North America Equity Research

12 July 2013

Software Technology
The Source Code V47- Claims Management Software
Stocks in our coverage are surging higher with the market as the pre-announcement period has been very quiet. CHKP and FTNT put out earnings call notices giving investors some confidence, but we would note our industry conversations indicate the June quarter was bumpy. So, even if revenue results are decent, it was probably not an easy accomplishment in our view. We have also seen a noticeable turn in RAX, one of our four favorite names, but remind everyone that this name will likely be volatile as shown by the stock reaction to the latest Amazon price cut on dedicated hosting. This week we take a look at another of GWRE's product segments the claims software space. Spotlight: Closer look at North American claims management market. As a follow-up to Source Code V34 P&C Policy Management, we are profiling the North American P&C claims management space in this Spotlight, a space where Guidewire is a clear leader. We recap current challenges in the P&C space, how claims management tools address these challenges, market sizing, and Guidewires competitive strength. Recent Buzz: SNCR (OW/PT $35) was down 12% on a competitor downgrade. We believe SNCR is on target and expect an in-line 2Q. Investor narrative around Rackspace has turned as evidenced by the first decline in short interest since April. Investors are looking at the potential of group stabilization and what it could do for the stock. But continued price cuts by Amazon showed just how volatile the name can be as this weeks announcement moved the stock by as much as 8% intraday. News That Matters: It was a relatively quiet week of news, as we gear up for 2Q earnings. ICANN Board approved 2013 registry agreement for new gTLDs, which is important for VRSN. Microsoft (covered by JPM Software analyst John DiFucci) announced it is focusing its engineering efforts around OS, Apps, Cloud and Devices and aims to facilitate a holistic view of the companys product lines. Metrics That Matter: This week we updated two of our quarterly macro economic metrics. The first one is for US unemployment rate for 2Q which came in at 7.6%, slightly ahead of JP Morgan estimate of 7.5% and the second update is for Euro and Yen currencies vs. USD at the end of 2Q which were USD 1.31 per EUR and 98.76 JPY per USD as compared to JPM estimate of USD 1.30 per EUR and 100.00 JPY per USD. And lastly, in our monthly metrics, we introduce Jun-13 metrics. Some major updates from the June metrics include: NFIB index for small business optimism which declined 0.9 points in June, Semiconductor revenues for the month of June which was 3.2% up from last month and Manufacturing data which showed expansion in US and contraction in Europe, although Europe showed some improvement from last month.

Software Technology Sterling Auty, CFA

AC

(1-212) 622-6389 sterling.auty@jpmorgan.com Bloomberg JPMA AUTY <GO>

Lauren Choi
(1-212) 622-6102 lauren.choi@jpmorgan.com

Saket Kalia, CFA

(1-212) 622-6477 saket.kalia@jpmorgan.com J.P. Morgan Securities LLC

Earnings season begins next week: Next week we start our earnings season
with one company CHKP on Thursday.

See page 19 for analyst certification and important disclosures.

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com

Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Table 1: Next Week Earnings Preview

JPM Company CHKP Rating OW PT $53 Call Info Jul 18, 8:30 AM (ET) Dial-In: 1 201.689.8261

Calendar 2Q13 Quarter Estimates JPM $331.8 $0.81 Street $336.4 $0.81 Preannounced/Guidance $320-350 $0.76-0.84 J.P. Morgan View All eyes will be on the product revenue line that we still have forecast to decline 7% y/y. We believe the company had a decent finish to the quarter, but was very back-end loaded. Given the run in the stock, that number along with implied bookings will have to be positive to keep the shares moving higher.

Revenue (in $M) EPS

Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Spotlight: Closer Look at North American Claims Management Market

As a follow-up to Source Code V34 P&C Policy Management, we are profiling the North American P&C claims management space in this Spotlight, a space where Guidewire is a clear leader. We recap current challenges in the P&C space, how claims management tools address these challenges, market sizing, and Guidewires competitive strength.

Claims Management Is another Key Element to Improving Customer Service & Retention
Pressures on the top line and bottom line of P&C carriers We believe property & casualty insurance carriers top and bottom lines are pressured as an industry. On the top line, the P&C insurance market is a stable and mature industry, with direct written premium (DWP) trending in line with GDP. It is also a very fragmented market with multiple sub-markets (personal, commercial, specialty, etc), and hundreds of players in each region, further pressuring DWP growth. On the bottom line, there seems to be a growing number of catastrophes (Hurricane Sandy, etc), which could drive claims (ie payouts to policy holders) up. Retention and new products are key to driving top line Because of the industry dynamics we described above, we believe customer retention and new product introductions are key to growth. We believe customer retention is important in the insurance industry because the longer customers pay a premium, the more profitable they will be even with periodic claims. New product introductions are important too, as we believe some sub-segments of insurance could have different growth/competitive profiles. Claims management tools need to be more interactive with customers, and be more technically savvy for vendors to improve retention P&C carriers use their claims management system to accept, process, and pay claims when customers need to make a claim against their insurance policy. A customer is probably not too happy when they are making an insurance claim, whether it is from a fender-bender with their car or for more serious damages to their property. For this reason, the claims management system has to be easy to use for insurance agents in order to provide timely, accurate service when paying claims. From the customer perspective, policyholders want to interact with their insurance similar to their interaction with other vendors through portals or mobile devices, which places different strains on claims management systems. From the P&C carriers perspective, new technologies like fraud analytics, business intelligence, and geographical informational systems for example can make claims management systems more efficient and reduce insurance leakage.

