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Technology Sector ScorecardQ4 2016

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PwCTechnology Sector Scorecard

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Q4 2016 Executive summary


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Q4 2016 Executive summary

• The technology sector, as measured by the group of companies in this study, posted solid year-over-year revenue growth of 4.1%, and significantly higher quarter-over-quarter growth of 18.8% in Q4 2016. Year-over-year performance by subsector:

Technology industry continues to grow with strong year-over-year and quarter-over-quarter results in Q4

Internet 21.9%

Semiconductors 15.4%

Software Services 7.6%

Software 2.6%

Consumer Electronics 1.0%

Systems and PC Hardware -3.4%

EMS -3.6%

Communications -9.7%


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• Year-over-year revenue growth in the technology industry was led by the Internet, Semiconductors and Software Services sectors posting 21.9%, 15.4% and 7.6% growth, respectively. Software and Consumer Electronics also reported meaningful gains. Growth was still lagging for the EMS, Systems and PC Hardware and Communications sectors, though demand improved marginally for these sectors toward year end.

• The fourth quarter 2016 marked the first time mobile web traffic exceeded that of desktop. As a result, mobile advertising is starting to mature. With over US$20 billion in spending in the US alone, mobile internet advertising now accounts for one third of all internet ad spend. Facebook and Google are solidifying their positions in the online ad space. In terms of total online advertising, Facebook achieved 59% year-over-year growth in 2016, with ad revenues of US$8 billion. Google still dominates the market with almost US$30 billion revenues from pay-per-click (PPC) ads, as much as all other platforms combined. As these platforms grow larger and more powerful, they'll be able to exert more and more control over ad markets.1

• Marking the highest ever annual sales, worldwide semiconductor revenue grew by 1.5% to US$339.7 billion in 2016. Following a slow start to the year, the second half of 2016 was fueled by inventory replenishment and improved demand and pricing. Intel remained the market leader with 15.9% market share.2

Q4 2016 Executive summary (continued)

1. http://www.smartinsights.com 2. Gartner.com, Jan 2017

http://www.smartinsights.com/


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• Increasing consumer enthusiasm for the Internet of Things (IoT) and adoption of emerging technologies such as smart home devices, wearables and 4K Ultra HD televisions is expected to drive the US consumer technology industry to US$292 billion in retail revenues in 2017.3

• Positive results for the Software Services sector are due to the migration from traditional sourcing to as-a-service sourcing as enterprises increasingly embrace the digital opportunity to transform their operations, enhance their engagement with customers and better leverage their connections with suppliers. The annual contract value (ACV) of Infrastructure-as-a-Service (IaaS) outpaced Software-as-a-Service (SaaS) as the strongest growth area. In Q4 2016 alone, IaaS ACV was three times that of SaaS. For the full year, IaaS ACV jumped 54% to reach US$10.0 billion, while SaaS ACV increased by 13% to reach US$4.6 billion.4

• Though the Software sector posted only nominal revenue growth year over year, activity in the business intelligence (BI) and analytics software market remains brisk. This segment is forecast to increase 7.3% in 2017 reaching US$18.3 billion. By the end of 2020, the market is forecast to grow to US$22.8 billion. Modern BI and analytics is expected to expand more rapidly than the overall market, which is offsetting declines in traditional BI spending.5

• Following a strong Q3 with 20 tech IPOs, Q4 saw just ten tech IPOs, a 50% decline. Proceeds declined 68% from the US$5.4 billion in Q3. The Internet Software & Services subsector registered the highest proceeds with Chinese Software & Services company Meitu raising US$629.1 million. Strong capital markets point to a healthier global tech IPO market in 2017.6


3. www.cta.tech, Jan 20174. ISG, Jan 20175. Gartner.com, Jan 20176. Global Tech IPO Review –Full-year and Q4 2016, PwC


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• Following a strong 2015, Q4 2016 global tech M&A deal value of US$117.2 billion was down 38% year over year. However, 18 deals in the fourth quarter topped US$1 billion; the biggest being, Qualcomm, which acquired NXP for US$39.2 billion.7

• Momentum in the global economy firmed up in Q4 2016 amid broad-based gains in developed economies and emerging markets. Global GDP grew 2.7% year on year in Q4, above Q3’s 2.5% increase and marked the fastest growth in a year. A weak yen and an improving global backdrop supported a notable pick-up in Japan’s economy, while private consumption in the United States benefited from a healthy labor market. Meanwhile, China’s economy accelerated on the back of strong manufacturing activity, and rising commodities prices supported gains in a number of emerging economies. Overall, the global economy grew 2.6% in 2016, down from 2015’s 3.0%.8


7. Jegi.com, Jan 20178. http://www.focus-economies.com/regions/major-economies

http://www.focus-economies.com/regions/major-economies


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Source: ISM

51

.4 54

.6 58

.2

56

.2

54

.4 57

.0 61

.0

56

.4

51

.0

52

.4

53

.3

52

.7

50

.3

50

.6 52

.9

50

.2

55

.8

56

.5

53

.7

55

.2 57

.6

56

.9

52

.6

52

.6

51

.3

51

.8

51

.2 53

.3

30

35

40

45

50

55

60

65

4Q

07

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

Quarter

Recession Threshold (42.7)

The Purchasing Manager’s Index (PMI®) rose 4.1% to 53.3 in Q4 2016, an expansion in manufacturing for the second consecutive quarter and a new high reading for the year.

US Purchasing Manager’s Index (PMI) trendsQ4 2007-Q4 2016


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Snapshot by subsector

Communications


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Market analysisCommunications

• The networking equipment industry is under pressure. Revenues for the companies in our sample for the sector declined by 10% year on year, but realized a 6% increase sequentially. The sequential increase was led by Ericsson and Motorola Solutions revenue growth of 20.4% and 22.9%, respectively. Year over year net income also dropped sharply by 35%. Three out of the four companies under study in the sector reported declines in net income year on year, with LM Ericsson leading the way with a 121% decline.

• The 4G market has slowed, and 5G technology has not yet fully been rolled-out. As a result, the industry is expected to remain under pressure in the near future. For now, it is all about saving costs in order to maintain margins. Nokia has been able to achieve some cost efficiencies and synergies from its Alcatel-Lucent acquisition, but overall margins still declined. However, the acquisition has started to positively impact revenue. Growth in Alcatel-Lucent's Submarine Networks resulted in full-year segment revenue growth of 34%.1

• A comparison with other industry players shows that almost all companies in the sector are having a tough time dealing with declining sales growth. Nokia's gross margin has come down to around 36% in the last year, down from around 44% in 2015. Falling sales and a stronger dollar have resulted in lower gross margins for the company. In comparison, Ericsson has lost substantial sales, and its gross margin is at 28%. Ericsson had the lowest gross margin of the four companies compared here.1

1. Seekingalpha.com, Feb 2016


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Market analysis (continued)Communications

• Internet of Things infrastructure spending is making inroads into enterprise IT budgets across a diverse set of industry verticals. Given the strong uptake in IoT-based technology solutions, enterprise IT buyers are looking for vendors who can add IoT capabilities to the current networking and edge IT infrastructure. Further, success of IoT initiatives will also depend on how IT buyers can effectively leverage newer frameworks of low-power connectivity mechanisms, network virtualization, data analytics at the edge and cloud-based platforms. This is adding new challenges to networking/communications companies. There is increased demand for newer networking elements that can address the needs of IoT traffic behavior. WiFi and Bluetooth low energy (BLE) are top contenders as preferred IoT connectivity mechanisms.2

• Long-range, wide-area networks (LoRaWAN) and narrowband IoT (NB-IoT) are equally poised to provide tough competition to WiFi and BLE vendors. Data analytics, correlation and pattern recognition capabilities at point-of-data creation are proving to be key decision factors in vendor evaluation. There will be a significant shift towards edge server deployments as well as broader adoption of public cloud-based services for IoT.2

2. Gartner, Jan 2016


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• Before the benefits of 5G—the latest technology in networking—can be realized, the technology must overcome some obstacles. As devices evolve into a more complex state, wireless standards must follow. The evolution from 4G to 5G has huge potential to substantially change the value offering, but 5G comes with potential barriers, including the adoption of formal specifications, the roll-out across carriers and the management of signal attenuation. The FCC has approved spectrum in the microwave bands of 28 GHz, 37 GHz and 39 GHz. These higher frequency bands are needed to achieve the allowable channel bandwidth required to reach the data rates, which will be 1000x higher than those of today’s 4G LTE speeds. Telecommunications companies such as T-Mobile and Ericsson have demonstrated trials with download speeds of more than 12Gbps and latency—the time it takes for data to travel between source and destination—at under 2 milliseconds. Next, the carriers need to incorporate all of this into their own build-outs. Not only will 5G be adopted as the standard in fixed wireless devices, but there are also many potential applications for 5G for the connected home and smart city that will improve communication bandwidth and speed: TVs, traffic lights, IoT devices, VR applications and games and self-driving cars.3

3. Networkcomputing.com, Jan 2017


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• Reflecting the tough environment, Cisco reported second quarter revenue of US$11.6 billion and net income ofUS$2.3 billion. Total revenue was down 2%, with product revenue down 4% and service revenue up 5%. Revenue for Americas was down 3%, EMEA was flat and APJC was down 3%. Total gross margin and product gross margin were 62.8% and 61.1%, respectively. The decrease in product gross margin compared with 61.3% a year ago was primarily due to pricing and, to a lesser extent, product mix, partially offset by continued productivity improvements and the divestiture of the SP Video CPE Business. As of January 28, 2017, Cisco had repurchased and retired 4.7 billion shares with an aggregate purchase price of approximately US$98.6 billion.

• Cisco is launching four next-generation firewall boxes aimed at giving smaller organizations protection that is better sized to their needs and engineered to reduce performance issues as additional security services are turned on. The devices are built around dual, multi-core processors. That architecture enables custom processing of traffic requiring threat inspection, and also supports tagging traffic that doesn’t need threat inspection so it flows through only the separate network processing unit.4

4. Networkworld.com, Feb, 2017


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• In an effort to enhance its software business, Nokia is looking to acquire Comptel for around US$370 million. This deal demonstrates Nokia’s intent to move beyond royalty payments collection from its patents business. The Software solutions business has the potential to grow considerably and help Nokia to diversify beyond its core telecom hardware business. Comptel provides services to operators in 90 countries. It will bring a large customer base to Nokia. Additionally, the combination of Nokia and Comptel technology will give the company a better chance to further grow the business and increase penetration.5

5. Venturebeat.com, Feb 2017


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Q4 performanceCommunications

Company Q4’16

Revenue(US$ billions)

Gross margin (%)

Net income/(loss)(US$ millions)

EPS (US$)

Market cap (US$ billions)

Cisco Systems Inc 11.6 62.8% 2,348 0.47 155.5

LM Ericsson* 7.2 26.1% (177) (0.05) 19.1

Motorola Solutions Inc 1.9 49.3% 243 1.43 13.8

Nokia Corp** 7.1 42.0% 692 0.12 27.5

* SEK to USD exchange rate used for Ericsson is 0.117237 USD/SEK.

**EUR to USD exchange rate used for Nokia is 1.0516 USD/EUR.

For additional financial information, please visit http://www.pwc.com/techscorecard and click on the “Data explorer” box.

Company Q4’15


Gross margin (%)


EPS(US$)


Cisco Systems Inc 11.9 62.3% 3,147 0.62 117.6

LM Ericsson* 8.7 36.3% 830 0.25 31.3

Motorola Solutions Inc 1.7 49.8% 279 1.57 11.9

Nokia Corp** 8.5 42.4% 546 0.49 27.7

* SEK to USD exchange rate used for Ericsson is 0.118885 USD/SEK.

**EUR to USD exchange rate used for Nokia is 1.106750 USD/EUR.

http://www.pwc.com/techscorecard


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Consumer Electronics


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Market analysisConsumer Electronics

• The Consumer Electronics sector reported a marginal increase in revenue of 1% in Q4 2016 compared to the last year. Sequentially the sector experienced higher growth due to the holiday buying in the quarter. The increase in revenue sequentially was driven by Apple Inc and Sony Corp which reported strong revenue of US$78.4 billion and 20.7 billion, respectively.

