Value Stocks in Technology By Tommy Bauman, Jared Gardner, Karina Gonzalez, Bryan Morrell, John Zicaro

Finding Value Stocks in the Tech Sector Very Difficult Characteristics of Value Stocks High dividend yields Low Price-to-Earning ratios Low Price-to-book ratios Low Valuations Poor earnings report Bad press Legal issues

Value Stocks IBM Large Cap Value AT&T Large Cap Value Ness Technology Small Cap Core Blend of both Value and Growth

Value in Technology Computer Hardware Maturing stage of its life cycle Consolidation Value in International markets Industry PE ratio of 18.3 Telecommunication Maturing stage of its life cycle Mergers and spin-offs Industry PE ratio of 19.4 Computer Commercial Services Early maturing stage of life cycle International Offshoring segment Consolidation Industry PE ratio of 19.63

Market Position: Trades on the New York Stock Exchange ticker T Current market cap of about $130 billion Wireline Telecommunications industry Also offers Wireless through 60% ownership in Cingular Market Leader: # 1 in wireless customers # 1 in large-business customers # 1 in DSL broadband lines # 1 in local access and long distance lines # 1 in data revenues # 1 in directory publishing

Company Upsides/Risks: Upsides: 60 percent-owned wireless affiliate, Cingular Wireless Wireline segment AT&T Knowledge Ventures AT&T Labs Risks: Interest rates and foreign exchange rates Availability of technology Federal and state regulations

Financial Analysis: Operating income in 2005 increased 4.5% Strong earnings growth, earnings per share to increase by $0.15 to $2.25 Operating margin decrease

Stock Chart (1 year)

Market Position NSTC:Industry: Market Cap: B 413B Qrtly. Rev. Growth: 51.80% 12.70% Net Margin: 13.84% 9.70% PE: EPS: 2.31 ROE: 14.80% 3.30

Current Price: $32.50 (11/15/06) Intrinsic Value: $36.49 Zero Alpha Price: $35.43 Growth 10% 12 month projection: $40.03 BUY!! Analysts (32): Lehman Brothers Outperform Citigroup Buy Projections: Yahoo! - Mean; $38.74 ThomsonOne - Mean; $80.00 General projections state mean of $38, with a high of $42. Valuation:

Company Background – Products & Services Ness Technologies (NASDAQ: NSTC) is a leading international provider of comprehensive end-to-end IT services and solutions, offering a unique global delivery model of innovative, high-quality, value-added services that enable organizations to attain sustainable competitive advantage. Ness Technologies specializes in the design and deployment of leading-edge information management solutions, supplied by an infrastructure of global resources, through: Outsourcing and Offshore Systems Integration and Application Developments Software and Consulting QA and Training

Company Background - Clients Ness maintains a blue-chip client base, including Fortune 1000 and Global 2000 companies, across all verticals in which they operate. Ness has accrued particular domain expertise and experience in five sectors: Government & Defense: Lockheed Martin, Israel Defense and Justice Ministries Financial Services: Credit Suisse, Citibank, Generali Group, Bank Hapoalim Telecom & Utilities: AT&T, Orange, Czech Telecom, Israel Electric Corporation Life Sciences & Healthcare: Pfizer, Johnson & Johnson, Serono High-tech & ISVs: Business Objects, Chordiant, Check Point

Company Background - Partnerships Ness maintains an expanding network of over 100 strategic alliances and partnerships with leading global software, infrastructure and consulting vendors, thereby guaranteeing delivery of the best available solutions. Selected key partners include: Microsoft – Gold Partner, winner of Partner of the Year and numerous other awards SAP – Provider of SAP professional services worldwide and SAP distributor in Israel EMC – Global partner for Documentum systems and sole Documentum distributor in Israel IBM – Hardware and software partner in the U.S. and Asia BEA Systems – Partner for EAI platform and solutions delivery Intel - Strategic outsourcing and enterprise solutions integration partner

Market Position NSTC:Industry: Market Cap: M M* Quarterly Rev. Growth: 21.90% 12.70% Gross Margin: 28.55% 25.52% PE: EPS: ROE: 8.9% (nearly doubled each year)

Strengths & Weaknesses: Strengths: Wide variety of products and services Strong global opportunities Great client base and corporate relationships Consistently increasing net income Met or exceeded analyst projections each quarter Outperformed market by nearly 33% over the past year STABLE TECH COMPANY! Weaknesses: High Beta of 2.84 (though we don’t see much volatility) High COGS – haven’t been able to reduce over years Low market cap compared to industry and competition

Current Price: $14.74 (11/15/06) Intrinsic Value: $15.81 Zero Alpha Price: $17.45 Growth 8% 12 month projection: $18.15 BUY!! Analysts (8): Merrill Lynch, Lehman Brothers, Piper Jaffray “Outperform, market perform, buy, overweight” Projections: Yahoo! - Mean; $16.45 Piper Jaffray - $17.00 ThomsonOne - Mean; $16.00 General projections state mean of $16, with a high of $18. Valuation:

Leading provider in computer products and services Market Cap B EPS-5.81

Strengths Q3 Revenue was up 5.1% year-year. Diverse product line Acquisitions “Integrate to Innovate” Weaknesses Long term contract sales were down in the service sector High beta 1.65

Opportunities Software business Research & Development Threats Industry Competition Macroeconomic conditions

IBM P/E: P/S: 1.55 P/B: 4.05 ROE: 28.3 Div/Share: $1.1 Industry P/E: 21 P/S: 1.4 P/B: 2.47 ROE: 9.2 Div/Share: $.44

Current Price: $93.11 (11/15/06) Intrinsic Value: $91.89 Zero Alpha Price:$ Growth 12.5% 12 month projection: $ BUY!! Analysts (32): Goldman Sachs Buy Citigroup Buy Projections: Yahoo! - Mean; $95.29 ThomsonOne - Mean; $101 General projections state mean of $95.29, with a high of $105. Valuation: