Google Inc.s Acquisition of AdMob

- How do investors evaluate young technology companies such as Google and how do these investor evaluations in turn impact management decisions?

- How would you value AdMob at the end of 2009: (i) as a stand-alone firm, and (ii) as an acquisition target.

Exhibit 4. Google Inc.'s Historical Balance Sheets Currency Consolidated 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 12/31/2002 USD (in thousands) USD (in thousands) USD (in thousands) USD (in thousands USD (in thousands USD (in thousands USD (in thousands) USD (in thousands) Yes Yes Yes Yes Yes Yes Yes Yes 426,873 1,705,424 2,132,297 311,836 89,972 159,360 2,693,465 57,752 88,579 146,331 61,994 12,646 10,825 583,068 148,995 185,723 334,718 154,690 22,105 48,721 560,234 261,837 73,582 188,255 0 231,796 86,886 33,013 10,197,588 14.287.187 24,484,775 3,178,471 667,650 836,062 29,166,958 8,130,134 3,285,524 4,844,610 128,977 5,677,503 262,611 416,119 40,496,778 1,892,307 215,867 1,676,440 0 8,656,672 7,189,099 15,845,771 2,642,192 286,105 1,404,114 20,178,182 7,576,341 2.342,498 5,233,843 85,160 5,836,544 0 433,846 31,767,575 1,522,194 178,004 1,344,190 Cash & Equivalents Short Term Investments Cash & Equivs & ST Investments Receivables (ST) Current Tax Assets Other Current Assets Total Current Assets Gross Property Plant & Equip Accumulated Depreciation Net Property Plant & Equip Long Term Investments Intangible Assets Deferred LT Assets Other Assets Total Assets Accounts Payable & Accrued Exps Accounts Payable Accrued Expenses Current Debt Current Lease Obligations Other Current Liabilities Total Current Liabilities LT Debt & Leases Deferred LT Liabilities Other Liabilities Total Liabilities Common Share Capital Preferred Share Capital Additional Paid-In Capital Retained Earnings Accum Other Comprehensive Income Other Equity Total Equity Total Liabilities & Equity 3,544,671 7,699,243 11,243,914 1,322,340 29,713 443,880 13,039,847 3,289,594 894,355 2,395,239 1,031,850 1,891,960 0 o 114,455 18,473,351 933,204 211,169 722,035 53,873 0 6,081,593 8,137,020 14,218,613 2,162,521 213.791 694,213 17,289,138 5,519,912 1,480,651 4,039,261 1,059,694 2,745,964 33,219 168,530 25,335,806 1,392,497 282, 106 1,110,391 0 - 0 643,105 2,035,602 0 30.249 580.276 2,646,127 313 3,877,174 4,157,073 8,034,247 687,976 49,341 229,507 9,001,071 1,417,425 455,676 961,749 0 277,683 0 31,310 10,271,813 530,134 115,575 414,559 0 0 215,250 745,384 0 45,887 61,585 852,856 293 0 7,477,792 2,055,868 4,019 -119,015 9,418,957 10,271,813 204,152 378,916 0 193,887 11,590 35,493 3,313,351 237,847 32,672 205,175 0 1.902 105,556 0 17,413 871,458 168,369 46,175 122.194 96 0 1,127 286,892 37,022 9,394 27,628 0 0 0 0 0 4,621 4,350 48,136 89,508 779,896 2,302,090 0 42,333 1,184,290 3,528,713 315 0 371,383 1,304,587 0 60,427 68,497 1,433,511 309 100,619 340,368 o 7,443 36,484 6,512 2,481 14,438 112,939 145 384,295 267 855,160 2.747,467 0 41,618 1,703,469 4,492,554 318 0 15,816,738 20,082,078 105,090 -83,348 36,004,224 40,496,778 62,462 235,452 1,988 23,524 21,724 282,688 161 44,346 725,219 191,352 1,660 -373,968 588,770 871,458 0 0 0 13,241,221 9,334,772 113,373 0 11,882,906 5,133,314 23,311 44,346 83,410 85,704 14,450,338 13,561,630 226,579 -6,677 28,238,862 31,767,575 0 2,582,352 590,471 5,436 -249,470 