• The Consumer Electronics sector finished the year on a high note. In fact, the Index of Consumer Technology Expectations (ICTE), which measures consumer expectations about technology spending, jumped 11.3 points in December to 89.1. Consumer sentiment toward technology spending bounced back in December following a temporary deviation in November. There was a healthy appetite for tech over the course of the 2016 holiday season thanks to strong performance by perennial strongholds, including strong sales of televisions over the Black Friday weekend and increasing interest in—even selling out of—emerging categories such as digital assistant devices, drones and VR headsets. In the entire holiday season, CTA projected tech spending would increase 3.1% over last year—driven mostly by an increase in online and mobile spending. The CTA ICE, measuring consumer sentiment about the US economy, increased another 4.5 points in December to reach 189.2, up significantly over the same month last year.1

• In other positive news, increasing consumer enthusiasm for the Internet of Things (IoT) and adoption of emerging technology will drive the US consumer technology industry to US$292 billion in retail revenues in 2017. The sales of emerging tech products such as smart home devices, wearables and 4K Ultra HD televisions will help produce 1.5% year-over-year growth in industry revenues. Connectivity has become the major driving trend. Consumers recognize that connected innovations are changing our lives for the better—offering us more control and personalization while helping us lead safer, healthier and happier lives.2

1. www.cta.tech, Jan 20172. www.cta.tech, Dec 2016


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Market analysis (continued)Consumer Electronics

• Q4 2016 was another positive year of smartphone growth, though the growth rate is slowing. According to the Worldwide Quarterly Mobile Phone Tracker, smartphone vendors shipped a total of 428.5 million units during the fourth quarter of 2016 (Q4’16), resulting in 6.9% growth when compared to the 401 million units shipped in Q4 2015. For the full year, the worldwide smartphone market saw a total of 1.5 billion units shipped, marking the highest year of shipments on record, yet up only 2.3% from the 1.4 billion units shipped in 2015. Large markets like China, the United States and Brazil all ended the year on a strong note, helping to keep worldwide volumes in positive territory. This year (2016) was the first down year for iPhone, yet Apple closed out the holiday quarter by surpassing Samsung for the top spot in the smartphone industry. There were also year-over-year declines in some emerging regions like the Middle East and Latin America where high growth had been expected.3

• In company news, Sony Corp’s sales decreased by 7.1% compared to the same quarter last year to US$20.7 billion. This decrease was mainly due to the impact of foreign exchange rates. There were significant increases in Game & Network Services (“G&NS”) and Semiconductor segment sales, which were offset by a decrease in Mobile Communications (“MC”) segment sales. Operating income this quarter decreased 54% year on year to US$796 million from US$1.7 billion last quarter. This significant decrease was mainly due to the US$962 million impairment charge of goodwill recorded in the Pictures segment. As announced on January 30, 2017, Sony made a downward revision to the projection for future profitability of the Motion Pictures business. Due to the revision, it was determined that the entire amount of goodwill, US$962 million, in the Production & Distribution reporting unit of the Pictures segment, which includes the Motion Pictures business, was impaired and an operating loss was recorded in the Pictures segment. During the current quarter, restructuring charges, net, decreased US$44 million. This amount is recorded as an operating expense included in the above-mentioned operating income.

3. IDC, Feb 2017


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Market analysis (continued)Consumer Electronics

• Philips NV said it agreed to sell an 80.1% interest in the LED components and automotive lighting supplier Lumileds for US$1.5 billion and a participating preferred equity that entitles it to a share of future returns. The Dutch health technology company said it would sell the interest to funds managed by affiliates of Apollo Global Management LLC (APO). Philips will keep the remaining 19.9% interest for a minimum of three years after the Apollo deal is completed. The deal is expected to be completed in the first half of 2017, subject to customary closing conditions, including regulatory approvals.


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Q4 performance Consumer ElectronicsCompany Q4’16


Grossmargin (%)

Net income /(loss)(US$ millions)

EPS(US$)


Apple Inc 78.4 38.5% 17,891 3.36 618.0

Canon Inc 8.2 47.7% 381 0.13 30.5

Philips* 7.6 44.3% 658 0.70 28.2

Sony Corp 20.7 37.6% 169 0.13 35.1

Toshiba CorporationN/A** N/A** N/A** N/A** N/A**

*EUR to USD exchange rate used for Philips is 1.0516 USD/EUR.

**Toshiba has delayed Q4 2016 financial reporting and has been excluded from this quarter’s analysis.


Company Q4’15


Grossmargin (%)

Net income /(loss)(US$ millions)

EPS(US$)


Apple Inc 75.9 40.1% 18,361 3.28 599.0

Canon Inc 8.5 50.1% 565 0.52 32.8

Philips* 7.8 43.5% (49) (0.05) 23.3

Sony Corp 21.5 37.1% 1,001 0.78 31.0

Toshiba Corporation** 12.0 13.6% (4,271) (1.01) 8.7

*EUR to USD exchange rate used for Philips is 1.1283 USD/EUR.

**JPY to USD exchange rate used for Toshiba is 0.0084 USD/JPY.



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EMS/Distributors


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Market analysis EMS/Distributors

• As a group, EMS companies in our sample had a slow quarter, posting a 3.6% decline in revenue year on year but a sequential increase of 7.3%, led by the seasonal holiday push. In terms of revenue, Flextronics had the greatest year-over-year decline of 9.6% to US$6.1 billion. In terms of net income, Avnet had the sharpest decline of 79% year over year. Overall, net income increased by 83% sequentially, but declined year over year by 27.6%.

• The EMS industry is closely following the growth projection of the overall OEM electronics market, which has been growing 2–3% a year. Most of the growth has been channeled into the commodities market—smartphones, PCs, tablets and digital televisions—dominated by the largest EMS and ODM suppliers. But of more interest to the broader industry is that there has been some good growth in the high-complexity industries such as industrial, medical, aerospace and automotive. This expansion in outsourcing is expected to continue as the benefits of subcontracting production become increasingly proven to the OEM world. Slowly, Asian OEMs are starting to question the significant capital investment needed to run their own in-house manufacturing. This is going to become increasingly apparent as the lines between IC foundries, advanced packaging and EMS assembly blur.1

1. Manufacturing Market Insider, Jan 2017


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Market analysis (continued)EMS/Distributors

• Foxconn Technology Group, a major EMS player is in preliminary discussions to make an investment and expand the company’s US operations. Apple has also begun exploring the possibility of moving smartphone production to the United States.1

• Electronics manufacturing overall is expected to experience slow growth in early 2017. Printed circuit board (PCB) book-to-bill ratio is based on three-month rolling averages of orders and sales, and normally leads PCB sales by three to six months. After three months of positive and strengthening ratios, the ratio fell to 0.99 (below parity) in November 2016, due to weak orders in recent months. Ratios below parity (1.00) indicate greater supply than demand, which may be a precursor of slowing or negative sales growth for electronics manufacturers. These indicators suggest the likelihood of slow growth in early 2017 with some volatility.2

1. Manufacturing Market Insider, Jan 2017

2. https://www.pannam.com/blog/top-trends-and-challenges-in-electronics-manufacturing/

https://www.pannam.com/blog/top-trends-and-challenges-in-electronics-manufacturing/


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Market analysis (continued) EMS/Distributors

• In company news, Ingram Micro Inc and HNA Group announced the completion of the merger on December 6th, under which Tianjin Tianhai Investment Company, Ltd, a publicly-traded subsidiary of HNA Group, acquired Ingram Micro for US$38.90 per share in an all-cash transaction with an equity value of approximately US$6 billion. Ingram Micro will cease trading on the New York Stock Exchange, but will remain headquartered in Irvine, California and will continue to be led by CEO Alan Monié.