Claims Management Is a Big and Growing Market

We estimate the claims management market is worth $2-$2.5B, with about half in North America We estimate the worldwide market for claims management software and services is worth $2-$2.5B. That is based on our estimate of pricing to be 4-6 bps for every $1B in DWP for the recurring license portion, plus ~1.5x for the services. The services
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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

intensity for claims is slightly lower than policy management, as that system is more integrated into the P&Cs core systems and is the system of record for the carrier. We estimate worldwide DWP to be ~$1.5T, so applying that math gets us to ~$2.1B worldwide. We estimate North America makes up about half of worldwide DWP, and with similar pricing, that means North America represents ~$1B in total market size, by our estimates. 27% growth in number of deals signed in 2012, and still room for growth for two reasons The six claims management vendors in Figure 1 below signed 33 new North American deals in 2012, up 27% from 2011, a sign of the healthy growth in this market. We believe growth can continue for two reasons. First, these six vendors had 116 customers in production in North America, which we estimate is about 20% penetrated. We estimate this back-of-the-envelope by assuming ~1,200 worldwide P&C carriers worldwide, of which ~50% are in North America, consistent with the distribution of direct written premium. Second, there is still room for existing customers to upgrade to more current versions of software. For example, Gartner estimates ~9% of Guidewires customers are on a current version, and similarly only a couple of Accentures customers were on their latest release. We believe upgrades bring more capability, cover more DWP, and thus help drive market growth.

Guidewire is the Clear Leader

Guidewire has the largest number of customers in production, and is winning the most deals As we show in Figure 2 below, Guidewire is the clear leader in the space with its ClaimCenter product, with 60 customers in production, or 3x its nearest competitor. Based on customer count, this would equate to roughly 50% market share in claims management, though we note this is a very rough estimate without sales information. Just as important, ClaimCenter is continuing to extend this lead by signing 4-5x more new customers in 2012 than its nearest competitor with 18. We think this shows Claimcenter is keeping up with customer demands, and is capitalizing on its leadership position in the market.
Figure 1: Guidewire the Clear Leader in Claims, and Continuing to Extend Lead with Customer Wins

Source: Gartner

Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Guidewire is a leader in all tiers of P&C insurance Figure 2 below shows how the 116 North American customers are spread across the three tiers of P&C insurance carriers. The three tiers are separated by the amount of direct written premium for an individual carrier, with tier 1 with more than $5B, tier 2 between $1-$5B, and tier 3 less than $1B. Guidewire leads by 3x in tier 2 carriers, and by 2x in tier 3. This is not surprising as tier 2 and tier 3 customers are usually quicker to adopt more recent technologies, compared to tier 1 customers who can afford to rely on older systems given their market share. By the same token, Guidewire is virtually neck-and-neck with Accenture with 8 and 9 tier 1 customers respectively, an admirable achievement for a much smaller and younger provider.
Figure 2: Guidewire's Leadership in Claims Crosses All Segments of the Market

Source: Gartner

Market is consolidating to select few vendors, we think partially from desire for suite Gartners Marketscope excluded six vendors in this version because they either did not win any new customers in North America or did not have at least three live customers in production in North America, indicating the market is consolidating to a smaller number of providers. The vendors that were excluded because of no new customer wins were Aon eSolutions, Insurity, MajescoMastek, Pegasystems and MphasiS Wyde. Stone River was excluded because it did not have the minimum number of live customers in North America (note Stone River is headquartered in Oakland, CA). We think part of the reason for the consolidation to less vendors is the desire for customers to consolidate vendors and buy suite solutions, rather than best-of-breed solutions.

Competitive Landscape
Guidewire is adding innovative products to maintain/grow its leadership Based on our analysis of Guidewires Claimcenter, we see three areas that the company has invested in for innovation. First, is analytics with its good catastrophe management tools that offer heat maps and integration with third-party data (for example weather services) which make insurers more prepared to respond. Second, is fraud detection, which recall we estimate fraud to consume 2-4% of global DWP or approximately $50B per year. Third, is their newest introduction Guidewire Live,
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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

which will allow existing customers to benchmark performance against other customers. This is a new and innovative offering in P&C insurance, and while it is still nascent, could help Guidewire extend its leadership position in claims mangement. As we show in Figure 3 below, Guidewire has received a "Strong Positive" rating, a distinction it has received for six consecutive years by Gartner. How is Accenture different in claims management? Just as in policy management (refer to Source Code V34), Accenture is Guidewire's most formidable competitor in claims management as we show in Figure 3 below with its "Strong Positive" rating. Accenture has a larger presence in tier 1 and tier 2 customers, with 14 of their 16 North American customers in one of those two tiers. We believe this has given Accenture the reputation in the market of being a "large customer" provider, making it more challenging to go down-market. Like Guidewire, Accenture benefits from having a full insurance suite with Claims Components and Duck Creek Policy Administration. We think this is helping it capture more share than smaller point providers.
Figure 3: Gartner Vendor Ratings

Source: Gartner

Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Top Picks
DealerTrack (TRAK)
Description: Provider of transaction-based solutions, including the largest credit application network, as well as a leading SaaS software provider of solutions, including dealer management systems (DMS) into the automotive industry. Action: Buy the stock as recent SAAR data suggest healthy auto sales, but the stock has faded, unlike its five-year correlation to this data. Valuation: EV/FCFF of 26.2x as compared to SaaS of 20x and peer group of 18x. Positives Large ~$3-5B industry Transaction revenue addressable market approximately $630 million and subscription software market $2.7-4B, by our estimates. 12% yoy SAAR should drive 15% organic growth rate Transaction revenue should grow 2-3x the SAAR, potentially providing 20-30% growth and, combined with subscription revenue, should lead to 15% organic growth. SaaS should accelerate in 2013 as divestitures annualize. Upsell / Cross-sell into healthy dealers Auto dealers are in better financial position than they have been in five years, providing opportunity to invest in solutions to help them grow, and TRAK is best positioned to capitalize, in our view. Opportunities Consolidation fragmented market Management utilizing a solid balance sheet to create shareholder value through acquisitions that bolster long-term growth and cash flow potential, in our view. Risks/Challenges Health of auto industry Transaction revenue is 60% of total and 70% correlated with auto sales. Embedded software competitors Reynolds & Reynolds and ADP lock in customers for long-term contracts, making replacement sales more challenging. Threats Lenders look for alternative in transaction business Technology has significantly changed since the company first began its credit application network. A threat would be if lenders and nonbank companies that are looking at mobile payment opportunities form a competitive solution.

