wells fargo business software themes 2014

Please see page 12 for rating definitions, important disclosures and required analyst certifications All estimates/forecasts are as of 01/13/14 unless otherwise stated.

Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.

January 13, 2014

Equity Research

Business Software Themes For 2014 • Technology is changing and innovation is happening at an unprecedented pace.

The proliferation and widespread use of social, mobile, analytics and cloud (SMAC) technologies are evident in both consumer and business environments. Because of all these changes, companies need to innovate and keep up with the latest technology, or be left behind. While 2013 was a big year for most software companies; we see even more opportunity in the year ahead. Below we highlight our top ten themes for 2014. These are ideas that we believe will impact the software industry in the coming year.

• 1) Becoming a Digital Business

• 2) Marketing is Hot, But Commerce is for Closers

• 3) Infrastructure as a Service – Surviving the Monster that is AWS

• 4) In-Memory Flowers Bloom

• 5) Rewriting the Security Landscape

• 6) Database Proliferation

• 7) Mobile First Business Design

• 8) Internet of Things Gets Real and Useful

• 9) Industry Clouds – Getting Vertical

• 10) Data Clouds

• • Save the Date: As part of our view on the changing tech market we are pleased to announce the fourth annual Wells Fargo Tech Transformation Summit to be held April 2-3 in San Francisco, CA at the St. Regis Hotel. The summit will provide a forum for leading tech firms and investors to discuss the business impact of the rapid technological changes facing the industry including social, mobile connectivity, big data analytics, and cloud computing. We invite you to attend the event, and engage in one-on-one meetings with senior executives from some of the leading technology firms. We look forward to seeing you there.

Technology

Jason Maynard, Senior Analyst(415) 947-5472 /

[email protected] Powell, CFA, Senior Analyst

(212) 214-8048 / [email protected]

Karen Russillo, Associate Analyst(415) 396-3505 /

karen.russil [email protected] Parasuraman, Associate Analyst

(617) 603-4269 / [email protected]

WELLS FARGO SECURITIES, LLC Technology EQUITY RESEARCH DEPARTMENT

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Becoming a Digital Business Transforming into a digital business is one of the biggest challenges facing companies in 2014. The rapid growth in social networks, cloud computing, big data, wearables, and mobile devices is changing the way customers, employees, partners, suppliers and all constituents engage with businesses. This means organizations must re-architect their processes, practices, and data strategies in order to better compete. The risk is new and/or existing firms will grow to become the Amazon or Uber of a particular market and disrupt long-standing models. InformationWeek says about digital business, “the new description is a testament to IT's advancement from a back-office, support-the-business role into a developer of products and apps that customers use directly.” It will reshape how businesses attract, manage and interact with customers in new customer facing systems. For enterprise resource planning (ERP), supply chain and operations it promises to deliver gains in efficiency, flexibility, and decision-making. Human capital management is no longer just about governance and compliance as it is morphing into a core capability for talent acquisition. IT budgets are becoming more flexible via low cost infrastructure in public and private clouds. Workers can be more productive on smartphones and tablets. New advanced analytics are enabling better decision-making and monetization strategies. In our opinion, this means every company is a technology company. Using information technology as part of every product or operational process is rapidly becoming the norm. Lines of business will increasingly own technology decision-making, and new roles are bound to emerge. We see organizations creating hybrid business/technology positions with names like chief data/digital officers in response to this trend. The net result is that we think spending on new digital initiatives will be a multi-year secular growth driver.

Source: www.dreamstime.com

WELLS FARGO SECURITIES, LLC Business Software Themes For 2014 EQUITY RESEARCH DEPARTMENT

3

Marketing is Hot, but Commerce is For Closers Marketing technology spending has skyrocketed as digitized customer interactions have turned this once largely immeasurable function from an art into a science. We think this trend will continue for a number of years as businesses implement new marketing-centric revenue performance management systems. As more offline ad dollars shift to online and the resulting data becomes actionable, marketers and revenue officers should be able to bring a level of precision and science to their craft. However, we don’t think marketing alone will be enough if it isn’t tied into the commerce and sales systems. Companies need to close the loop between their marketing strategies and revenue-producing activities, in our view. We see digitization enabling more sophisticated analytical approaches to marketing that will lead to closer alignment with a business’s commerce activities. In our view, the activities at the top of the marketing funnel should, and ultimately will, drive more than just a call to action at the bottom of the funnel. Rather, businesses will increasingly need to extend beyond CPM, CPC and other traditional advertising metrics into the actual customer conversion or cost per revenue (CPR). These systems will likely enable customer acquisition and commerce transactions to take place not only online, but also via mobile and local scenarios, and through what we call syndicated commerce networks. The commerce technology market is tied to the growth in online and mobile retail sales. We have conservatively assumed that 3% of a company’s online and ecommerce revenue is spent on development and ecommerce technology. (Forrester research has estimated that 3-5% goes to ecommerce technology). Using the Wells Fargo ecommerce retail sales estimates through 2016 and applying 3% for ecommerce technology, we estimate that the size of the market was approximately $7.4 billion in 2012 and is expected to grow at a CAGR in the low to mid-teens through 2016.

