Who Is In Play? Oppenheimer Research Top Picks

67 WALL STREET, New York - October 15, 2011 - The Internet Services Report offers in-depth information for serious investors and industry executives. This Wall Street Transcript report contains expert industry commentary delivered directly by interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling 952-7433 or via The Wall Street Transcript Online.

Topics covered: Internet Infrastructure and Services Consolidation - Enterprise Adoption of Cloud Computing - Growing Cybersecurity Demand - Social Networking Economics

The growth of Apple Computer

The growth of Apple Computer and Google cloud services for the consumer and the desire of large telcos like ATT and Verizon to control a key communications industry component provides for significant upside in Cloud Computing and will trigger a significant increase in the acquisitions of public companies the Internet Services sector.

Timothy K. Horan, CFA, is a Managing Director and Senior Analyst heading the communication and cloud services equity technology team at Oppenheimer & Co. Inc. He has been with the firm since 1998 and has been a communications services Analyst for more than 13 years. Earlier, Mr. Horan was a Technology Analyst at Smith Barney, in a group that was ranked number two among wireline services teams in the 1997 Greenwich Associates institutional survey, and a perennial winner of the Institutional Investor analyst survey.

Equity Analyst

Before becoming an Equity Analyst, Mr. Horan worked as a Civil Engineer on various projects in the New York area. He received a B.S. in civil engineering from Rutgers, The State University of New Jersey, and earned an MBA in finance, with Beta Gamma Sigma honors, from Columbia Business School.

Mr. Horan: At a very high level, the large telephone companies want to in effect dominate cloud services for enterprises. They have very strong relationships with enterprises already by selling them networking capabilities. So they want to bundle in cloud services with networking, and that's why you have the acquisitions by Verizon and CenturyLink. I think they'll be looking to do more acquisitions.

You've had managed services companies, a lot of private companies get acquired, a lot of even small ones, however there are not that many public companies left to get acquired. In effect, Rackspace is a most logical one. If a company wants to be dominant in cloud services, and we think there is a decent chance either a large telephone company like an AT&T, Verizon or someone global like a BT would be interested in it, or even a large IT-based company, someone like an IBM historically.

The higher end of our coverage universe

Rackspace is more at the higher end of our coverage universe. It would be as a matter of fact more at the lower end or kind of in line with more traditional software companies or Internet companies, content companies. It trades at 11 times then year's EBITDA. We don't see that as particularly expensive. We'd to put it more exactly buy the company that sells in the 10 times range because we do think it's worth up in the 13 to 15 times range either on a take over or just on the pure growth that they're going to be seeing.

Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc.. International historical chart data, daily updates, fundAnalyst estimates data provided by Thomson Financial Network. All data povided by Thomson Financial Network is based solely upon innovation information provided by third party analysts. Yahoo! has not reviewed, and by no means whatsoever endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.