Source: J.P. Morgan.

Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Model N (MODN)
Description: Leading provider of software that helps customers maximize and grow revenue (revenue management) through pricing analysis, contract management/compliance, incentive/rebate management, regulatory compliance, channel strategy, etc. focused in Life Sciences and High Tech. Action: Buy the stock as we believe the market will reward the stock with a higher multiple for this secular story. Valuation: Stock is trading at 4.3x FY14E EV/S; we believe this multiple could expand to 4x (compared to peers at 4-7x), which combined with estimate upside potential could drive share outperformance Positives Large addressable market. MODNs two main markets (Life Sciences and High Tech) spend ~$17B on technology in the sales, marketing, and finance departments. We estimate about a third of this (or ~$5B) could be devoted to revenue management. Generates incremental revenue for customers, creates better growth and profitability The company estimates that for every $1B of sales, most companies leave $40-120M on the table per year. That growth drops to the bottom line, so, for example, high-tech customers can see anywhere from 6-20% gross margin improvement over five years. 94% revenue coverage next 12 months Backlog plus deferred revenue we estimate gives them 94% coverage on FY13 revenue estimates. Opportunities Deeper penetration into segments of High Tech and Life Sciences We know of just one customer in the software industry, so we believe there is lots of penetration opportunity in the high-tech vertical. Vertical industry expansion Can add other industries where pricing is complex or discounting prevalent. Go down market with SaaS simplified offering. Risks/Challenges Revenue growth tied to Implementation; if sales cycles lengthen, could get troughs in growth. The bulk of an average implementation is 9-12 months. So if sales cycles lengthen, it could impact forward revenue estimates. Threats Potential SaaS-only competitor. MODN offers its solutions on both a traditional license basis and SaaS basis, giving customers the choice. But when SaaS-only vendors enter the market, it could potentially pressure share gains.

Source: J.P. Morgan.

Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Web.com (WWWW)
Description: Putting small business on the Internet. Action: Buy stock because we believe valuation will re-rate higher as operating metrics keep improving. Valuation: Trading at 11.4x 2014E earnings for a company that we believe will generate consistent double-digit earnings growth. Too cheap, in our opinion. Positives Opportunities Risks / Challenges Threats Market. Social, local and Mobile Cyclical New Entrants Attacking $19B market for Selling marketing solutions SMB typically suffers in Barriers to entry not very small business Internet, for social networks, local, tough economic times. high. Large tech or social eCommerce, and and in mobile. network company offering advertising. Competition: similar solutions could gTLD program adds new VistaPrint and impact do-it-yourself part of Network Solutions ConstantContact increasing WWWW business. real estate on the Internet acquisition could add focus on providing small Web.com applied for .web incremental $144M in business online solutions. Shelf registration domain and could benefit revenue General Atlantic (GA) still from adoption of potentially has an estimated 8.5 million up to 400 new top-level Accelerating growth shares from the Network domains in 2013 and 7% organic growth in 2013E Solutions acquisition beyond. should accelerate to double registered that come digits in next few years. unlocked at the end of October and the company Visibility has 7M primary shares. 80-90% recurring subscription revenue.
Source: J.P. Morgan.

Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Rackspace Hosting (RAX)

Description: Rackspace is a cloud-computing provider in the managed hosting and public cloud infrastructure-as-a-service (IaaS) markets. RAX resells data center space, leases network equipment, and provides service so customers can focus on their core business. Action: Buy the stock as we believe the public cloud business will re-accelerate in 2H13, and the managed hosting growth will stabilize, which we think will drive multiple expansion. We note this stock, in our opinion, represents a very high risk, but potentially high reward opportunity. Valuation: Stock is trading at 9.2x FY14E EBITDA and has approximately 10% short interest; we think the multiple can get to 13x, which would still be a discount to its three-year average of 15x. Positives Move to cloud is secular trend, and RAX is a pure play. More computing is moving to the cloud. RAX is a pure play in the space, compared to others that are small parts of larger businesses. Public cloud market is ~40% grower The public cloud IaaS market is expected to grow at ~40% CAGR through 2016. We believe RAX can participate in this growth. RAX has been gaining share in Managed hosting IDC forecasts the complex managed hosting market to grow at 7-8% CAGR through 2016, and RAX has grown 15-20%, showing company is taking share. Hybrid cloud is a nice differentiator. The combination of RAX's managed hosting and public cloud business gives customers the choice to put different applications on dedicated hosting versus public cloud. This differentiates from pure-play public cloud, where the range of applications could be limited.
Source: J.P. Morgan.

Opportunities Openstack could be a gamechanger in public and private cloud RAX runs its public cloud on an open-source platform called OpenStack. Because it is open source, customers can prevent vendor-lock in on other systems, and run it in the private and public clouds. Enterprise is still an opportunity RAXs historical stronghold has been in small business (SMB). But because of its Fanatical service model, it has started to penetrate enterprises, which are usually larger deal sizes. Long-term margin target of 47% leavea a lot of runway EBITDA margins have been in the 30-35% range, as the company invests in cloud opportunity. Longer term, RAX is targeting 47%+ EBITDA margins, leaving a lot of runway for growth.

Risks/Challenges Public cloud could cannibalize managed hosting business As more computing moves to the cloud, there could be a risk that more customers opt for public cloud rather than managed hosting, cannibalizing RAXs larger, more profitable business. Company does not give detailed guidance. RAX has historically not given quarterly or annual revenue guidance (though it started in 2Q13). In our experience, this sometimes creates big ranges in expectations, which could potentially create tough comparables despite solid business performance.

Threats Amazon continues to lower pricing frequently. Amazon (covered by J.P. Morgan Internet analyst Doug Anmuth) Web Services (AWS) is the #1 provider of public cloud services. It lowers pricing frequently, which could commoditize the public cloud.