Source: Wells Fargo Securities, LLC


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Infrastructure as a Service – Surviving the Monster that is AWS We would compare the experience of analyzing Amazon Web Services (AWS) revenue estimates to the feeling residents of Tokyo had upon seeing Godzilla emerge from the sea for the first time. AWS is huge, growing fast, and is very scary for incumbents in the traditional data center services sector. Based on Amazon year-to-date results, (AMZN is covered by Wells Fargo ecommerce analyst Matt Nemer), we estimate AWS will generate $3.1B in revenue in 2013, up 65%+ yr./yr. In 2013, it will have added the same amount of revenue (almost $1.3B) that took Rackspace 13 years to grow into as a company. For Q3 2013 we estimate that AWS generated $818MM in revenue +70% yr./yr. In absolute dollar terms, AWS added 2x as much revenue as the largest pure play IaaS providers combined.

AWS Versus Largest Pure Play IaaS Providers$'s in mil l ions

Abs $ Growth Yr./ Yr.Q3'12 Q3'13 Yr./ Yr. % Growth

EQIX $489 $541 $52 11% RAX $336 $389 $53 16% Savvis $327 $342 $15 5% DLR $344 $382 $37 11%Total Large Pure Play IaaS $1,496 $1,653 $157 10%

Amazon Web Services (AWS) (1) $479 $818 $339 71%

Note: (1) Based on Amazon's North American Other revenue disclosure and backing out estimated advertising services and co-branded credi t card agreement revenueSource: Company reports and Wells Fargo Securities, LLC estimates

The figures show the bulk of new workloads are moving to cloud environments. As a result, we think investors need to focus on IaaS investments that have enough barriers to entry to survive the growing domination of AWS. We believe AKAM (Outperform, $48.20) is one such company. AKAM’s distributed CDN in 800+ markets is hard to replicate. There is also significant IP in the company’s site acceleration business. And Akamai continues to innovate by expanding into security. To the extent that AWS moves into new platforms such as Amazon Workspaces (i.e. virtualized desktop) or Kinesis (i.e. big data analytics) AKAM could actually benefit because cloud based applications need to look and feel like they are running on a server down the hall versus a data center 200 miles away. While 2013 was difficult for EQIX (Outperform, $179.01), we think latency sensitive applications will be harder for cloud to cannibalize. We also take a contrarian view on RAX (Outperform, $36.59). While the managed hosting sector will likely see slowing growth, we believe it remains positive for the next five years. In addition, RAX should be able to offset slowing managed hosting trends with improving growth in its cloud platform. In fact, we think RAX will be in a position to announce some larger reference customer wins in the next few months.


5

In-Memory Flowers Bloom The in-memory movement is upon us and a bevy of solutions are emerging to solve new and existing business problems. So with the goal of doing things “faster, better, cheaper”, in memory databases help to get you the “faster”. From our perspective, mass-market in-memory adoption is still in the early stages but is poised to gain momentum. While in-memory database systems aren’t new per se, they are gaining in popularity because of lower cost DRAM and flash options. We think it has greater potential than many recognize—and more known use cases than many believe. While the available products still have room to mature in their development lifecycles, we think customers are looking for pre-packaged, purpose-built applications and platforms that show concrete benefits. In-memory databases are database management systems that utilize main memory for computer data storage instead of disk storage. This brings benefits such as faster performance, response time and reduced modeling. Many industries such as financial services, telecommunications, and retail have used in-memory for trading systems, network operations, and pricing. But as new modern systems such as SAP’s HANA, Oracle’s Exalytics and a number of startups appear, the market should expand in size. Moving in-memory from specialized markets to mainstream adoption means that many applications will need to be re-written to take advantage of the new capabilities. SAP’s HANA database engine supports analytic applications and should eventually work for transactional systems. Oracle has released a number of in-memory apps across its entire application product portfolio. Budgeting, planning, forecasting, and financial reporting are great places to start, in our view. Their massive data volumes and large numbers of variables can yield faster and more informed decisions, and likely lead to measurable business impact. The idea here is to reduce cycles and increase planning accuracy by allowing a deeper level of operational detail to be included within the plan and by enabling users to perform more what-if scenario modeling iterations in the same budgeting window. This means insights can be put to use without reengineering the back-end core processes and existing transactions can be run with more valuable, timely input. Among others, Anaplan has emerged as a leader with its differentiated cloud-based planning and modeling solution that was built with a native in-memory engine.