• Avnet, Inc announced in November that it has acquired a majority interest in Hackster, Inc(“Hackster.io”) as the first step of a two part transaction in which Avnet will acquire the remainder of the company in 2017. Hackster.io is an online community that helps users globally learn how to design, create and program Internet-connected hardware. Hackster.io engages with nearly 90 technology partners, and maintains 100 Hackster Live ambassadors that support a network consisting of close to 200,000 engineers, makers and hobbyists. The combination of Hackster.io with Avnet’s recently launched MakerSource resource directory and acquisition of Premier Farnell’s element14 community will allow start-ups to design and create new ideas, then quickly find the resources to support them as they prepare to take their product to market.


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Q4 performanceEMS/DistributorsCompany Q4’16


Gross margin (%)


EPS (US$)


Arrow Electronics Inc 6.4 12.8% 165 1.81 6.3

Avnet Inc 4.3 13.7% 33 0.25 6.1

Flextronics International Ltd 6.1 6.8% 129 0.24 7.7

Tech Data Corporation 7.4 5.0% 79 2.22 2.1

Ingram Micro* NA NA NA NA NA

Foxconn** NA NA NA NA NA


*Ingram Micro has been acquired and has been replaced by Tech Data Corporation in this analysis.

**Foxconn financial release was not published at the time of production of this analysis.



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Q4 performance (continued)EMS/DistributorsCompany Q4’15


Gross margin (%)


EPS (US$)


Arrow Electronics Inc 6.8 12.4% 158 1.69 6.8

Avnet Inc 4.2 -45.9% 156 1.16 5.6

Flextronics International Ltd 6.8 6.7% 149 0.27 6.2

Tech Data Corporation 7.5 4.7% 96 2.72 1.5

Ingram Micro* 11.3 6.8% 141 0.93 4.5

Foxconn** 40.6 7.1% 1,452 0.09 35.3

*Ingram Micro has been acquired and has been replaced by Tech Data Corporation in this analysis.

**Foxconn financial release was not published at the time of production of this analysis.

**TWD to USD exchange rate used for Foxconn is 0.0318 USD/TWD




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Internet


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Market analysisInternet

• The Internet players in our study reported strong numbers in Q4 2016 with revenue growth of 20.2% year over year and 22.9% quarter over quarter. Net income increased sharply year over year by 739%, but it declined sequentially by 15.5%. The year-over-year growth was due to eBay’s significant increase in net income of US$5.9 billion, driven by a US$4.6 billion income tax benefit related to a legal structure realignment and eBay’s sale of its equity holdings of MercadoLibre, Inc, for a US$0.8 billion gain.

• Asia now makes up over half of the entire global smartphone user base. As a result, a ‘mobile first’ approach is a must when entering into an Asian market. The fourth quarter 2016 marked the first time mobile web traffic exceeded that of desktop. As a result, mobile advertising is starting to mature. With over US$20 billion in spending in the US alone, mobile internet advertising now accounts for a 3rd of all internet ad spend. Facebook and Google are solidifying their positions in the online ad space. In terms of total online advertising, Facebook achieved 59% year-over-year growth in 2016, with ad revenues of US$8 billion. Google still dominates the market with almost US$30 billion revenues from pay-per-click (PPC) ads, as much as all other platforms combined. As these platforms grow larger and more powerful, they'll be able to exert more and more control over ad markets. Facebook has already announced a plan to allow businesses to leverage their user data to deliver targeted ads on other sites, which would be purchased via Facebook.1

1. http://www.smartinsights.com/



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Market analysis (continued)Internet

• Online video consumption has also jumped significantly. Almost 5 billion videos are viewed on YouTube daily. Facebook's daily video views have shot through the roof, reaching 8 billion per day at the end of 2016 from around 1 billion in 2015. However, note that Facebook counts a view after three seconds where as YouTube counts a view after 30 seconds. Snapchat has grown tenfold over the course of 2016 to an astonishing 10 billion daily video views. But Snapchat counts a view as soon as the video is rendered on the screen.1

• Messaging app usage for photo and video sharing such as WhatsApp and Snapchat is growing rapidly. People are choosing to communicate with a group of friends via messaging apps rather than social networks. This has led to a massive increase in messaging app users, with WhatsApp reaching 1 billion users and Facebook Messenger and WeChat following the same growth trajectory. These messaging apps now have more users than established social networks like LinkedIn, Twitter and Instagram.

• Ecommerce continues to be a high growth sector. American online spending reached a massive US$340 billion in 2016, up considerably from 2015 at US$304 billion. Ecommerce now makes up over 10% of total retail sales in the US leaving it with plenty of room to grow.1 The E-commerce sector has even more growth potential with the use of the Internet of Things (IoT) technologies. The IoT has already been adopted by retail stores. For instance, retailers are using beacons, devices that automatically send notifications and discounts directly to shoppers' smartphones based on where the shopper is located in the store. Analysts expect the beacon installed base to escalate from 96,000 in 2015 to 3.5 million in 2018. Also, digital signs push ads and price changes to stores in real-time, which creates target sales for consumers. It is expected that the global market value for digital signage will grow to US$23.7 billion by 2020 from US$15.8 billion in 2015. Smart mirrors let customers virtually try on clothes. Smart shelves automatically monitor inventory in stores and notify the manager when an item is running low.