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Recent Buzz
SNCR (OW/PT $35) down 12% on competitive downgrade We fielded a number of calls this week on Synchronoss post a competitor downgrade. We believe with Verizon live now, the company is on track to their 2Q guidance. Also because Verizon pays SNCR based on a combination of active, dormant, subscription and storage fees, we feel comfortable that our estimates for 2Q and 2H is achievable. With Verizon Cloud, Vodafone and the Indian carrier going live in 4Q or 1Q 14, we think there is enough catalysts for the stock to work in the 2H. We would buy on weakness. Investors looking for the bottom in Rackspace The short interest in Rackspace according to Bloomberg declined in the June 28 report, the first notable reduction since April. We are getting a number of investor calls looking at the name on the long side as we believe the valuation under 10x EV/EBITDA is attractive. The stock continues to be one of our four favorite stocks, but we continue to highlight to investors that we believe the risk associated with it is high as evidenced by the 8% intraday hit the stock took when Amazon announced the price cut to its dedicated server pricing. We believe the dedicated hosting part of Rackspace business will see growth stabilize over the next two quarters, and that the cloud business has the potential for re-acceleration. If that happens we believe the stock will react favorably.

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

News That Matter

ICANN Board approves 2013 registry agreement for new gTLDs The New gTLD program committee of the ICANN board of directors approved the new registry agreement on 7/3. This has brought the new gTLD applicants closer to a point where they can see their names go online. The new registry agreement includes a Trademark clearinghouse where the trademark holder can protect there rights. This agreement is intended to enhance the security and stability of the Domain name System while bolstering the competition in domain name industry. To learn more please follow the link to ICANN press release below: http://www.icann.org/en/news/announcements/announceme nt-03jul13-en.htm Amazon Web Services (AWS) cuts prices again AWS announced on 7/9 that is cutting prices on dedicated EC2 compute instances by up to 80%. Amazon has done 20+ price cuts over the last few years on its various cloud products, so this is not surprising. This could be negative for Rackspace (RAX/OW), since the cuts are geared towards the dedicated business rather than the shared (ie public cloud) infrastructure business, which is RAXs larger business. Microsoft announces restructuring, some questions remain MSFT (covered by JPM Software analyst John DiFucci) formally announced the details of a long-awaited reorganization that focuses the companys engineering efforts around OS, Apps, Cloud and Devices and aims to facilitate a holistic view of the companys product lines. Notably, Windows and Office will fall under new leadership, while longtime Office leader Kurt DelBene is retiring. We believe the new organizational structure reflects MSFTs efforts to more clearly define its strategy though that strategy still lacks clarity, in our opinion.

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Metrics That Matter

Below you will find a table containing metrics that we believe are most important to the companies that we follow. We believe this will provide a concise resource to track these metrics, and we will likely expand this section going forward. Many of these metrics are critical to the way that we build or validate the revenue forecasts for the companies listed. Highlighted in gray are new updates and the value within bracket is the old value.
Table 2: Annual Metrics that Matter
Annual Metrics Engineers Employed (US) yoy change Giving USA (in $ Bil) yoy change Top 500 Assets Under Management (in $ Tril) yoy change JPM Semi R&D Spending Tracker ($ Bil) yoy change EDA Spending ($ Bil) yoy change Flat Panel TV Shipments (in millions) yoy change US Individual Income Tax Returns (in millions) yoy change Global Wireless Capex ($ Bil) yoy change US Total Advertising Spending ($ Bil) yoy change US Internet Advertising Spending ($ Bil) yoy change Security Spend ($ Bil) yoy change
Source: Shown Above.

Relevant Stocks ADSK, PMTC, ANSS BLKB

Why Relevant? Tracks the number of mechanical engineers, civil engineers, and architects in the US This tracks the amount of total donations by most major sources (individuals, corporations, etc) in the US. Assets under management (AUM) are the lifeblood of investment managers, and sometimes the metric for which vendors price solutions. EDA spending typically comes out of semiconductor research and development (R&D) budgets, and has shown a 90%+ correlation over the last 10+ years. This tracks the health of EDA industry.

2007 576530 3.8% 314.1 6.3% 69.4 8.9% 19.2 13.3% 4.1 9.6%

2008 605960 5.1% 307.7 -2.0% 53.4 -23.1% 17.6 -8.1% 3.4 -17.6% 116.1 28.0% 142.5 -0.4% 78.9

2009 593610 -2.0% 303.8 -1.3% 62.0 16.1% 17.4 -1.1% 3.1 -7.4% 159.1 37.0% 144.4 1.3% 73.9 -6.3% 347.4 -8.8% 20.3 14.1% 14.8 6.4%

2010 571220 -3.8% 290.9 -4.2% 65.0 4.8% 19.8 13.4% 3.4 8.7% 209.9 32.0% 142.4 -1.3% 63.1 -14.6% 350.5 0.9% 23.1 13.5% 16.5 11.6%

2011 575980 0.8% 305.4 5.0% 63.0 -3.1% 22.6 14.4% 3.9 15.1% 221.7 5.6% 145.3 2.0% 72.2 14.4% 356.7 1.8% 26.0 12.6% 17.7 7.5%

2012 593360 3.0% 316.2 3.5%

2013E

Next Update May 2014 June 2014 October 2013

Source US Bureau of Labor Statistics Giving USA

ADVS, SSNC SNPS, CDNS, MENT SNPS, CDNS, MENT ROVI

Tower Watson JPMorgan proprietary model JPMorgan proprietary model Display Search US Internal Revenue Services (IRS) JP Morgan Analyst Rod Halls Estimate Zenith Optimedia Zenith Optimedia

25.4 TBD 12.2% 4.2 7.9% 216.6 -2.3% 148.4 2.1% 70.0 -3.0% 369.0 3.5% 30.7 18.2% 19.1 6.4% 378.0E 2.4% 36.3E 18.2% 20.6E 8.5% TBD TBD TBD 4.6E 9.6% TBD Feb/March 2014 January 2014

Rovi generates an estimated ~25% of total revenue from licensing IP to TV manufacturers based on shipments. INTU generates ~35% of revenue from its consumer tax business, so we believe the change in total US tax returns is a relevant metric for this business The budget to vendors that sell into Telco's come from capex. This is a gauge of how spending is at their customers. Online advertising spending is an important metric for ROVI, VRSN, and WWWW. Online advertising spending is an important metric for ROVI, VRSN, and WWWW. We track this to keep an eye on spending levels for security companies.

90.7 63.1% 143.0 3.3%

INTU DOX, CMVT, NSR, CSGS ROVI, VRSN, WWW ROVI, VRSN, WWW CHPK, FTNT, WBSN, IMPV

TBD

0.0% 386.4 3.2% 14.5 30.9% 11.6 40.1%

0.0% 380.8 -1.4% 17.8 22.8% 13.9 19.6%

Gartner

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Table 3: Quarterly Metrics that Matter

Quarterly Metrics US Real GDP Change (at annual rate) Euro Real GDP Change (at annual rate) Relevant Stocks All All All, but particularly ADSK, INTU, PMTC, ANSS All, but particularly ADSK, PMTC, ANSS All, but particularly ADSK, PMTC, ANSS DOX, SNCR, MOTR, ROVI Why Relevant? On average, our coverage universe generates ~40% of revenue from the US On average, our coverage universe generates ~20-30% of revenue from Europe 1Q12 2.0 -0.1 2Q12 1.3 -0.7 3Q12 3.1 -0.2 4Q12 0.4 -2.3 1Q13 2.4 -0.9 2Q13E 2.0E 0.0E 3Q13E 2.0E 0.5E Next Update TBD TBD Source J.P. Morgan Economics J.P. Morgan Economics

US Unemployment rate (at annual rate) EUR/USD FX Rate yoy change USD/JPY FX Rate yoy change Smartphone Units ( in Millions) yoy change North American Video Subscribers (in 000s) yoy change Total .net and .com net additions (in millions) yoy change Total Domain Names (in millions) yoy change Wireless Subscribers (in millions) yoy change
Source: Shown Above

Many software tools are sold on a per seat basis

8.3

8.2

8.1

7.8

7.7

7.6 (7.5E) 1.31 (1.30E) 1.6% 98.76 (100.00E) 22.4% 221.3E 44.0% 96,942E

7.4E

TBD

J.P. Morgan Economics

1.33 For translation purposes -1.6% 77.6 For translation purposes -6.1% This is important for the health of the industry Rovi generates ~40% of total revenue from licensing interactive program guide (IPG) product and patents to service providers Verisign generates 95%+ of total revenue from its .com and .net registry business We track the growth of all domains combined to gauge market share Tracks the health of the wireless industry. 147.0 47.4% 97,802 0.8% 2.86 4.4% 233.0 11.1% 308.59 5.6%

1.29 -9.6% 80.7 -1.1% 153.7 42.6% 97,480 1.0% 1.81 -7.2% 240.0 11.6% 310.76 5.1%

1.25 -12.0% 78.80 0.4% 169.2 46.9% 96,733 0.2% 1.37 -31.3% 246.0 11.8% 312.33 4.0%

1.32 -2.9% 86.75 12.3% 207.7 38.3% 96,914 0.1% 1.25 -34.2% 252.0 12.0% 315.02 3.1%

1.3 -2.5% 94.28 21.5% 192.0 30.6% 97,144E -0.7% 2.00 -30.1%

1.30E TBD 4.0% 102.00E TBD 29.4% 242.9E TBD 43.6%

J.P. Morgan Economics

J.P. Morgan Economics JP Morgan, Rod Hall's Global Handset Model JPMorgan Telecom Research Team (Phil Cusick) market model VeriSign

ROVI

TBD -0.6% 1.25E (0.92E) -30.9% 0.89E (0.81E) -35.0% TBD 316.13 2.4%

VRSN VRSN, WWWW DOX, SNCR, NSR, CNSI

TBD

VeriSign JPMorgan proprietary model

TBD

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Table 4: Monthly Metrics that Matter

Monthly Metrics Total .com and .net name additions (in thousands) monthly change TurboTax Season to Date Returns (Total ex FF, in 000s) y/y change (over comparable period) US Auto Sales Total Annualized SA monthly change Architectural Billings Index monthly change ISM Manufacturing Survey monthly change Euro PMI Manufacturing index monthly change SIA data (in $ Bil) monthly change EUR/USD FX Rate monthly change USD/JPY FX Rate monthly change Brent Crude Oil Prices monthly change Small Business Optimism Index Intuit Small Business Employment Index monthly change
Source: Shown Above

Relevant Stocks VRSN

Why Relevant? Verisign generates 95%+ of total revenue from its .com and .net registry business INTU generates 35% of revenue from its consumer tax business TRAK's transaction revenue is 70% correlated with SAAR numbers. Autodesk generates at least 30% of total revenue from the architectural, engineering, and construction (AEC) industry. Manufacturing is a key vertical for design software Manufacturing is a key vertical for design software Tracks worldwide semi revenue, important for health of EDA spending

Dec-12 363.8 -18.1%

Jan-13 749.3 105.9%

Feb-13 584.4 -22.0% 12,699 -6.0%

Mar-13 641.9 9.8% 17,649 0.6% 15.2 -0.7% 51.9 -5.5% 51.3 -5.4% 46.8 -2.3% 26.2 24.2% 1.30 -2.5% 94.3 2.3% 111.2 -3.4% 89.5 -1.4% 94.7 0.2%

Apr-13 442.0 -31.1% 24,252

May-13 486.9 10.2%

Jun-13 323.3 -33.6%

Next Update 8/1/2013

Source Verisign

INTU

Feb 2014 3.8% 14.9 -2.2% 48.6 -6.4% 50.7 -1.2% 46.7 -0.2% 23.6 -9.9% 1.30 -0.3% 96.9 2.8% 104.8 -5.8% 92.1 2.9% 94.8 0.2% 15.2 2.4% 52.9 8.8% 49.0 -3.4% 48.3 3.4% 23.5 -0.2% 1.30 0.1% 100.5 3.6% 103.0 -1.7% 94.4 2.5% 95.0 0.2% 50.9 3.9% 48.8 1.0% 24.3 3.2% 1.31 0.9% 98.8 -1.7% 103.2 0.1% 93.5 8/13/2013 0.6% 94.1 0.1% 1.0% 94.4 0.4% 2.1% 94.5 0.1% -1.0% 95.1 0.1% 8/1/2013 TBD TBD TBD 15.9 4.3% 7/24/2013 8/1/2013 TBD

Company Reports Automotive News American Institute of Architects Institute of Supply Management Markit Semiconductor Industry Association J.P. Morgan Economics J.P. Morgan Economics J.P. Morgan Economics National Federation of Independent Business. Intuit

TRAK ADSK ADSK, PMTC, ANSS ADSK, PMTC, ANSS SNPS, CDNS, MENT All, but particularly ADSK, PMTC, ANSS All, but particularly ADSK, PMTC, ANSS AZPN INTU, WWWW, RAX INTU, WWWW, RAX

15.3 -1.0% 51.2 -3.8% 50.7 2.4% 46.1 -0.1% 25.5 3.6% 1.31

15.2 -0.5% 54.2 5.9% 53.1 4.7% 47.9 3.9% 23.1 -9.1% 1.33 1.6% 88.3 5.8% 111.8 1.9% 88.9

15.3 0.7% 54.9 1.3% 54.2 2.1% 47.9 0.0% 21.1 -8.8% 1.34 0.7% 92.2 4.4% 115.2 3.0% 90.8

8/1/2013

For Translation Purposes

1.5% 83.4

For Translation Purposes Aspen generates 40-50% of total revenue from the energy industry INTU, RAX and WWWW generate significant percentages of revenue from small business INTU, RAX and WWWW generate significant percentages of revenue from small business

3.3% 109.7 0.3% 88.0

TBD

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

IPO and M&A in the Sector

Below we provide a table of recent notable IPOs in software and related sectors.
Table 5: IPO List in the Software sector for the year.

Name Guidewire Software Inc AVG Technologies NV Brightcove Inc Bazaarvoice Inc Yelp Inc Demandware Inc Exact Target Vocera Communications Millennial Media Inc. Splunk Inc. Infoblox Inc Proofpoint Inc Acquity Group Ltd Audience Exa Corp. Service Now Inc. Palo Alto Networks E2open Inc. Trulia Qualys FleetMatics Group PLC Ambarella Inc Shutterstock Inc Workday Inc ModelN Marin Software Rally Software Tableau Software
Source: Bloomberg 16

Company Description Insurance industry software Antivirus and Internet Security Video hosting and publishing services Social Analytics Platform Social Networking e-commerce solution provider Email marketing software Instant voice communication solutions Mobile advertising and data services Online information technology search engine soln. Automated network control devices Data protection solutions Brand e-commerce and digital marketing Voice and audio processors Simulation Software Developer Enterprise information technology management software Next generation firewall provider On demand demand-supply solutions Real estate search engine Provides IT security risk and compliance management solutions Global Provider of fleet management solutions delivered as SaaS HD video compression and image processing semiconductors Operates a global marketplace for commercial digital imagery Renders enterprise SaaS business model products. Provides revenue management software Provides online advertising management services Provides application lifecycle management solutions Provides analytics and data visualization software

Ticker GWRE AVG BCOV BV YELP DWRE ET VCRA MM SPLK BLOX PFPT AQ ADNC EXA NOW PANW EOPN TRLA QLYS FLTX AMBA SSTK WDAY MODN MRIN RALY DATA

Trading Date 1/24/2012 2/1/2012 2/16/2012 2/23/2012 3/1/2012 3/14/2012 3/21/2012 3/27/2012 3/28/2012 4/18/2012 4/19/2012 4/19/2012 4/26/2012 5/9/2012 6/28/2012 6/28/2012 7/19/2012 7/25/2012 9/19/2012 9/27/2012 10/4/2012 10/9/2012 10/10/2012 10/11/2012 3/20/2013 3/22/2013 4/12/2013 5/16/2013

IPO Price 13.0 16.0 11.0 12.0 15.0 16.0 19.0 16.0 13.0 17.0 16.0 13.0 6.0 17.0 10.0 18.0 42.0 15.0 17.0 12.0 17.0 6.0 17.0 28.0 15.5 14.0 14.0 31.0

Current Price 7/11/2013 44.3 21.0 9.1 9.8 37.5 46.4 33.8 14.0 9.5 49.5 31.5 24.0 13.0 13.1 10.4 44.4 46.8 17.4 34.2 16.4 33.5 17.8 60.2 65.1 24.5 11.8 24.5 55.8

% Change 240.8% 31.4% -17.0% -18.3% 149.7% 190.3% 77.6% -12.6% -26.7% 191.2% 96.7% 84.8% 116.0% -23.2% 4.0% 146.8% 11.4% 16.1% 101.3% 36.4% 97.1% 196.7% 253.9% 132.3% 58.0% -16.0% 74.9% 79.9%

Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Table 6: Key M&A events in the sector

Acquirer Intel Microsoft Google HP Providence Equity Partners Oracle Corp. Synopsys SAP AG Oracle Corp. NEC SAP AG Microsoft Apple Synopsys PTC IBM DealerTrack RedPraire NCR Oracle Corp. Synchronoss Oracle Corp. Goldman Sachs Affiliate
Source: Bloomberg.

Target McAfee Skype Motorola Mobility Autonomy Blackboard Right Now Magma SuccessFactors Taleo Corp. Convergys IM Business Ariba Yammer Authentec Springsoft Servigistics Kenexa ClickMotive JDA Retalix Ltd. Eloqua Newbay Acme Packet EBIX Inc.

