.2% 1.4%TTM EBITDA Growth (YoY) -13.2% 14.7%Cash as Percent of Market Cap 12.9% 13.9%Enterprise Value Growth (YoY) 11.7% -35.9%EV/Revenue 2.3x 1.0xEV/EBITDA 14.6x 13.3xEV/Earnings 14.2x 11.2x

Education & Computer Based Training 2Q07 1Q07Current Ratio 1.0 1.1EBITDA Margin 7.9% 10.1%Gross Profit Margin 63.5% 69.6%Net Income Margin -4.5% -5.9%TTM Earnings Growth (YoY) -54.8% -50.4%TTM Revenue Growth (YoY) 10.8% 1.7%TTM EBITDA Growth (YoY) 19.5% -40.5%Cash as Percent of Market Cap 8.1% 7.5%Enterprise Value Growth (YoY) 3.3% 11.7%EV/Revenue 2.5x 2.2xEV/EBITDA 27.9x 34.4xEV/Earnings 44.4x 39.3x

Electronic Design Automation 2Q07 1Q07Current Ratio 2.2 1.4EBITDA Margin 16.2% 18.6%Gross Profit Margin 79.4% 80.8%Net Income Margin 5.6% 3.8%TTM Earnings Growth (YoY) 39.8% -17.9%TTM Revenue Growth (YoY) 9.6% 10.7%TTM EBITDA Growth (YoY) -2.8% 14.0%Cash as Percent of Market Cap 12.9% 15.3%Enterprise Value Growth (YoY) 32.5% 19.7%EV/Revenue 3.2x 3.0xEV/EBITDA 24.2x 13.9xEV/Earnings 37.2x 49.0x

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17| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

APPENDIX A: 2Q07 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY (CONTINUED)

Engineering, PLM & CAD/CAM Software 2Q07 1Q07Current Ratio 2.3 1.5EBITDA Margin 19.9% 19.2%Gross Profit Margin 72.6% 73.8%Net Income Margin 7.6% 5.2%TTM Earnings Growth (YoY) 5.4% -6.6%TTM Revenue Growth (YoY) 11.5% 10.7%TTM EBITDA Growth (YoY) 26.2% 24.0%Cash as Percent of Market Cap 10.6% 9.8%Enterprise Value Growth (YoY) 18.6% 19.0%EV/Revenue 3.2x 2.9xEV/EBITDA 17.5x 14.2xEV/Earnings 27.9x 32.2x

Enterprise Application Integration 2Q07 1Q07Current Ratio 1.8 2.0EBITDA Margin 18.7% 15.2%Gross Profit Margin 72.5% 71.3%Net Income Margin 5.3% 6.1%TTM Earnings Growth (YoY) 8.9% 11.1%TTM Revenue Growth (YoY) 12.2% 8.3%TTM EBITDA Growth (YoY) 20.1% 16.9%Cash as Percent of Market Cap 24.6% 27.8%Enterprise Value Growth (YoY) 18.8% 4.2%EV/Revenue 2.2x 2.0xEV/EBITDA 11.4x 13.7xEV/Earnings 23.7x 25.2x

Enterprise Resource Planning 2Q07 1Q07Current Ratio 1.5 1.5EBITDA Margin 8.8% 8.8%Gross Profit Margin 49.8% 50.3%Net Income Margin 2.2% 3.1%TTM Earnings Growth (YoY) -65.7% -60.6%TTM Revenue Growth (YoY) 14.8% 10.4%TTM EBITDA Growth (YoY) -8.5% 3.0%Cash as Percent of Market Cap 15.7% 17.2%Enterprise Value Growth (YoY) 21.1% 12.5%EV/Revenue 2.1x 2.2xEV/EBITDA 13.9x 16.3xEV/Earnings 35.9x 26.4x

Entertainment 2Q07 1Q07Current Ratio 2.7 2.3EBITDA Margin 10.9% 13.3%Gross Profit Margin 33.9% 35.6%Net Income Margin -3.4% -1.7%TTM Earnings Growth (YoY) 48.8% 26.0%TTM Revenue Growth (YoY) 3.7% 8.9%TTM EBITDA Growth (YoY) 32.7% 25.7%Cash as Percent of Market Cap 12.7% 11.5%Enterprise Value Growth (YoY) 12.4% 18.0%EV/Revenue 1.6x 1.6xEV/EBITDA 13.1x 13.3xEV/Earnings 27.7x 34.1x

Financial Services Software 2Q07 1Q07Current Ratio 1.3 1.3EBITDA Margin 19.9% 17.1%Gross Profit Margin 54.8% 52.8%Net Income Margin 11.1% 7.1%TTM Earnings Growth (YoY) 34.4% 21.3%TTM Revenue Growth (YoY) 11.7% 9.6%TTM EBITDA Growth (YoY) 14.6% 13.9%Cash as Percent of Market Cap 9.1% 8.4%Enterprise Value Growth (YoY) 25.5% 27.0%EV/Revenue 2.7x 2.6xEV/EBITDA 13.1x 13.5xEV/Earnings 22.6x 21.7x