1. http://www.smartinsights.com



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Market analysis (continued)Internet

• Company highlights include Amazon net sales increasing 22% to US$43.7 billion in the fourth quarter of 2016, compared to US$35.7 billion in Q4 2015. In Q4 2016 operating income increased 13% year over year to US$1.3 billion. Net income was US$749 million in Q4 2016 compared to net income of US$482 million in Q4 2015. This was due to Amazon’s success in generating add-on service sales. Amazon Web Services (AWS) has expanded with Amazon GO and its new Prime video offerings. AWS also is on track to launch an apparel site.

• eBay Inc delivered a sharp rise in net income from continuing operations to US$5.9 billion, driven by a non-cash US$4.6 billion income tax benefit related to a legal structure realignment. Its gross merchandise volume (GMV) increased by 5% to US$22.3 billion in Q4 2016. Revenue for Q4 2016 was US$2.4 billion, up 6% year over year. During the fourth quarter, eBay also repurchased US$1.0 billion of its common stock. StubHub had a record quarter with GMV of US$1.2 billion, up 5%, and revenue of US$279 million, up 20%, mostly from its baseball and theater genres. eBay’s marketplace delivered record results of over US$10 billion of volume for the first time ever.


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Q4 performance Internet

Company Q4’16


Gross margin (%)

Net income(US$ millions)

EPS (US$)


Amazon 43.7 33.8% 749 1.54 357.7

eBay 2.4 77.5% 5,936 5.30 33.3

Google 26.1 59.1% 5,333 7.56 548.1

LinkedIn* NA NA NA NA NA

Netflix 2.5 33.2% 67 0.15 53.3

Yahoo! 1.5 47.6% 162 0.17 36.9

Yelp 0.2 92.0% 8 0.10 3.0

* LinkedIn’s acquisition by Microsoft was completed on December 8, 2016.




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Q4 performance (continued) Internet

Company Q4’15


Gross margin (%)


EPS(US$)


Amazon 35.7 31.9% 482 1.00 318.3

eBay 2.3 78.8% 477 0.39 33.0

Google 21.3 61.6% 4,923 7.06 534.8

LinkedIn 0.9 86.2% (8) (0.06) 26.0

Netflix 1.8 31.5% 43 0.10 48.9

Yahoo! 1.3 53.9% (4,435) (4.70) 31.4

Yelp 0.2 90.2% (22) (0.29) 1.8




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Semiconductors


33

Market analysisSemiconductors

• The Semiconductors companies in our sample reported strong numbers in the fourth quarter with average year-over-year revenue growth of 15%. Net income grew by 8% year over year, but declined 5% sequentially. Strong fourth quarter performance for Applied Materials, Texas Instruments and TSMC led to the positive numbers. On a sequential basis net income was relatively flat for the group except for Applied Materials, which reported 15% growth and Qualcomm, the only company reporting a sharp decline of 57% in net income.

• Worldwide semiconductor revenue totaled US$339.7 billion in 2016, a 1.5% increase from 2015 revenue of US$334.8 billion and the industry’s highest ever annual sales. The top 25 semiconductor vendors' combined revenue increased by 7.9% compared with 2015, and accounted for 75.9% of the market. The start of 2016 was relatively slow, but the second half of 2016 was fueled by inventory replenishment and improved demand and pricing.1

• Intel remained the market leader with 15.9% market share. Samsung Electronics maintained the No. 2 position with 11.8% of the market. Broadcom Ltd had the strongest performance in the top 25, climbing 11 places to reach the fifth position as a result of Avago Technologies’ acquisition of Broadcom Corporation.1

• Fourth quarter worldwide sales of US$93.0 billion were 12.3% higher than the total from the fourth quarter of 2015 and 5.4% more than the third quarter of 2016. Market growth was driven by the increasing amount of semiconductor technology in devices. Regionally, annual sales increased 9.2% in China, followed by Japan with 3.8%. All other regional markets—Asia Pacific/All Other (-1.7%), Europe (-4.5%), and the Americas (-4.7 %)—saw decreased sales compared to 2015.2

1. Gartner.com, Jan 20172. Semiconductors.org, Jan 2017


34

Market analysis (continued)Semiconductors

• Logic was the largest semiconductor sales category with US$91.5 billion in 2016, or 27.0% of the total semiconductor market. Memory (US$76.8 billion) and micro-ICs (US$60.6 billion) rounded out the top three segments.1

• The semiconductor outlook has improved in comparison with early 2016, owing to the stronger pricing and expanding footprint of the smartphone market. A recovery in memory and changes in vital applications are anticipated to lead growth in 2017.

• Global semiconductor capital spending is expected to increase 2.9% to US$69.9 billion in 2017, down from 5.1% in 2016 and it has been predicted that semiconductor capital spending will witness a slump by 2020 where it will fall to US$75.7 billion after reaching a peak of US$78.3 billion in 2019. The year 2019 has also been predicted as the year seeing the highest overall growth in semiconductor equipment spending.

• The stronger growth in 2016 was fueled by increased spending late in the year and is attributed to a NAND flash shortage which is predicted to persist though most of 2017. NAND spending increased by US$3.1 billion in 2016 due to a stronger smartphone market. Several related wafer fab equipment

segments also showed stronger growth than previously forecast. In particular, the thermal, track and implant segments are expected to increase 2.5%, 5.6% and 8.4%, respectively, in 2017.2

1. Gartner.com, Jan 20172. Semiconductors.org, Jan 2017


35

Market analysis (continued) Semiconductors

• In company news, Applied Materials’ last quarter’s new orders were US$4.24 billion, up 86% year over year and its net sales of US$3.28 billion were up 45% year over year. Operating margin grew 8.9 points year over year to 24.6%, and diluted earnings per share (EPS) grew by 160%. The margin improvement resulted from a smaller increase in R&D and marketing and sales expenses (11%) compared to revenue (45%). The company generated US$646 million in cash from operations and returned US$238 million to shareholders through stock repurchases and cash dividends.

• Qualcomm’s revenue increased by 4% year over year to US$6 billion in the fourth quarter. Operating income decreased by 54% year over year to US$778 million. Net income of US$682 billion was down 55% year over year and 57% sequentially. This sharp decline in income was due to “Other Expenses” including the US$868 million charge related to the Korea Free Trade Commission (KFTC) investigation, US$159 million of acquisition-related charges, US$30 million of impairment charges and US$8 million of restructuring-related charges related to Qualcomm’s Strategic Realignment Plan. The definitive agreement to acquire NXP Semiconductors NV for an estimated US$38 billion in cash is expected to close by the end of calendar 2017 and is subject to receipt of regulatory approvals in various jurisdictions. During the fourth quarter the company returned US$1.2 billion to stockholders, including US$784 million of cash dividends and US$444 million in share repurchases.