Deal Value $7.7B $8.5B $12.5B $10.3B $1.6B $1.5B $507M $3.4B $1.9B $449M $4.3B $1.2B $356M $406M $220M $1.3B $48.9M $1.9B $650M $871M $55M $1.7B $820M

Announcement Date 8/19/2010 5/10/2011 8/15/2011 8/18/2011 10/4/2011 10/24/2011 11/30/2011 12/3/2011 2/9/2012 3/22/2012 5/22/2012 6/25/2012 7/27/2012 3/8/2012 8/8/2012 8/27/2012 10/2/2012 11/2/2012 11/28/2012 12/20/2012 12/2/2012 2/4/2013 5/1/2013

Acquisition Multiple 3.8x EV/Sales 9.9x EV/Sales 11x EV/ FY2 EBITDA 17.6x FY1 EV/FCFF 6.8x EV/Sales 3.6x EV/Sales 11.7x EV/Sales 5.9x EV/Sales 8.6x EV/Sales 54x EV/Sales 3.5x FY1 EV/Sales 3.1x FY1 EV/Sales 2.7x EV/Sales 17x FY13E EBITDA 9.3x EV/Sales 23.2x EV/maintenance 3.8x EV/Sales

Reason Acquired for security solutions. Support Xbox, Windows Phone, Lync & Outlook Wireless connectivity patent portfolio and also boost to Google TV. To strengthen data analytics, cloud and workflow management capabilities. Taking company private. Acquired for on-demand customer service solutions. Cost synergies, enhanced R&D in analog design. For cloud-based human capital management solutions. To strengthen SAAS portfolio. IM system, including smart revenue solutions. For cloud based spend management solutions Acquired for enterprise social networking. Biometric authentication sensors & software. For additional analog & verification capabilities. For Service Lifecycle Management (SLM) For recruiting & talent management solutions. To strengthen the digital marketing footprint. To offer broad portfolio of solutions & services To expand retail industry leadership To create a comprehensive Customer Experience Cloud offering To add cloud based technologies expand their international reach To speed deployment of All-IP networks Taking company private.

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Table 7: Comparables
Price Info Price as of Target 7/11/2013 Price $54.15 $53.00 $19.92 $21.00 $47.35 $47.00 $16.37 $15.00 $23.44 $26.00 Average Akamai Technologies Equinix Rackspace Hosting Verisign, Inc. Web.com Amdocs Limited Comverse Inc. CSG Systems Neustar Synchronoss Technologies Ansys Aspen Technology Autodesk Cadence Design Systems Mentor Graphics Parametric Technology Corp Synopsys Advent* Blackbaud DealerTrack Guidewire Intuit Monotype Imaging ModelN Realpage SS&C Technologies Inc. AKAM EQIX RAX VRSN WWWW DOX CNSI CSGS NSR SNCR ANSS AZPN ADSK CDNS MENT PMTC SNPS ADVS BLKB TRAK GWRE INTU TYPE MODN RP SSNC OW OW N OW N N N N OW N OW N OW N N OW N N OW OW N OW OW N OW $44.50 $199.51 $40.25 $46.10 $26.12 $38.14 $30.81 $23.58 $51.70 $28.48 $78.35 $31.42 $35.40 $15.48 $20.43 $26.58 $37.20 $26.87 $33.00 $38.22 $44.30 $64.38 $27.78 $24.49 $20.01 $36.05 $52.00 $55.00 $48.00 $20.00 Average $39.00 $32.00 $22.00 $48.00 $35.00 Average $80.00 $33.00 $37.50 $17.00 $21.00 $24.00 $38.00 Average $35.00 $30.00 $40.00 $45.00 $65.00 $25.00 $25.00 $22.00 $34.00 Average Mean Median
Source: Company reports and J.P. Morgan estimates.

Company Check Point Software Tech. Fortinet Imperva Qualys ROVI

Ticker CHKP FTNT IMPV QLYS ROVI

Rating OW N OW OW N

Non-GAAP P/E FY1 FY2 16.1 15.2 41.0 34.6 NM NM NM 51.3 10.8 9.9 24.1 26.7 22.8 39.5 45.6 20.8 13.0 28.3 13.0 28.8 11.3 15.6 21.4 18.0 26.1 74.5 18.3 17.8 13.2 15.3 15.3 25.8 23.0 27.1 30.7 NM 20.3 23.7 NM 34.1 19.6 25.5 24.5 21.1 19.6 30.5 39.7 19.2 11.4 24.1 12.6 12.6 10.3 14.3 17.4 13.5 23.7 49.7 16.3 15.5 12.0 13.5 15.0 20.8 21.8 23.7 26.4 NM 18.6 21.9 NM 27.5 17.6 22.5 21.5 18.6

Valuation EV/Sales FY1 FY2 5.4 5.1 4.3 3.8 8.6 6.9 3.6 3.1 4.7 4.4 4.9 4.3 4.5 5.6 3.6 7.5 3.8 5.0 1.6 0.6 1.2 4.1 3.1 2.1 7.9 9.1 2.7 3.0 2.1 2.5 2.7 4.3 4.1 3.3 3.3 8.6 4.3 6.2 5.2 3.8 5.5 4.9 4.3 4.0 3.9 4.9 3.0 6.9 3.5 4.4 1.5 0.7 1.1 3.8 2.6 1.9 7.2 7.7 2.5 2.7 2.0 2.4 2.5 3.9 3.9 3.1 2.9 7.4 4.0 5.8 4.3 3.2 5.1 4.4 3.9 3.6

EV/EBITDA FY1 FY2 9.1 8.6 19.3 15.8 NM 66.6 23.3 16.1 10.3 9.5 15.9 21.9 10.5 12.2 11.1 11.6 13.4 11.8 7.6 5.4 5.3 8.4 10.9 7.5 15.9 42.0 9.7 9.8 9.3 10.7 9.4 15.3 13.1 15.1 13.9 55.1 11.3 14.5 NM 16.6 13.6 19.2 14.5 11.5 9.0 10.4 9.2 10.5 11.9 10.2 7.1 3.6 4.9 7.6 7.8 6.2 14.3 28.2 8.7 8.7 8.1 9.4 8.3 12.2 11.9 13.0 11.7 57.2 9.5 13.3 NM 12.9 12.4 17.7 14.2 10.4