Healthcare 2Q07 1Q07

Current Ratio 2.4 2.4EBITDA Margin 17.4% 16.4%Gross Profit Margin 55.9% 54.2%Net Income Margin 8.4% 7.3%TTM Earnings Growth (YoY) 65.1% 32.8%TTM Revenue Growth (YoY) 13.2% 19.0%TTM EBITDA Growth (YoY) 51.5% 48.5%Cash as Percent of Market Cap 12.9% 12.8%Enterprise Value Growth (YoY) 21.1% 6.0%EV/Revenue 2.8x 2.6xEV/EBITDA 14.3x 14.7xEV/Earnings 41.8x 39.3x

HR & Workforce Management 2Q07 1Q07Current Ratio 2.1 2.2EBITDA Margin 14.6% 10.4%Gross Profit Margin 56.7% 57.0%Net Income Margin 5.5% 3.5%TTM Earnings Growth (YoY) 51.2% 24.5%TTM Revenue Growth (YoY) 31.4% 22.1%TTM EBITDA Growth (YoY) 52.3% 40.8%Cash as Percent of Market Cap 12.6% 10.8%Enterprise Value Growth (YoY) 60.0% 7.8%EV/Revenue 3.5x 2.7xEV/EBITDA 25.8x 20.9xEV/Earnings 29.0x 32.6x

Messaging, Conferencing & Communications 2Q07 1Q07Current Ratio 1.5 1.5EBITDA Margin 6.5% 8.2%Gross Profit Margin 53.6% 55.2%Net Income Margin -7.1% -2.8%TTM Earnings Growth (YoY) 9.0% -16.6%TTM Revenue Growth (YoY) 16.7% 17.2%TTM EBITDA Growth (YoY) 58.6% 32.8%Cash as Percent of Market Cap 17.5% 15.8%Enterprise Value Growth (YoY) 22.9% 9.7%EV/Revenue 1.3x 1.8xEV/EBITDA 14.1x 15.5xEV/Earnings 33.6x 28.2x

Networking & Connectivity 2Q07 1Q07Current Ratio 2.6 2.7EBITDA Margin 4.7% 5.9%Gross Profit Margin 73.6% 73.6%Net Income Margin -0.9% -0.9%TTM Earnings Growth (YoY) -135.9% 23.2%TTM Revenue Growth (YoY) 4.5% 8.3%TTM EBITDA Growth (YoY) -8.2% -7.9%Cash as Percent of Market Cap 24.5% 24.8%Enterprise Value Growth (YoY) -20.4% -17.3%EV/Revenue 1.5x 1.6xEV/EBITDA 13.8x 16.2xEV/Earnings 21.0x 26.7x

Security 2Q07 1Q07Current Ratio 2.0 2.1EBITDA Margin 13.8% 12.2%Gross Profit Margin 67.9% 66.0%Net Income Margin 5.6% 7.3%TTM Earnings Growth (YoY) -3.0% 1.7%TTM Revenue Growth (YoY) 16.2% 14.8%TTM EBITDA Growth (YoY) 0.5% 7.5%Cash as Percent of Market Cap 17.1% 19.5%Enterprise Value Growth (YoY) 19.8% 1.1%EV/Revenue 3.2x 3.2xEV/EBITDA 14.6x 15.4xEV/Earnings 27.6x 24.2x

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18| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

APPENDIX A: 2Q07 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY (CONTINUED)

Storage & Systems Management Software 2Q07 1Q07Current Ratio 1.7 1.7EBITDA Margin 19.7% 20.4%Gross Profit Margin 70.7% 63.2%Net Income Margin 7.8% 8.9%TTM Earnings Growth (YoY) 11.2% 2.4%TTM Revenue Growth (YoY) 20.9% 15.5%TTM EBITDA Growth (YoY) 25.6% 26.7%Cash as Percent of Market Cap 11.7% 11.7%Enterprise Value Growth (YoY) 16.5% 9.1%EV/Revenue 3.6x 3.7xEV/EBITDA 14.0x 14.4xEV/Earnings 25.5x 26.6x

Supply Chain Management & Logistics 2Q07 1Q07Current Ratio 1.8 1.8EBITDA Margin 6.2% 6.5%Gross Profit Margin 56.6% 59.6%Net Income Margin -0.1% 0.6%TTM Earnings Growth (YoY) 3.2% 33.4%TTM Revenue Growth (YoY) 7.2% 6.3%TTM EBITDA Growth (YoY) 32.0% 15.7%Cash as Percent of Market Cap 23.9% 21.7%Enterprise Value Growth (YoY) 30.7% -0.5%EV/Revenue 1.9x 1.6xEV/EBITDA 13.3x 13.0xEV/Earnings 24.1x 24.3x