2,929,056 3,313,351 0 49 -39,701 173,953 286,892 22,689,679 25,335,806 17,039,840 18,473,351 Exhibit 3. Google Inc.'s Historical Income Statements USD Currency Consolidated Scale 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 12/31/2002 12/31/2001 USD USD USD USD USD USD USD USD Yes Yes Yes Yes Yes Yes Yes Yes Yes Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands 86,426 14.228 72,198 44,734 16,500 Total Revenue Direct Costs Gross Profit Selling General & Admin Research & Development Other Operating Expense Total Indirect Operating costs Operating Income Interest Income Gains on Sale of Assets Foreign Exchange Gains Other Non-Operating Income Total Non-Operating Income Earnings Before Tax Taxation Extraordinary Items Accounting Changes Net Income 23,650,563 8,844,115 14,806,448 3,651,235 2,843,027 0 6,494,262 8,312,186 229,673 96,738 -259,778 2,370 69,003 8,381,189 1,860,741 0 0 6,520,448 21,795,550 8,621,506 13,174,044 3,748,883 2,793,192 0 6,542,075 6,631,969 389,533 94,205 - 171,877 -1,090,234 -778,373 5,853,596 1,626,738 0 0 4,226,858 16,593,986 6,649,085 9,944,901 2,740,516 2,119,985 0 4,860,501 5,084,400 558,002 0 0 31,578 589,580 5,673,980 1,470,260 0 0 4,203,720 10,604,917 4,225,027 6,379,890 1,601,305 1,228,589 0 2,829,894 3,549,996 411,806 0 0 49,238 461,044 4,011,040 933,594 0 6,138,560 2,571,509 3,567,051 975,795 483,978 90,000 1,549,773 2,017,278 120.262 0 0 4,137 124,399 2.141,677 676,280 0 0 1,465,397 3,189,223 1,457,653 1,731,570 664,746 225,632 201,000 1,091,378 640,192 15,134 0 0 -5,092 10,042 650,234 251, 115 0 0 399,119 1,465,934 625,854 840,080 406,388 91,228 0 497,616 342,464 732 0 0 3,458 4,190 346,654 241,006 0 0 105,648 439,508 131,510 307,998 89,784 31,748 0 121,532 186,466 -1,355 0 0 -196 -1,551 184,915 85,259 0 0 99,656 0 61.234 10,964 -897 0 0 1 -896 10,068 3,083 0 0 0 0 3,077,446 6,985 Net Income to Common Shares Outstanding 6,520,448 4,226,858 317,772,051 315,140,484 4,203,720 312,917,000 3,077,446 308,997,486 1,465,397 296,330,644 399,119 266,917,000 105,648 160,866,000 99,656 145,346,000 6,985 137,384,000 Google Inc.'s Acquisition of AdMob Exhibit 2. Google Inc.'s Historical Cash Flow Statements 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12131/2003 12/31/2002 12/31/2001 USD (in thousands) USD (in thousands) USD (in thousands) USD (in thousands) USD (in thousands) USD (in thousands) USD (in thousands) USD (in thousands USD (in thousands) Yes Yes Yes Yes Yes Yes Yes Currency Consolidated Yes Yes 6,520.448 2,309,763 268,511 217,476 9,316,198 -809,888 -29,204,160 22,102,867 1,465,397 950.285 -43,660 87,400 2,459,422 -838,217 -12,675,880 10.257.214 -108,024 -101 310 Net Income Adjustments from Inc to Cash Change in Working Capital Other Operating Cash Flows Cash Flow from Operations Purchase of Pty Plant & Equip Purchase of Investments Disposal of Investments Other Investing Cash Flows Cash Flow from Investing Change in LT Debt Change in Equity Other Financing Cash Flows Cash Flow from Financing Effect of Exchange Rate Change in Cash Opening Cash Closing Cash 4,226.858 3,298,767 -298,795 626,027 7,852,857 -2,358,461 -15,403,458 15,762,796 -3,320,299 -5,319,422 0 87,567 0 87,567 -45,923 2,575,079 6,081,593 8,656,672 4,203,720 1,253,145 426,257 744,802 5,775,410 -2,402,840 -16,031,571 15,659,473 -906,651 -3,681,589 0 403,067 0 403,067 40,034 2,536,922 3,544,671 6,081,593 3,077,446 460,781 -356,133 398,414 3,580,508 -1,902,798 -27.701,038 23.107.132 -402,446 -6.899,150 0 2.966, 398 0 2,966,398 19,741 -332,503 3,877 174 3,544,671 399,119 831.132 -127,980 -125,227 977,044 -318,995 -4,134,576 2,611,078 -58,863 -1.901,356 -4,707 1,195,025 4,300 1,194,618 7,572 277,878 148,995 426,873 105,648 296,028 88 -6.319 395,445 -176,801 -316,599 219,404 -39,958 -313,954 -7,386 15,476 0 8,090 1,662 91.243 57,752 148,995 99,656 50,618 -6,526 11,517 155, 265 -37,198 -93,061 20,443 99 -109.717 -7,735 2.262 0 -5,473 0 40.075 17,677 57,752 6,985 26,565 -4,859 2,398 31.089 -13,060 -26,389 11,460 -1,102 -29,091 -4,503 2.030 34 -2,439 0 -441 18,118 17,677 -8,019,205 0 233,412 0 233,412 10,511 1,540,916 8,656,672 10,197,588 -3,358,193 -1.425 4,372,255 0 4,370,830 -21,758 3,450, 301 426,873 3,877.174 Depn & Amorth (CF) Net Purch of Pty Plant & Equip 1,524,308 -809,888 967,658 1,499,887 -2,358,461 571,939 -1.902,798 293,812 -838,217 148,473 -318,995 55,049 -176,801 28,983 -37.198 -2.402.840 14,182 -13,060 Exhibit 1. Google Inc.'s Historical Revenue Growth Google's Revenue (in thousands, except per share amounts) 2002 2003 2004 2006 2001 2005 2007 2008 2009 Revenues YIY Growth Rate Google web sites YIY Growth Rate Google Network web sites YIY Growth Rate Total Advertising Revenues YIY Growth Rate Licensing & other revenues YIY Growth Rate As % of Revenues Google web sites Google Network web sites Licensing & other revenues 86,426 439,508 1,465,934 3,189,223 6,138,560 10,604,917 16,593,986 21,795,550 23,650,563 352% 409% 234% 118% 92% 73% 56% 31% 9% 66,932 306,978 792,063 1,589,032 3,377,061 6,332,797 10,624,705 14,413,826 15,722,486 NA 359% 158% 101% 113% 88% 68% 36% 9% 0 103,937 628,600 1,554,256 2,687,942 4,159,831 5,787,938 6,714,688 7,166,318 NA NA 505% 147% 73% 55% 39% 16% 7% 66,932 310,915 1,420,663 3,143,288 6,065,003 10,492,628 16,412,643 21,128,514 22,888,804 NA 514% 246% 121% 93% % 73% 56% 29% 8% 19,494 28,593 45,271 45,935 73,558 112,289 181,343 667,036 761,759 NA 47% 58% 1% 60% 53% 61% 268% 14% 77% 0% 23% 70% 24% 6% 54% 43% 3% 50% 49% 1% 55% 44% 1% 60% 39% % 1% 64% 35% 1% 66% 31% 3% 67% 30% 3% Source: http://Investor.google.com/fin_data.html 0.35% 3.42% 5% -6% 1.12 15% ? 12/31/2009 1 Google Inc Risk Free Rate, 1-year Treasury Note: 2 Average for May, 2010 Risk Free Rate, 10-year Treasury 3 Note: Average for May, 2010 Required Market Risk Premium relative 4 to 10-year Treasury Note 5 Beta Google's estimated ke (based on 6 case Exhibit 18) 7 Adjustment for Size, Liquidity 8 Admobs Cost of Equity Capital 9 Admob's FCF Estimates (in 10 millions) 11 Net Revenues 12 EBIT(1-T) 13 Depreciation 14 Capex 15 Change in NWC 16 Free Cash Flows AdMob's Terminal Value 17 estimates Warranted MV firm / EBIT (1-tax 18 rate), using Google's 2009 multiple Warranted MV firm / Sales, using 19 Googles's 2009 multiple 20 21 Value of AdMob Using, Warranted MV Firm / EBIT 22 (1-tax rate); as multiple Using, Warranted MV Firm / Sales; 23 as multiple 12/31/2013 $146.48 $31.29 $10.10 $23.18 $137.24 ? 12/31/2012 $107.04 $13.97 $7.31 12/31/2011 $77.93 $11.83 $5.32 $11.91 $7.56 ? 12/31/2010 $55.68 $15.35 $2.57 $11.37 $11.34 ? $10.67 $28.45 ? 12/31/2013 12/31/2012 12/31/2011 12/31/2010 12/31/2009 24