EV/FCFF FY1 9.4 17.2 NM 26.0 16.1 16.8 19.2 NM NM 12.9 15.3 15.8 11.4 29.7 9.9 13.1 34.0 19.6 19.7 21.4 12.5 12.4 18.4 17.3 13.2 16.4 21.1 25.6 41.5 86.6 16.4 19.7 NM 29.6 21.1 32.7 21.6 17.9 FY2 8.8 15.1 67.8 18.6 11.3 22.6 15.0 NM 94.6 12.4 12.2 33.5 10.6 24.6 8.8 12.4 22.3 15.8 17.1 18.8 11.4 11.3 17.4 12.2 12.8 14.4 14.9 20.1 26.2 70.9 14.3 18.3 NM 21.6 19.3 25.7 21.8 15.0

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Companies Recommended in This Report (all prices in this report as of market close on 12 July 2013) DealerTrack Holdings Inc (TRAK/$38.24/Overweight), Guidewire Software (GWRE/$44.51/Overweight), Model N (MODN/$24.09/Overweight), Rackspace Hosting (RAX/$40.37/Overweight), Web.com (WWWW/$26.21/Overweight)
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures

Market Maker: JPMS makes a market in the stock of DealerTrack Holdings Inc, Web.com, Guidewire Software.

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Model N, Web.com within the past 12 months. Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: DealerTrack Holdings Inc, Model N, Web.com, Rackspace Hosting, Guidewire Software. Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: DealerTrack Holdings Inc, Model N, Web.com, Rackspace Hosting, Guidewire Software. Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: Web.com, Rackspace Hosting. Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: DealerTrack Holdings Inc, Web.com, Rackspace Hosting. Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking DealerTrack Holdings Inc, Model N, Web.com, Rackspace Hosting, Guidewire Software. Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from DealerTrack Holdings Inc, Model N, Web.com, Rackspace Hosting, Guidewire Software. Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Web.com, Rackspace Hosting. Gartner: All statements in this report attributable to Gartner represent J.P. Morgan's interpretation of data opinion or viewpoints published as part of a syndicated subscription service by Gartner, Inc., and have not been reviewed by Gartner. Each Gartner publication speaks as of its original publication date (and not as of the date of this report). The opinions expressed in Gartner publications are not representations of fact, and are subject to change without notice. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan covered companies by visiting https://mm.jpmorgan.com/disclosures/company, calling 1-800-477-0406, or e-mailing research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgans Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail research.disclosure.inquiries@jpmorgan.com.

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

DealerTrack Holdings Inc (TRAK, TRAK US) Price Chart

85

68

51 Price($) 34

OW

OW $35

OW $40

Date 29-Feb-08 12-Aug-08 02-Oct-12 03-Jul-13

Rating Share Price ($) OW N OW OW 20.47 15.79 28.01 36.24

Price Target ($) 35.00 40.00

17

0 Oct 06 Jul 07 Apr 08 Jan 09 Oct 09 Jul 10 Apr 11 Jan 12 Oct 12 Jul 13

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Feb 29, 2008.

Model N (MODN, MODN US) Price Chart

40

32 OW $25 24 Price($) 16

Date 15-Apr-13

Rating Share Price ($) OW 19.92

Price Target ($) 25.00

0 Mar 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Apr 15, 2013.

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Web.com (WWWW, WWWW US) Price Chart

44

33 OW $18 Price($) 22 OW $20

Date

Rating Share Price ($) 10.67 15.94 OW

Price Target ($) 18.00 20.00

20-Dec-11 OW 26-Oct-12
11

0 Nov 08 Aug 09 May 10 Feb 11 Nov 11 Aug 12 May 13

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Dec 20, 2011.

Rackspace Hosting (RAX, RAX US) Price Chart

125

OW $75

OW $81 100 OW $83 Price($) 75 OW $55

Date

Rating Share Price ($) 66.59 74.98 55.33 52.24 OW OW

Price Target ($) 83.00 81.00 75.00 55.00

05-Dec-12 OW
50

13-Feb-13 22-Feb-13

09-May-13 OW
25

0 Jun 09 Mar 10 Dec 10 Sep 11 Jun 12 Mar 13

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Dec 05, 2012.

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Guidewire Software (GWRE, GWRE US) Price Chart

70

56 OW $30 Price($) 42 OW $40 OW $45

Date 05-Mar-12

Rating Share Price ($) OW OW 21.69 32.25 41.53

Price Target ($) 30.00 40.00 45.00

28

05-Sep-12

29-May-13 OW
14

0 Jan 12 Apr 12 Aug 12 Nov 12 Mar 13 Jul 13

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Mar 05, 2012.

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research website, www.jpmorganmarkets.com. Coverage Universe: Auty, Sterling P: ANSYS, Inc. (ANSS), Advent Software (ADVS), Akamai Technologies, Inc. (AKAM), Amdocs (DOX), Aspen Technology (AZPN), Autodesk (ADSK), Blackbaud Inc (BLKB), CSG Systems (CSGS), Cadence Design Systems (CDNS), Check Point Software (CHKP), Comverse Inc (CNSI), DealerTrack Holdings Inc (TRAK), Equinix (EQIX), Fortinet, Inc (FTNT), Guidewire Software (GWRE), Imperva (IMPV), Intuit (INTU), Model N (MODN), Neustar (NSR), Parametric Technology Corp. (PMTC), Qualys (QLYS), Rackspace Hosting (RAX), Rovi (ROVI), SS&C Technologies (SSNC), Synopsys Inc (SNPS), VeriSign (VRSN), Web.com (WWWW) J.P. Morgan Equity Research Ratings Distribution, as of June 28, 2013
J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients* Overweight (buy) 44% 56% 42% 76% Neutral (hold) 44% 50% 50% 66% Underweight (sell) 12% 40% 8% 55%

*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com. Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

Other Disclosures
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Sterling Auty, CFA (1-212) 622-6389 sterling.auty@jpmorgan.com

North America Equity Research 12 July 2013

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