Web Analytics 2Q07 1Q07Current Ratio 2.1 2.3EBITDA Margin 23.9% 22.8%Gross Profit Margin 65.4% 71.9%Net Income Margin 7.9% 6.2%TTM Earnings Growth (YoY) -0.3% 109.5%TTM Revenue Growth (YoY) 46.8% 20.3%TTM EBITDA Growth (YoY) 33.2% 32.0%Cash as Percent of Market Cap 10.9% 21.5%Enterprise Value Growth (YoY) 19.6% 10.3%EV/Revenue 4.1x 4.2xEV/EBITDA 19.3x 16.7xEV/Earnings 35.6x 33.9x

Wireless 2Q07 1Q07Current Ratio 6.2 5.8EBITDA Margin 14.0% 13.7%Gross Profit Margin 53.6% 53.8%Net Income Margin 1.9% 0.6%TTM Earnings Growth (YoY) -54.0% -12.4%TTM Revenue Growth (YoY) 11.9% 11.9%TTM EBITDA Growth (YoY) 38.2% 10.1%Cash as Percent of Market Cap 29.7% 31.7%Enterprise Value Growth (YoY) -19.8% -8.3%EV/Revenue 1.6x 1.8xEV/EBITDA 12.9x 10.6xEV/Earnings 41.4x 21.7x

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19| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

APPENDIX B: 2Q07 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS

Buyer Seller Purchase Price Enterprise Value PP/R EV/R EV/EBITDA

Quarterly Revenue Growth (YoY)

Allen Systems Group Mobius Management Systems [NASDAQ:MOBI] 211,000,000$ 160,897,000$ 2.4x 1.8x N/A N/ABattery Ventures Quovadx [NASDAQ:QVDX] 136,700,000$ 106,280,000$ 1.6x 1.3x 15.2x 4.5%Captaris [NASDAQ:CAPA] Castelle [NASDAQ:CSTL] 18,200,000$ 9,410,000$ 1.7x 0.9x 10.7x -4.5%DealerTrack [NASDAQ:TRAK] Arkona [OTC:ARKN] 58,900,000$ 58,162,280$ 4.6x 4.6x 40.7x 30.4%Henry Schein [NASDAQ:HSIC] Software of Excellence [NZX:SOE] 58,000,000$ 57,713,000$ 3.0x 3.0x N/A N/AIBM [NYSE:IBM] Telelogic [Nordic Exchange:TLOG] 745,000,000$ 733,800,000$ 3.1x 3.1x 15.3x 19.0%Infor Workbrain [WB.TO] 199,980,000$ 180,750,000$ 2.1x 1.9x N/A N/AInvensys [OTC: IVNSY] Cimnet [OTC:CIMK] 24,000,000$ 24,471,550$ 4.3x 4.4x 29.6x 23.0%Microsoft [NASDAQ:MSFT] aQuantive [NASDAQ:AQNT] 6,000,000,000$ 5,783,290,000$ 12.2x 11.7x 44.4x 54.7%Motorola [NYSE:MOT] Terayon [PINKSHEETS:TERN.PK] 140,000,000$ 178,200,000$ 2.1x 2.6x N/A N/AOracle [NASDAQ:ORCL] Agile Software [NASDAQ:AGIL] 495,000,000$ 330,560,000$ 3.8x 2.5x N/A 1.2%Pearson Education eCollege.com [NASDAQ: ECLG] 538,000,000$ 529,912,000$ 9.8x 9.7x 23.0x 23.2%Software AG [FRANKFORT:SOW] WebMethods [NASDAQ:WEBM] 546,000,000$ 468,790,000$ 2.6x 2.2x 52.4x 1.1%Software Solutions Partners Sirius Financial Solutions [LSE:SIR] 86,800,000$ 77,014,000$ 1.1x 1.0x 3.9x 9.0%Symphony Technology Group Aldata Solutions [HELSINKI:ALD] 167,152,000$ 157,632,000$ 1.4x 1.3x 35.7x -18.8%Ericsson [NASDAQ:ERIC] LHS [XETRA:LHS] 441,400,000$ 418,900,000$ 4.6x 4.3x 5.9x 54.0%Websense [NASDAQ:WBSN] SurfControl [LSE:SRF] 400,000,000$ 358,917,000$ 3.3x 3.0x 51.5x N/A

Median: 3.0x 2.6x 26.3x 14.0%

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20| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

APPENDIX C: MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS

Company Seller Purchase Price

Autodesk NavisWorks $25,000,000 Opticore Birdstep Technology Service Factory $16,777,500 Segco Software $12,512,000 Broadcom Global Locate $146,000,000 Octalica $31,000,000 Business Objects Cartesis S.A. $300,000,000 Inxight $100,000,000 Chinadotcom Optic Saratoga Systems Syndmail Vectra Divestco i Land Data Spectrum Seismic Processing Experian Group Hitwise $240,000,000 Tallyman Collections Business Informarketing Fox Interactive Media Flektor Photobucket Google DoubleClick $3,100,000,000 GreenBorder Security Marratech Panoramio Peakstream