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Rewriting the Security Landscape The recent data breach at Target impacting 40 million credit and debit cards is a clear example of attackers being more sophisticated and the risk to companies escalating steeply. Target could face a $3.6B fine for PCI violations (with credit cards selling for $20-$100 per card on the black market). The last few years have seen several high profile and very public cyber-attack events, and we believe that we will continue to see this increasing in both scope and scale. Now it’s not a question of had an enterprise been breached – as the Verizon Breach Report of 2013 states – “assume you have been breached”. Some of reasons advanced malware are growing are 1) Rapidly evolving technology landscape driven by Mobile, Social, Big Data and Cloud and 2) Traditional security products struggling in the face of the evolved malware. AV uses obsolete signature based technologies, which is now over 20 years old. A new crop of vendors lead by FireEye has recently seen fast growth by using sandboxing as a new tool to attack the problem of advanced malware. Over the past few years, FireEye alone has grown at a 3-year CAGR of 167%, faster than the overall security market which is growing in the mid to high single digits. We have already seen the traditional network security vendors like Palo Alto, Check Point, Cisco, and Fortinet introduce products to carve out a niche in this market. Unlike other recent disruptive technologies we believe the new advanced malware defense market could potentially have more staying power and transform multiple areas of security. While it’s difficult to size the exact total addressable market (TAM), ultimately the opportunity could encompass the entire $12B signature based security industry. We think overall this is an attractive market with fast growing companies like FireEye seeing growth in excess of 100%. We also stress that there are opportunities for mature network and endpoint security companies to increase revenue in excess of 10% in this market, while smaller companies can grow in excess of 20-30% as this new technology gain market share.

Modern APTs vs. Legacy Malware

Source: Wells Fargo Securities, Fire Eye, Inc.


7

Database Proliferation In our view, the next few years will see faster innovation in the database market as new technologies will expand, replace and in some cases re-imagine how data is consumed, built, stored, and delivered. We think there will be changes in the traditional online analytical processing (OLAP), online transaction processing (OLTP), and embedded markets along with new use cases in appliances and cloud delivery. We think these technologies will bring benefits across all key operational, financial and strategic organizational areas. We think the promise of smarter decisions, revenue growth, cost reduction, supply chain efficiency, and productivity gains are all reachable. One of the primary challenges with harnessing big data is that the problem is multi-layered. We have created a framework to help sort through the different technologies. We see five layers in the big data stack that we have dubbed the “Five V’s” of data. These include: (1) Variety (unstructured, non-relational); (2) Velocity (in- memory computing and flash); (3) Volume (machine generated and social); (4) Value (improved predictive analytics and algorithms); and (5) Visualization (new UX and formats for users). We think the NoSQL database market will break traditional lines with new advancements in both analytics and transactional systems processing. While Hadoop and Big Data have been widely hyped we think adoption is still in the early phases with greater value and potential just around the corner. Cloudera is articulating the concept of the enterprise data hub as it promises to be the primary source or “lake” for all corporate data. One of the standouts in the NoSQL space is MongoDB. MongoDB is an open source NoSQL database that is highly popular given its ease of use, and ability to solve modern application requirements. We are also seeing innovations around developer productivity that should increase the usability and reduce the reliance on scarce data scientists. Technologies like DataStax’s CQL modeling and query language should help close the productivity gap. Clearly for organizations, the end goal of the big data process is to make better business decisions that ultimately lead to monetization. In order to do so, we believe businesses will have to adopt new process workflows for how they visualize, share, collaborate and act on their data. This means deeper integration of business analytics into data and transaction streams and real-time event driven business analytics that proactively monitor activity.