• Texas Instruments (TI) reported revenue of US$3.41 billion and net income of US$1.05 billion. Revenue increased by 7% year over year due to demand for its products in the automotive market. Analog revenue grew by 1% and Embedded Processing grew 6% year over year. Gross margins increased to 62.5% led by TI’s improved product mix and efficiency of manufacturing strategy, including the benefit of 300-millimeter Analog production. The company returned US$3.8 billion to shareholders in 2016 through stock repurchases and dividends.


36

Q4 performance Semiconductors

Company Q4’16


Grossmargin (%)

Net income/(loss)(US$ billions)

EPS(US$)


Intel 16.4 61.7% 3.6 0.73 171.9

Applied Materials 3.3 44.1% 0.70 0.65 34.9

Texas Instruments 3.4 62.5% 1.0 1.02 72.7

TSMC 8.3 52.3% 3.2 0.61 149.1

Qualcomm Inc 6.0 59.3% 0.68 0.46 98.8

Company Q4’15


Grossmargin (%)

Net income/(loss)(US$ billions)

EPS(US$)


Intel 14.9 64.3% 3.6 0.74 165.5

Applied Materials 2.3 40.6% 0.29 0.25 20.5

Texas Instruments 3.2 58.5% 0.84 0.80 95.4

TSMC 6.2 48.6% 2.2 0.43 118.0

Qualcomm Inc 5.8 56.1% 1.5 0.99 74.1




37


Software


38

Market analysis Software• In aggregate, revenue of the software companies in our sample was positive with 8.6% growth year over

year and 15.1% sequentially. All the companies under study in the sector reported positive revenue growth both year on year and sequentially. Adobe led the way with 23% growth in revenue year over year, followed by Symantec with 11% . But the aggregate growth in revenue was not reflected in net income, which in aggregate decreased by 1.7% year on year. Intuit and Symantec reported the sharpest declines in net income year over year of 46% and 73%, respectively. Decreased margins were due to increases in other operating expenses for the sector.

• On a positive note, global revenue in the business intelligence (BI) and analytics software market is forecast to reach US$18.3 billion in 2017, an increase of 7.3% from 2016. By the end of 2020, the market is forecast to grow to US$22.8 billion. Modern BI and analytics is expected to expand more rapidly than the overall market, which is offsetting declines in traditional BI spending. The modern BI and analytics platform emerged in the last few years to meet new organizational requirements for accessibility, agility and deeper analytical insight, shifting the market from an IT-led, system-of-record reporting to a business-led, agile analytics system including self-service. Though the modern BI and analytics market is expected to grow in terms of seat expansion, revenue will be dampened by pricing pressure and the growth rate is projected to decelerate from 63.6% growth in 2015 to 19% in 2020.1

1. Gartner.com, Jan 2017


39

Market analysis (continued) Software

• Continuing its expansion, the worldwide public cloud services market is projected to grow 18% in 2017 to total US$246.8 billion, up from US$209.2 billion in 2016. The highest growth will come from cloud system infrastructure services (infrastructure as a service [IaaS]), which is projected to grow 36.8% in 2017 to reach US$34.6 billion. Cloud application services (software as a service [SaaS]) is expected to grow 20.1% to reach US$46.3 billion. The overall global public cloud market has entered a period of stabilization, with its growth rate expected to peak at 18% in 2017.

• Though SaaS has experienced several years of strong growth, the SaaS market is expected to see slightly slower growth over the next few years with increasing maturity of SaaS offerings, namely human capital management (HCM) and customer relationship management (CRM). Nevertheless, SaaS will remain the second largest segment in the global cloud services market. As enterprise application buyers are moving toward a cloud-first mentality, it is expected that more than 50% of new 2017 large-enterprise North American application adoptions will be composed of SaaS or other forms of cloud-based solutions.2



40

Market analysis (continued) Software• In company news, Adobe’s 2016 revenue grew by 22% year over year reaching US$85 billion. In its

fourth quarter Adobe achieved record quarterly revenue of US$1.61 billion, representing year-over-year growth of 23%. Its Digital Media segment revenue was US$1.08 billion, with Creative revenue growth at 33% year over year to US$886 million. Strong Creative Cloud and Document Cloud adoption drove Digital Media Annualized Recurring Revenue (CARR) to US$4.01 billion, a quarter-over-quarter increase of US$316 million. Adobe Marketing Cloud achieved record revenue of US$465 million, representing 32% year-over-year growth. Operating income grew 63% and net income grew 79%.

• VMware revenue for the fourth quarter was US$2.03 billion, an increase of 9% from the fourth quarter of 2015. License revenue for the fourth quarter was US$887 million, an increase of 8% year over year. Net income of US$441 million was an increase of 18% compared to US$373 million in the year ago quarter. In October, VMware and Amazon Web Services announced a partnership to provide a new Vmware vSphere®-based cloud service running on AWS. VMware Cloud™ on AWS will make it easier to run any application, using a common set of familiar software and tools, in a consistent hybrid cloud environment. This new service will be delivered, sold and supported by VMware and will be available later in 2017.


41

Q4 performance Software

Company Q4’16


Gross margin (%)


EPS(US$)


Adobe 1.6 86.5% 400 0.80 49.3

Intuit 1.0 79.7% 13 0.05 30.4

Microsoft 24.1 58.9% 5,200 0.66 480.3

Oracle 9.0 80.1% 2,032 0.48 164.8

SAP* 7.1 73.0% 1,591 1.33 103.7

Symantec 1.0 77.4% 46 (0.09) 14.8

VMware 2.0 86.5% 441 1.04 8.5

*Euro to USD exchange rate used for SAP is 1.0516 USD/Euro.

For additional financial information, please visit http://www.pwc.com/techscorecard and click on the “data explorer” box.



42

Q3 performance (continued)Software

Company Q4’15


Gross margin (%)


EPS(US$)


Adobe 1.3 84.6% 223 0.44 45.9

Intuit 0.9 78.4% 24 0.09 25.2

Microsoft 24.0 58.5% 4,998 0.62 439.7

Oracle 9.0 79.4% 2,197 0.51 163.7

SAP* 7.0 70.8% 1,408 1.17 94.9

Symantec 0.9 83.5% 170 0.25 13.7

VMware 1.9 85.8% 373 0.88 6.9

*Euro to USD exchange rate used for SAP is 1.3255 USD/Euro.