IBM Telelogic [Nordic Exchange:TLOG] $745,000,000

Watchfire Infor Workbrain [WB.TO] $199,980,000 Hansen $100,000,000 Intelligentias DATAKOM Systeam Italy Leica Geosystems Geospatial Imaging Acquis Earth Resource Mapping Ionic Software Microsoft aQuantive [NASDAQ:AQNT] $6,000,000,000 Engyro Stratature ScreenTonic

Motorola Terayon [PINKSHEETS:TERN.PK] $140,000,000

Modulus Video Nuance Communications VoiceSignal Technologies $293,000,000 Tegic Communications $265,000,000 Open Solutions Fincentric IA Systems

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21| 2Q07 SOFTWARE INDUSTRY EQUITY REPORT Copyright © 2007 Software Equity Group, L.L.C.

APPENDIX C: MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONTINUED)

Company Seller Purchase Price

Oracle Agile Software [NASDAQ:AGIL] $495,000,000 Appforge LodeStar Quest Software ScriptLogic $90,000,000 Magnum Technologies $18,200,000 SAP MaXware Outlook Wicom Communications Software AG Systems WebMethods [NASDAQ:WEBM] $546,000,000 Orgaplan Software $7,830,000 The Sage Group Snowdrop Systems $22,909,197 Pro-Concept $15,037,500 Xpert TouchStone Software DriverMagic.com PCDrivers.com 62nds Solutions

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APPENDIX D: SELECTED MERGERS AND ACQUISITIONS Battery Ventures acquires Quovadx (NASDAQ: QVDX) Category: SOA Software Purchase Price: $136,700,000 Seller Revenue: $81,200,000 EBITDA: $5,590,000 Revenue Multiple: 1.7x EBITDA Multiple: 24.5x Payment Terms: Cash SEG’s Perspective: Battery Ventures, a large venture capital/private equity firm, acquires Quovadx, developer of SOA solutions and software for healthcare organizations and financial services firms. Battery’s deep pockets will likely help Quovadx grow market share and compete against larger rivals. Healthcare IT spending is projected to grow at a 7.7% CAGR1 and SOA software and services are projected to grow at a 41.7% CAGR2. Immediately prior to deal announcement, Quovadx sold its CareScience division, an ASP based provider with over 200 hospital customers, to Premier, a Group Purchasing Organization comprising 1,700 hospitals and 45,000 other healthcare sites3. The $136.7 million purchase price paid by Battery Ventures includes the proceeds of the CareScience sale and represents a 24% premium compared to Quovadx’s closing stock price prior to announcement. 1: CAGR 2004-2009 Estimate. Source: CIBC Report, February, 2007 2: CAGR 2006-2010 Estimate. Source: Forrester 3: Puchase Price: $34.9 million, 2.3x TTM Revenue, 19.4x TTM EBITDA Birdstep Technology (Oslo: BIRD) acquires ServiceFactory AB Category: Enterprise Mobility Management Software Purchase Price: $16,777,500 Seller Revenue: $3,758,160 EBITDA: $601,305 Revenue Multiple: 4.5x EBITDA Multiple: 27.9x Payment Terms: Stock Birdstep Technology (Oslo: BIRD) acquires Secgo Software Category: Enterprise Mobility Management Software Purchase Price: $12,512,000 Seller Revenue: $4,216,000 EBITDA: $210,800 Revenue Multiple: 3.0x EBITDA Multiple: 59.4x Payment Terms: Stock and Earnout SEG’s Perspective: Birdstep, a developer of mobile workforce management solutions acquires both ServiceFactory (the developer of Orbyte – a service and access management system for broadband network operators and service providers) and Secgo Software (a developer of enterprise mobility management solutions). Secgo’s information security and mobility management solutions complement Birdstep’s connectivity offering to mobile operators while Orbyte, by ServiceFactory, gives Birdstep the opportunity to leverage its customer base by enabling mobile operators to offer wireless data services on top of their voice offerings. The company beefed up its global presence with the acquisition of US based lap-top connectivity software provider Aramova in December 2006. According to IDC, Enterprise Mobility Management is a $214 million market, growing 35% annually.

