Digital Media Software is a universe categorization unique to Kaufman Bros., LP and is composed of three sub-categories.  (It should be noted that we use a broad definition of media, whereas formal definitions may only include the usual: text, images, video and audio, we have extended the definition to include engineering designs as well.)  The three sub-categories of companies in our universe are, namely, content creation (ADBE, ADSK, ANSS, AVID, PMTC, DTSI, DLB, MSCS, NUAN & SNIC), content management (OTEX & IWOV), and the sale/distribution of digital content (GYI, RNWK, & NAPS).  Each category represents a pillar in the content lifecycle.  That said, even though the inherent purpose of each stage differs by means of functionality and therefore so do the respective companies, there are common threads driving adoption of these technologies across sectors and belief that the adoption of these technologies will affect how creators and consumers work and engage with the media.

Financial Services & Banks

The financials sector is the largest of the S&P industry sectors and consists of many sub-sectors within the specialty finance and banking segment.  We focus on debt purchasers or service providers, regional banks and specialty finance segments involved in lending or packaging consumer, commercial or retail loans.  Monetization of assets is a global industry, which is emerging based on the creative ability of finance companies to originate, package and sell assets, and the demand from buyers with a focus on the purchase of long-term assets as global liquidity grows.

 

IT Services & Enterprise Software

The IT Services and Enterprise Software sector includes companies that either sell packaged software applications to corporate customers or provide consulting and programming services to help these customers implement packaged software, write new applications or maintain existing systems. These segments, some of the largest in the technology sector, include IT Services firms such as Accenture, EDS, IBM and Infosys, while the larger enterprise software providers include Oracle, SAP, Microsoft and Salesforce.com. Sub-segments include firms with a particular vertical industry focus (such as telecommunications with the likes of Amdocs, Convergys and CSG), the India-based IT Services firms (such as Infosys, TCS and Wipro) and those offering software on a hosted “software-as-a-service” basis (including Salesforce.com and NetSuite). We believe that demand for software and IT Services will remain robust in 2008 despite concerns about slowing IT spending stemming from U.S. economic woes.

 

The Global Semiconductor industry is expected to grow to $260 billion in revenue in 2007, up +5% Y/Y and accelerate in 2008 to typical historical annual growth at 8%-10% Y/Y. Unit demand in the large semiconductor markets, such as PCs and Handsets, are expected to track greater than 10% Y/Y, supporting this growth. We currently see a well balanced supply chain and healthy utilization levels, allowing semiconductor companies to participate in this growth. Across the various semiconductor sectors, such as processors/memory and analog, we expect relatively balanced growth. We believe, in the current environment, that reasonably priced growth names with sustainable fundamental momentum, as well as value names with improving fundamentals, can provide attractive investment opportunities, given the stable overall environment.