For additional financial information, please visit http://www.pwc.com/techscorecard and click on the “data explorer” box.



43


Software Services


44

• The Software Services players in our sample performed well in Q4 2016 with an 8% increase in revenue year over year and a 0.4% increase quarter over quarter. Profits increased by 4% year over year, but declined by 4% sequentially. Computer Sciences Corp (CSC) reported the sharpest decline in net income of 28% year over year, but grew over 107% sequentially.

• The ISG Outsourcing Index, which measures commercial outsourcing contracts with annual contract value (ACV) of US$5 million or more, was US$9.6 billion in Q4 2016, down 5% from Q4 2015. However, for the full year, ACV reached US$37.4 billion, a 9% increase over US$34.4 billion in 2015. The growth was led by the as-a-service segment, which had a 38% gain in ACV in both year-over-year and sequential terms.

• The migration from traditional sourcing to as-a-service sourcing is gaining momentum as enterprises increasingly embrace the digital opportunity to transform their operations, enhance their engagement with customers and better leverage their connections with suppliers. This shift demands speed, mobility, innovation and increased productivity from service and technology providers, who are investing in digital platforms and services and adapting their delivery models to this new paradigm. Decline in traditional sourcing ACV is likely the result of fewer megadeals during the year.

• The ACV of Infrastructure-as-a-Service (IaaS) outpaced Software-as-a-Service (SaaS) as the strongest growth area. In Q4 2016 alone, IaaS ACV was three times that of SaaS. For the full year, IaaS ACV jumped 54% to reach US$10.0 billion, while SaaS ACV increased by 13% to reach US$4.6 billion.1

Market analysisSoftware Services

1. ISG, Jan 2017


45

• In Q4 2016 the American outsourcing market generated an ACV of US$4.7 billion (+5% year over year). ACV in the Americas has outpaced the Europe, Middle East and Africa (EMEA) region in eight of the past 10 quarters. For the full year, the Americas ACV grew 14% and reached US$18.4 billion compared to 2015. Growth was driven by the as-a-service segment, which experienced a 37% growth totaling US$8.5 billion. Among industries, Financial Services experienced a 12% increase in traditional sourcing ACV over last year and grew to US$2.31 billion driven by the digitization of banking services. Healthcare’s ACV also hit an all-time high and reached US$1.28 billion driven by new opportunities in care and claims management, as well as present and possible future changes in Medicare, Medicaid and compliance.

• Asia Pacific’s combined ACV was US$1.1 billion for Q4 2016, an increase of 15% year on year. Full-year 2016 ACV was 16% higher than 2015 at US$4.3 billion, with as-a-service ACV increasing by 51% to US$2.3 billion. Asia Pacific’s as-a-service ACV now accounts for 53% of total ACV. As-a-service growth in both SaaS (+25%) and IaaS (+64%) was the highest of all three regions. In 2016 Australia and New Zealand, the region's largest market, saw traditional sourcing ACV rise 29% year on year. By industry, Telecom and Media saw a year-over-year increase of 12%, despite dropping against its five-year average. Manufacturing saw significant gains, jumping 60% over 2015.1

Market analysis (continued)Software Services

1. ISG, Jan 2017


46

• On a company level, Computer Science Corp (CSC) reported revenues of US$1.9 billion in Q4 2016, a growth of 10% year over year and 3% quarter over quarter. The growth was primarily driven by the recent acquisitions of Xchanging and UXC. Both these acquisitions have been largely integrated and have positively contributed to the year-on-year growth as well as margin improvement due to cost synergy realization in Q4 2016. In Q4 2016 CSC’s agreement with MetLife went live as planned and began generating revenue.

• On 23 December 2016, CSC filed with the SEC that it is looking to raise up to US$250 million by selling off some of its account receivables. The move is aimed at diversifying the company’s funding structure and enhancing its liquidity and capital efficiency. The receivables would come from certain CSC subsidiaries, such as Alliance-One Services Inc, CSC Agility Platform Inc, CSC Consulting Inc, CSC Cybertek Corporation, Mynd Corporation and PDA Software Services LLC. CSC has created a 100% owned special purpose entity called CSC Receivables LLC to buy the receivable acknowledgements and bundle them together.

Market analysis (continued)Software Services


47

Q4 performanceSoftware Services

Company Q4’16


Gross margin (%)


EPS (US$) Market cap (US$ billions)

Cognizant 3.5 40.0% 416 0.68 34.0

CSC 1.9 29.7% 31 0.21 8.4

Infosys 2.6 37.2% 547 0.24 33.9

HCL 1.7 33.9% 306 0.22 17.3

TCS 4.4 43.2% 1,000 0.51 69.1

Company Q4’15


Gross margin (%)



Cognizant 3.2 40.2% 423 0.69 36.5

CSC 1.8 30.5% 43 0.30 4.5

Infosys 2.4 37.2% 524 0.23 38.3

HCL 1.6 34.6% 291 0.21 18.4

TCS 4.1 44.4% 926 0.47 72.8

For additional financial information, please visit http://www.pwc.com/techscorecard and click on the “data explorer” box



48


Systems and PC Hardware


49

Market analysisSystems and PC Hardware

• The Systems and PC Hardware sector had a relatively slow fourth quarter with four out of the five companies under study reporting declines in revenues on a year-on-year basis resulting in a 3.4% revenue decline compared to Q4 2015. On a sequential basis, excluding Dell Technologies, which has not yet reported their latest earnings, revenues grew by 1.9%. Year-over-year net income for the sector declined by 3.8%, with Lenovo and Xerox reporting the greatest declines of 64.3% and 32.1%, respectively.