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Business Objects (NASDAQ: BOBJ) acquires Cartesis Category: Corporate Performance Management Software (CPM) Purchase Price: $300,000,000 Seller Revenue: $125,000,000 Revenue Multiple: 2.4x Payment Terms: Cash SEG’s Perspective: Business Objects, one of the largest pure play business intelligence providers, acquires Cartesis, developer of enterprise performance management software. Cartesis extends Business Objects’ existing business intelligence (BI) platform with financial reporting and consolidation, as well as governance, IRR and compliance management. The acquisition follows closely after Oracle’s acquisition of Hyperion (3.4x1, 17.1x2), arguably the leader in Cartesis’ core CPM market. Cartesis was acquired from PricewaterhouseCoopers in 2004 by a group of private equity buyers which grew Cartesis’ revenue 43% in 2005 and 28% in 2006 with the help of two acquisitions (Advance Info Systems, INEA). The acquisition is expected to be neutral to slightly accretive to earnings in the year following closing. 1: Enterprise Value/TTM Revenue 2: Enterprise Value/TTM EBITDA Business Objects (NASDAQ: BOBJ) acquires Inxight Category: Data Analytics Software Purchase Price: $100,000,000 (estimate) Seller Revenue: $25,000,000 (estimate) Revenue Multiple: 4.0x Payment Terms: Cash SEG’s Perspective: Business Objects, one of the world’s largest business intelligence (BI) software providers, acquires Inxight, a Palo Alto Research Center spinout and developer of unstructured data access and analysis software. Inxight positions Business Objects in the fast growing unstructured data management market, aiding its expansion beyond BI and into enterprise performance management. According to IDC, Inxight is estimated to have 3% of the information access tools market, which is expected to grow at a 22% CAGR over the next five years and is dominated by Autonomy, Fast Search & Transfer, Convera and Endeca. The acquisition follows closely on the heels of Reuters’ recent acquisition of text analytics solution provider ClearForest, and is Business Objects’ second acquisition (Cartesis) of 2007. CAE (NYSE: CGT) acquires Engenuity Technologies (TSX: EGY) Category: Simulation and Visualization Software Purchase Price: $19,763,693EV Seller Revenue: $11,161,800 Revenue Multiple: 1.8xEV Payment Terms: Cash SEG’s Perspective: CAE, a $1 billion provider of simulation equipment and services for the aviation and defense industries, acquires Engenuity Technologies, a developer of simulation and visualization software for the aerospace and defense vertical. Engenuity’s ability to leverage CAE’s modeling, simulation and training products in the competitive aerospace and defense vertical garnered a 14% purchase price premium1 despite being unprofitable and posting a 6% decline in revenue over the last three years. Initial investors in Engenuity will remain dissatisfied. CAE’s purchase price is 76% less than Engenuity’s 1999 IPO price. 1: The purchase price represents a premium of 14% based on the weighted volume average closing price for Engenuity over its last 20 trading days.

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CheckFree (NASDAQ: CKFR) acquires Corillian (NASDAQ: CORI) Category: Internet banking software and services Purchase Price: $219,780,000EV Seller Revenue: $60,960,000 Seller EBITDA: $2,250,000 Revenue Multiple: 3.6xEV EBITDA Multiple: 97.7xEV Payment Terms: Cash SEG’s Perspective: Financial software and services provider CheckFree acquires Corillian, a developer of online banking, payment and security solutions to the financial services industry. The acquisition, CheckFree’s second in 2007, brings together Corillian’s online banking platform and suite of financial applications, and CheckFree’s electronic billing, payment and online transaction services. With Corillian, CheckFree is better positioned to provide an integrated electronic billing and payment platform. Despite doubling revenue since its IPO in 2000, Corillian has struggled to remain profitable, posting losses in four of the last seven years and disappointing investors. Even with CheckFree’s 49% premium, the purchase price was 36% under Corillian’s IPO price. CheckFree recently acquired Carreker for $169 million (1.5xEV TTM revenue), a provider of payments technology and consulting services to the financial services industry. The two acquisitions follow Intuit’s acquisition of banking software provider Digital Insight ($1.26EV billion, 5.3xEV TTM revenue) in late 2006. DealerTrack (NASDAQ: TRAK) acquires Arkona (OTC: ARKN) Category: Automotive Dealer Management Software Purchase Price: $58,162,280EV Seller Revenue (TTM): $12,760,000 EBITDA (TTM): $1,430,000 Revenue Multiple (TTM): 4.6xEV EBITDA Multiple (TTM): 40.7xEV Payment Terms: Cash SEG’s Perspective: DealerTrack, developer of SaaS solutions to automotive dealers, financing sources and other automotive service and information providers, makes another acquisition in its target vertical by purchasing Arkona, a developer of on-demand software for automotive dealerships. Arkona had grown revenue 105% from FY04 and had gained real traction among independent automotive dealerships. DealerTrak has performed well, too, despite problems plaguing the domestic automobile industry. The company’s stock price has risen over 90% from its IPO opening in 2005, in large part due to strategic acquisitions that have grown revenue 147.6% in CY06 compared to CY04. Arkona is DealerTrack’s eighth and largest automotive retail acquisition since 2005 and its second in 2007 (Curomax – $37.5 million1, 3.7x2). The purchase price represents a 4% premium over Arkona’s five day average closing stock price prior to announcement. 1: Equity Purchase Price 2: Purchase Price/TTM revenue

