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SECTOR: Technology COMPANY: Quantum Corporation (QTM) SR. ANALYST: BENJAMIN SOMMER JR. ANALYSTS: SIGMUND CORREA, FADI HUMAID, JAKE EPSTEIN, JASON GOTTLIEB,

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Presentation on theme: "SECTOR: Technology COMPANY: Quantum Corporation (QTM) SR. ANALYST: BENJAMIN SOMMER JR. ANALYSTS: SIGMUND CORREA, FADI HUMAID, JAKE EPSTEIN, JASON GOTTLIEB,"— Presentation transcript:

1 SECTOR: Technology COMPANY: Quantum Corporation (QTM) SR. ANALYST: BENJAMIN SOMMER JR. ANALYSTS: SIGMUND CORREA, FADI HUMAID, JAKE EPSTEIN, JASON GOTTLIEB, ALEX PUGLISI

2 Investment Recommendation QTM RecommendationBUY Current Price$2.65 1yr Target Price$3.97 % Upside49.9% Key investment drivers 1. Increase in IT service revenue with reduced costs 2. Well positioned with StorNext development 3. Significant patent advantages

3 Outsourced Data Hosting Micro-industry IT service providers specializing in cloud hosting and software development for a variety of hardware and software platforms, as well as providing virtualized storage services primarily for corporate clients.

4 Revenue Generation 4 Storage Center Leassors/ Buildings Storage Facilities Data Hosting and Management IT/Software Services Worldwide client accessibility Composes 90%+ of Revenue Generation Service and software support for clients

5 Technology $2,971.8B IT 69.7% Software 23.5% Data Storage 2.8% Outsourced Data Hosting 1.2% Industry Breakdown (by Market Cap) 5 = $35.67 Billion

6 Major Players in Industry – By Revenue 6

7 Company Snapshot BetaStock Price Shares Outstanding Market Cap (MM) Enterprise Value (MM) 2010 Revenue (MM) EBITDA (MM) 3.31$ $568.01$720.45$671.62$72.25 Primary Services – Provides cloud backup, recovery, and archive solutions Customer Base – Small businesses to multinational enterprises – US and international governments Products – DX series, StorNext, Scalar, Tape and Disk Drives

8 Trends: Global Bandwidth Utilization 8 Source: Mintel/U.S. Census Bureau, Service Annual Survey CAGR 46%

9 Trends: Worldwide IT Spending Forecast Source: Gartner Quarterly IT Spending Forecast

10 Trends: Enterprise Demand for Outsourcings Source: CISCO VNI, 2010 CAGR 21% E 2012E 2013E 2014E

11 Opportunities: Patents Opportunities: Patents Patent for the de-duplication and replication technologies Products of the Year 2010 by Storage Magazine 504 patents and 96 pending patent applications

12 Opportunities: StorNext StorNext File System delivers… o a shared disk file system used where large files can be shared by users without delay o Enables high performance file creation, storage, and Data Sharing o Enhanced Data Management & Protection features o Opens up market share potential for Apple customers to expand on existing IT departments, making their investments more efficient

13 DCF Forecasts EBIT $90.36 $ $ $ $ Taxes $84.03 $ $ $ $ D&A CAPEX (18.97) (19.35) (19.74) (20.13) (20.54) - Δ in NWC Unlevered FCF $ $ $ $ $ Net Present Value $432.91

14 Valuation Year2011(e)2012(e)2013(e)2014(e)2015(e) FCF $112.02$132.98$149.52$175.10$ DCF WACC20.72% Growth Rate2.5% DCF Value (50%) $ yr Price$3.12 Comparables TEV/EBITDA (%25) $ yr Price$6.91 TEV/Revenue (%25) $ yr Price$2.73 % Weight 1yr Target Price % Upside12% 1yr Target Price$3.97

15 Risks & Sensitivities One Year Price Targets Current Price

16 Recommendation De-duplication patent advantages Exclusive Apple Mac OSX offerings Increased demand for outsourcing and IT spending Recent acquisitions in the industry (TMRK) QTM RecommendationBUY Current Price$2.65 1yr Target Price$3.97 % Upside41.9%

17 Back-up slides Technology Sector | Outsourced Data Hosting Micro-industry 17

18 WACC 18 rD6.92% Tc7.11% D $368,941, % TEV $976,391,000 E $607,450, % rE29.40% WACC:20.72%100.00% beta3.30 historical return11% risk free rate3%

19 CompCo Analysis CompanyTickerTEVRevenueEBITDAEBIT TEV/Reven ue TEV/EBI TDA Quantum CorporationQTM x10.9x 1VMWare, Inc.TMRK3,160.02, x4.6x 2Rackspace HostingRAX4, x21.1x 3Intuit, Inc.INTU1,612.03,550.01, x1.5x 4Bottom Line TechnologiesEPAY x20.2x 5TeremarkTMRK1, x17.1x High 4,950 3,550 1, x21.1x Mean 2,214 1, x11.7x Median 1, x10.9x Low x1.5x

20 CompCo Valuation TEV/EBITDA 1yr Financial Projection I $ Implied 1yr Price Target $6.91 Upside (Downside) %147% Price/Sales: 1yr Financial Projection II $ Implied 1yr Price Target $3.64 Upside (Downside) %30% TEV/Revenue: 1yr Financial Projection II $ Implied 1yr Price Target $2.73 Upside (Downside) %-3% Net Debt $ Shares Outstanding225.4 Current Price ( ) $2.80


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