• PC shipments have declined annually since 2012. Stagnation in the PC market continued into the fourth quarter of 2016 as holiday sales were weak due to the fundamental change in PC buying behavior. PC shipments to the consumer market were driven by solid Black Friday sales in Western European countries, such as the UK and France, especially on traditional notebooks, ultramobileclamshells, the hybrid form factor and gaming PCs.1

• Worldwide PC shipments totaled 72.6 million units in the Q4 2016, a 3.7% decline from Q4 2015. For the year, 2016 PC shipments totaled 269.7 million units, a 6.2% decline from 2015. The Asia/Pacific PC market totaled 24.8 million units in Q4 2016, a 3.9% decline from Q4 2015.1 PC shipments in EMEA surpassed 21.9 million units in Q4 2016, a 3.4% decline year over year. In the US, PC shipments totaled 16.5 million units in Q4 2016, a 1.3% decline from Q4 2015. Five of the top six vendors in the US PC market experienced a shipment increase in Q4 2016. However, this was offset by a 20.9% decline in the Others category, and a 48.3% decline in shipments by Asus.2

1. IDC, Feb 20172. Gartner, Jan 2017


50

Market analysis (continued)Systems and PC Hardware

• The broad PC market has been static as technology improvements have not been sufficient to drive real market growth. There have been innovative form factors like 2-in-1s and thin and light notebooks, as well as technology improvements, such as longer battery life. However, the market driven by PC enthusiasts is not big enough to drive overall market growth. Consumers who have high dependency on smartphones, stretch PC life cycles longer.

• HP remained in the second position behind number one Lenovo, and has recorded three consecutive quarters of shipment growth. Dell also registered three consecutive quarters of shipment growth in Q4’16. Dell continued to place PCs as a strategic business segment in commercial and consumer markets during 2016. Asus suffered the steepest shipment declines in Q4’16.2



51

Market analysis (continued)Systems and PC Hardware

• In other company news, on December 31, 2016, Xerox Corp completed the separation of its Business Process Outsourcing (BPO) business from its Document Technology and Document Outsourcing business. The separation was accomplished by moving the BPO business into a new legal entity, Conduent Incorporated, and then distributing one hundred percent (100%) of the outstanding common stock of Conduent to Xerox Corporation stockholders. Conduent is now an independent public company trading on the New York Stock Exchange. As a result of the separation and distribution, the BPO business has presented as a discontinued operation and, as such, has been excluded from continuing operations and segment results for all periods presented. In connection with the separation, Xerox entered into several agreements with Conduent to (1) effect the legal and structural separation of Xerox and Conduent, (2) govern the relationship between Xerox and Conduent up to and after the completion of the separation and (3) allocate between Xerox and Conduent various assets, liabilities and obligations, including, among other things, employee benefits and tax-related assets and liabilities. Separation costs were US$159 million. During 2017, the company expects to incur additional separation costs of approximately US$15 million.

• Hewlett Packard Enterprise (HPE) acquired machine-learning security technology startup, Niara, for an undisclosed amount. Niara has developed machine-learning technologies that can detect small changes in user behavior and other anomalies to automatically isolate and disconnect security threats internally or from external attack vectors. The company has developed a security analytics platform that applies machine-learning algorithms to data from security infrastructure to better detect attacks that have bypassed an enterprise's perimeter defenses. HPE's acquisition of Niara will add to its "Intelligent Edge" initiative.3

3. Seekingalpha, Feb 2017


52

Q4 performance Systems and PC Hardware

Company Q4’16


Grossmargin (%)

Net income/(loss) (US$ millions)


Dell Technologies Inc N/A* N/A* N/A* N/A* N/A*

HP Inc 12.7 17.7% 611 0.36 25.7

Hewlett Packard Enterprise Co 11.4 28.9% 267 0.16 37.6

IBM 21.8 50.0% 4,501 4.73 157.8

Lenovo 12.2 11.6% 107 0.09 6.7

Xerox 2.7 40.0% 184** 0.17 8.8


*Dell will not be announcing Q4’16 results until 30 March 2017.

** Income from continuing operations that excludes $1,028 million loss on discontinued operations recorded by Xerox.



53

Q4 performance (continued)Systems and PC Hardware


Company Q4’15


Grossmargin (%)

Net income/(loss) (US$ millions)


Dell Technologies IncN/A* N/A* N/A* N/A* N/A*

HP Inc12.2 18.7% 592 0.33 16.8

Hewlett Packard Enterprise Co 12.7 28.4% 267 0.15 -

IBM22.1 51.7% 4,463 4.59 133.5

Lenovo12.9 14.6% 300 2.70 11.3

Xerox2.9 40.1% 271 0.27 10.8

*Dell was privately held at this time and did not report financial results.



54

Methodology

We analyzed a selection of the largest technology companies included in the S&P 500 index as well as a selection of large international technology companies that regularly report financial results.

In order to present the information by calendar year or calendar quarter, the financial information for companies with non-calendar years or quarters was included in the nearest calendar year or quarter.

We analyzed technology companies that operate predominantly within the following sectors:

• Communications

• Consumer Electronics

• EMS/Distributors

• Internet

• Semiconductors

• Software

• Software Services

• Systems and PC Hardware


55

Technology industry leaders

Raman ChitkaraGlobal Technology LeaderPhone: +1 408 817 3746Email: [email protected]

Rod Dring – Australia Werner Ballhaus – Germany Yury Pukha – RussiaPhone: +61 2 8266 7865Email: [email protected]

Phone: +49 211 981 5848Email: [email protected]


Estela Vieira – Brazil Sandeep Ladda – India Mark Jansen – SingaporePhone: +55 1 3674 3802Email: [email protected]

Phone: 91 22 6689 1444Email: [email protected]

Phone: +65 6236 7388Email: [email protected]

Christopher Dulny– Canada Masahiro Ozaki– Japan Philip Shepherd ― UAEPhone: +416 869 2355Email: [email protected]


Phone: +97 1 43043501Email: [email protected]

Jianbin Gao – China & Hong Kong Hoonsoo Yoon – Korea Jass Sarai – UK



Phone: +44 0 1895 52 2206Email: [email protected]

Pierre Marty – France Ilja Linnemeijer – The Netherlands Pierre-Alain Sur – USPhone: +33 1 5657 5815Email: [email protected]



We exercised reasonable professional care and diligence in the collection, processing and reporting of this information. However, the data used is from third-party sources and PricewaterhouseCoopers has not independently verified, validated or audited the data. PricewaterhouseCoopers makes no representations or warranties with respect to the accuracy of the information, nor whether it is suitable for the purposes to which it is put by users.

PricewaterhouseCoopers shall not be liable to any user of this report or to any other person or entity for any inaccuracy of this information or any errors or omissions in its content, regardless of the cause of such inaccuracy, error or omission.

Furthermore, in no event shall PricewaterhouseCoopers be liable for consequential, incidental or punitive damages to any person or entity for any matter relating to this information.

© 2017 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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