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Equifax (NYSE: EFX) acquires TALX (NASDAQ: TALX) Category: Human Resource / Payroll Solutions Purchase Price: $1,397,622,000EV Seller Revenue: $256,830,000 Seller EBITDA: $89,710,000 Revenue Multiple: 5.4xEV EBITDA Multiple: 15.6xEV Payment Terms: Cash and Stock SEG’s Perspective: Equifax, one of the nation’s largest credit reporting agencies, acquires TALX, a provider of unemployment tax management services, and automated employment and income verification services. Talx brings Equifax 9,000 customers, a new market, and proprietary database of 142 million employment records to complement Equifax’s stable, recurring, transaction-based revenue model. Equally compelling, Talx has grown revenue 29% and earnings 55% over the last three years, with analysts forecasting 13% revenue growth in its next fiscal year1. According to Equifax, the purchase price represents an 11.0x multiple of CY07 EBITDA2 and will be accretive to Equifax’s EPS in 2008. 1: Talx next fiscal year ends March 2008 2: Pro forma for synergy opportunities Experian (London: EXPN) acquires Hitwise Category: Internet Marketing Intelligence Purchase Price: $240,000,000 Seller Revenue (TTM): $40,000,000 (estimate) Revenue Multiple (TTM): 6.0x Payment Terms: Cash SEG’s Perspective: Experian, a leading provider of credit, marketing, automotive and consumer related solutions and services, continues to grow its Marketing Solutions business with the acquisition of Hitwise, a provider of on-demand web intelligence solutions for internet marketers. The acquisition of Hitwise provides Experian best-of-breed digital intelligence solutions to further leverage its data, tools and expertise in consumer research services and email distribution. Specifically, Hitwise leverages the sales and distribution network of email delivery and analytics company CheetahMail, one of three additional acquisitions (Informarketing – Brazilian direct marketing services provider and Tallyman – collections management software) announced in Q207. The acquisition also provides Experian better footing in the US online advertising market which is projected to grow to $32 billion by 2010, a five year 20% CAGR1. 1. Interactive Advertising Bureau Infor acquires Workbrain (TSX: WB) Category: Workforce Management Purchase Price: $180,750,000EV Revenue (TTM): $96,509,000 EBITDA (TTM): ($185,000) Revenue Multiple: 1.9xEV Payment Terms: Cash SEG’s Perspective: Infor, the world’s largest private software company and third largest ERP provider, acquires Workbrain, a Canada based developer of web-based workforce management solutions for large enterprises. While Infor had earlier aggregated a broad array of human resource management solutions from acquisitions of SSA Global and Geac, it did not have a foothold in workforce planning, scheduling, time & attendance and intelligence, all core components of Workbrain’s product portfolio. Until recently, Workbrain had been a high growth company, growing new license revenue 58% in CY04 and 41% in CY05, but stalled badly, reporting

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new license revenue growth of only 2% in CY06. The arrested growth combined with Workbrain’s $2.5 million net income loss made its investors more receptive to Infor’s 26% premium1. Infor’s acquisition of Workbrain positions it to compete head-on with Kronos, which is being acquired by private equity firm Hellman & Friedman for $1.8 billion (2.9x2, 15.0x3). 1: 26% premium represents the increase over Workbrain’s closing stock price prior to announcement 2: Enterprise Value/TTM Revenue 3: Enterprise Value/TTM EBITDA Invesnsys (LSE: ISYS) acquires Cimnet (OTC: CIMK) Category: Manufacturing Software Purchase Price: $23,670,000EV Seller Revenue (TTM): $5,610,000 EBITDA (TTM): $635,900 Revenue Multiple: 4.2x EV EBITDA Multiple: 37.2x EV Payment Terms: Cash SEG’s Perspective: Invensys, a multibillion dollar industrial automation, controls and process conglomerate acquires Cimnet, developer of manufacturing software for the aerospace, automotive, pharmaceutical, medical devices, food and beverage and consumer packaged goods industries. The acquisition of Cimnet’s manufacturing intelligence and MES software is a natural plug-in to Invensys’ solutions that encompass the entire manufacturing and control enterprise. Despite competing against much larger ERP and manufacturing software and services vendors, Cimnet was able to grow revenue at a CAGR of 23.2% from CY2003 to CY2006 and posted net income of $1.4 million in CY2006. The purchase price represents an 8.5% premium over Cimnet’s 30 day average closing stock price prior to announcement. Mediasurface plc (AIM: MSR) acquires Immediacy Category: Web Content Management Solutions (WCM) Purchase Price: $11,100,000 Seller Revenue (TTM): $6,739,000 Revenue Multiple (TTM): 1.7x Payment Terms: Cash and Stock SEG’s Perspective: European web content management provider Mediasurface acquires Immediacy, a developer of web content management software for mid-sized businesses. The acquisition provides Mediasurface further down-market penetration and complements its Morello and Pepperio web content management products for large enterprises and small businesses, respectively. The deal consideration included two million shares of Mediasurface stock with 90% of that going to Immediacy’s four major shareholders who are locked up until year end 2007. Mediasurface acquired Class-Act Bv ($515,000) for its Silverbullet content management software in April 2005 and renamed the product Pepperio in early 2006.

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Microsoft (NASDAQ: MSFT) acquires aQuantive (NASDAQ:AQNT) Category: Digital Marketing and Services Purchase Price: $5,783,290,000 Seller Revenue: $492,650,000 EBITDA: $130,380,000 Revenue Multiple (TTM): 11.7x EBITDA Multiple (TTM): 44.4x Payment Terms: Cash SEG’s Perspective: In its largest acquisition to date, Microsoft acquires digital marketing and services company aQuantive. aQuantive’s acquisition is highly strategic for Microsoft, enabling it to compete with Google and Yahoo in the online media space. Avenue A / Razorfish is a leading interactive ad agency that will give Microsoft a major platform to serve advertisers, agencies, media owners, publishers and the digital marketing ecosystem, as well as promote Silverlight, Microsoft’s new rich-media and video plug-in, over Adobe’s Flash. Atlas, a provider of advanced tools to advertisers and publishers, competes directly with DoubleClick, a company Microsoft reportedly lost to Google in a bidding war earlier this year. The $66.50 per share bid represents an 85% premium over aQuantive’s pre-announcement last day trading price. The deal follows acquisitions of DoubleClick by Google ($3.1 billion), RightMedia by Yahoo ($650 million1), and 24/7 Real Media by WPP Group ($649 million) in a major consolidation of the lucrative internet advertising market, one that, dominated for decades by traditional broadcast television, is now projected to grow to US $32 billion by 2010, a five year 20% CAGR2. 1. Purchase price equals 80% of the shares outstanding 2. Interactive Advertising Bureau Oracle (NASDAQ: ORCL) acquires Agile (NASDAQ: AGIL) Category: Product Lifecycle Management (PLM) Purchase Price: $330,560,000EV Seller Revenue: $130,120,000 EBITDA: ($5,850,000) Revenue Multiple: 2.5x EV Payment Terms: Cash SEG’s Perspective: Enterprise software giant Oracle acquires Agile Software, a developer of product lifecycle management solutions. With Agile, Oracle picks up a relatively small but respected company in one of the fastest growing enterprise application segments. Agile runs on Oracle and 98% of Agile’s customers are Oracle technology customers. PLM spend is expected to reach $7.3 billion in 2009 and grow at an 11% CAGR1. Despite boasting renewal rates of 95% on maintenance and support contracts and 46% recurring revenue, Agile has reported a net loss for each of its last three fiscal years, but its exit valuation was buoyed by a significant cash hoard which constituted 33% of the equity purchase price. Agile posted a 0.4% decrease in revenue over its last twelve months, but analysts projected 10.0% growth in its next fiscal year ending April 2008. Oracle paid a 14% premium over Agile’s closing stock price prior to announcement. 1: Source: AMR Research 2006

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Pearson (NYSE: PSO) acquires eCollege (NASDAQ: ECLG) Category: Education Software Purchase Price: $529,000,000EV Seller Revenue (TTM): $54,877,000 EBITDA (TTM): $23,030,000 Revenue Multiple: 9.6x EV EBITDA Multiple: 23.0x EV Payment Terms: Cash SEG’s Perspective: Pearson Education, one of the world’s largest educational textbook publishers for the K-12, higher education and professional markets, acquires eCollege, a provider of on-demand information services to the post-secondary and K-12 education market. While eCollege’s $55 million in revenue pales in comparison to Pearson Education’s digital education sales of $1 billion, eCollege is a leader in the high growth online distance learning market, and has grown revenue at a 2003-2006 CAGR of 22%. Analysts were projecting eCollege would grow revenue 21.6% in CY07 compared to CY06, and 19.9% in CY08 compared to CY07. The purchase price represents a modest 7% premium over the company’s closing stock price prior to announcement. Sage (LSE: SGE) acquires Snowdrop Systems Category: Human Resource Management Purchase Price: $33,650,000 Revenue: $14,850,000 EBITDA: $2,180,000 Revenue Multiple: 2.3x EBITDA Multiple: 15.4x Payment Terms: Cash SEG’s Perspective: Sage, a U.K. based global supplier of business management solutions, acquires Snowdrop Systems, developer of human resources and payroll management software to over 700 mid-sized businesses in the U.K. Snowdrop will complement Sage’s existing ERP solutions for SME customers with products that manage the entire employee life-cycle, including recruitment, training, development and succession planning. Snowdrop was able to grow revenue 35% year-over-year to $14.9 million, a rounding error compared to Sage’s $1 billion in revenue, but a welcome growth metric considering Sage’s 7% organic growth.

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Quest Software (NASDAQ: QSFT) acquires ScriptLogic Category: Windows-based Systems Lifecycle Management Software Purchase Price: $90,000,000 Revenue: $20,000,000 Revenue Multiple: 4.5x Payment Terms: Cash SEG’s Perspective: Database and app management developer Quest Software acquires ScriptLogic, a provider of systems lifecycle management solutions for Windows-based networks. ScriptLogic gives Quest greater access to the SME market and a two-tier VAR distribution model to supplement Quest’s direct sales force. The acquisition follows closely on the heels of ScriptLogic’s launch of Security Explorer for SharePoint, a product for managing Microsoft SharePoint Server 2007. Quest is no stranger to purchasing Windows management providers, having acquired Aelita Software ($115 million, 3.8x1) and Vintela Software ($56.5 million, 4.7x2) in 2004 and 2005, respectively. Quest acquired Magnum Technologies in May 2007 and gained entry into the business services management (BSM) space, a market that Forrester predicts will nearly triple by the end of 2008. 1. Purchase Price/Revenue 2. Purchase Price/Revenue Software AG (XETRA: SOW) acquires WebMethods (NASDAQ: WEBM) Category: Enterprise Application Integration (EAI) Purchase Price: $417,790,000EV Revenue (TTM): $209,290,000 EBITDA (TTM): $8,950,000 Revenue Multiple: 2.0xEV EBITDA Mulitple: 46.7xEV Payment Terms: Cash SEG’s Perspective: Germany-based Software AG, Europe’s largest SOA provider, acquires fellow EAI developer WebMethods to leverage its enterprise business process management strategy. The combined company will service 4,000 customers and double Software AG’s customer base in North America. The two companies will likely be formidable competition for IBM and Oracle, which have made EAI a major strategic priority. EAI is expected to become an $11.5 billion market by 2013 and grow at a seven year CAGR of 14.0%1 as CIOs continue to spend on SOAs and integrated web services. Since WebMethods had stumbled recently, growing 3.4% TTM (5,5% projected for next fiscal year), the acquisition was a positive outcome for WebMethods’ shareholders, who received a 26% premium2. 1 Source: Research and Markets: Enterprise Application Integration (EAI) Market Opportunities, Strategies, and Forecasts, 2007 to 2013 2: 26% premium represents the increase over WebMethod’s closing stock price prior to announcement Tibco (NASDAQ: TIBX) acquires Spotfire Category: Business Intelligence (BI) Purchase Price: $195,000,000 Revenue (TTM): $45,000,000 (estimate) Revenue Multiple (TTM): 4.3x (estimate) Payment Terms: Cash SEG’s Perspective: Tibco, a leading provider of service oriented architecture and business process management software, acquires Spotfire, developer of next generation BI solutions with visual analytics. Tibco will combine its current infrastructure software with Spotfire’s applications products to create a complete solution that facilitates analytics on real-time data feeds. Tibco will face fierce competition from large pure-play BI vendors (Cognos, Business Objects), enterprise software companies (SAP, Oracle, IBM) and infrastructure developers (BEA, Sybase, Software AG/WebMethods). Approximately 80% of Spotfire’s revenue was from

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new licenses, a result of renewed CIO interest in BI applications. The all-cash transaction represents a significant premium over the median TTM M&A valuation for BI software companies (2.5x Purchase Price/Revenue). Tibco expects the deal to be dilutive to its pro forma FY07 EPS. Websense (NASDAQ: WBSN) acquires SurfControl (LSE: SRF) Category: Content Filtering Software Purchase Price: $358,917,000EV Seller Revenue: $121,400,000 EBITDA: $6,970,000 Revenue Multiple: 3.0x EV EBITDA Multiple: 51.5x EV Payment Terms: Cash SEG’s Perspective: Internet security company Websense acquires SurfControl, a leading provider of on-demand email and website scanning technology. With SurfControl, Websense eliminates its main competitor in the content filtering space, increases revenue by 64% and adds 16 million subscription seats and 25,000 customers. Websense also benefits from SurfControl’s recent acquisition of BlackSpider, an on-demand email security solution ($38 million, 5.0x TTM Revnue) that should enable Websense to penetrate the elusive SME market. Websense paid 6.0x TTM revenue in December to acquire PortAuthority, a leading provider of information leak prevention solutions, its first acquisition as a public company. Websense expects SurfControl to be 20% accretive to earnings over the next twelve months.

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To keep your finger on the pulse of the software equity markets, subscribe to our Quarterly Reports at http://www.softwareequity.com/research_reports.aspx, Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Since 1992, our firm has represented and guided private companies throughout the United States and Canada, as well as Europe, Asia Pacific, Africa and Israel. We have advised public companies listed on the NASDAQ, NYSE, Toronto, London and Euronext exchanges. Software Equity Group also represents several of the world's leading private equity firms. For confidential consultation without obligation, please contact Managing Director, Ken Bender (858) 509-2800, [email protected]. CONTACT INFORMATION: Software Equity Group, L.L.C. 12220 El Camino Real, Suite 320 San Diego, CA 92130 www.softwareequity.com p: (858) 509-2800 f: (858) 509-2818

This report was prepared by Software Equity Group, L.L.C. (SEG), an investment bank and M&A advisory serving the software and technology sectors. SEG is solely responsible for its content. This material is based on data obtained from sources we deem to be reliable; it is not guaranteed as to its accuracy and does not purport to be complete. This information is not to be used as the primary basis of investment decisions. For more, please visit www.softwareequity.com, or phone (858) 509-2800.