8

Mobile First Business Design We think the primary design point for business applications will increasingly become “mobile first”. We believe the rise of business consumers of technology (we call them bizumers) are the driving catalyst in the ongoing consumerization of IT. Consumer technology is amazing, but when people get to work they often find outdated, difficult to use, unintuitive, and desktop centric offerings. Given the growth in smartphones and tablets we see a huge opportunity for software applications to be re-imagined and re-built for the mobile worker. While laptops and desktops will still have their business use we think more and more interaction points will occur on a mobile device. Most corporate systems have not been designed with the user experience as the key objective. In the consumer world, fast bandwidth, mobile connectivity, multi-device ownership, and social and cloud-based sharing have become common features. However, enterprise IT has been slow to adapt and/or leverage these new modes of operating, creating a large disconnect between personal and corporate technology behaviors. Mobile first business design isn’t an easy thing to accomplish. In our view, in order to build an app that meets the high expectation user, organizations will have to embrace three primary elements: 1) Consumer grade UX, 2) atomized design, and 3) action aware. We call the user experience ethos of the bizumer movement “consumer grade.” Being “enterprise class” or “mission-critical” is important for infrastructure, but we do not think it should be the design goal for building the modern worker, user experience. We think business technologies need to embrace and adopt consumer-centric product architecture and interaction models. Atomized means to break something into smaller parts. The massive success of consumer apps that do 3-5 things shows how a simplified design approach can lead to massive adoption. We think workers win if key apps like travel and expense, file sharing, and note taking could be atomized for business use. Finally, we believe there will be a new breed of apps that automate business actions when triggered by real-time changes in data. We like the term action apps since it explains how these apps are all about enabling knowledge workers to do something within the context of their mobile device (for example, a real time flight monitoring app that lets you know if your plane is on time, but can also rebook if it is cancelled, or an expense approval app that alerts you and enables you to make a decision on report). Most industry watchers believe in this trend, but the reality is there are still few enterprise apps in the market today that epitomize these design goals. Sure the consumerization of the enterprise market is moving along but for the most part that just means workers can get corporate email on a smartphone or tablet. Some of the apps we are most excited about include file sync and sharing services from Dropbox and Box.com. We also like travel solutions like Tripit from Concur, new conference calling apps like Uber Conference, and social collaboration tools from salesforce.com and Jive Software.

Source: Salesforce.com, concur.com, Dropbox.com and jivesoftware.com company websites


9

Internet of Things (IoT) Gets Useful and Real The advancements in technology increasingly mean that every product or service will have some “connected” or digital component. Mobile connectivity, beacons, RFID, near field connectivity is driving web integration into a wide array of traditionally offline devices. IDC expects the global wearable technology ecosystem value to reach $14B by 2018. Cisco estimates 75 billion connected devices by 2020 and other industry sources have projected more than 100 million wearable devices sold by 2016. As devices proliferate, the volume of resulting data will increase exponentially, likely causing a significant data problem. We think this will create a new market opportunity for IoT software infrastructure platforms. The data from and about connected devices is arguably the key asset with IoT. It doesn’t matter how many devices are sold if you can’t utilize the associated information. The only way to understand the data is by aggregating and analyzing information in ways that allow businesses to better serve customers and capitalize on information in real-time. While the value of making sense of such data is obvious, the challenge of capturing and managing such a vast amount of variegated arrays is significant. To date nearly every IoT solution has required an organization to either build its own service from scratch or implement a proprietary hardware/chip based approach. As in most early markets, the innovators must do it themselves, given the lack of commercial offerings. To make matters worse, the first mover IoT products have been an unwieldy combination of custom chipsets, proprietary hardware, and device specific software. It's fair to say that easy to use, developer friendly, and consumer-like software has lagged hardware advancements. Most “platforms” require the use of a specific chipset and very few device makers have the software expertise necessary to abstract components. We think the future of this market will be data cloud service providers that make it easy to connect, collect, track and measure data from any IoT device through simple and elegant software developer kits, API's, and central data cloud collection repository. API Management is increasingly going to be a key part of developing a multi-channel strategy for enterprises of all sizes. API management enables organizations to securely expose APIs to external developers and partners, allowing them to easily create new apps.

Internetof

Things



10

Industry Clouds - Getting Vertical The growth in cloud computing over the past decade has been extraordinary, as many legacy horizontal business software applications have been replaced with new solutions. Software as a Service (SaaS) apps has seen great success in CRM, HCM, and now even in ERP. Infrastructure as a Service (IaaS) has eliminated the need for server and storage infrastructure, thanks in a large part to Amazon Web Services. Platform as a Service (PaaS) solutions are now growing in popularity as more app developers build on cloud software infrastructure. However we believe there is a great white space opportunity in delivering apps and infrastructure to specific industries and vertical categories. We project that “Industry Clouds” adoption will accelerate in the coming years. Industry clouds are purpose-built software solutions for specific end markets. These markets often have special functional requirements and characteristics. Because of these needs, many industries often are forced to custom design their own software. In a survey conducted by Forrester Research, results indicate that most companies spend over 25% of their software budgets on custom development projects. Nearly every industry faces this challenge because there are certain practices or processes that are specific to each particular segment, such as regulatory requirements, etc. In the on premise world, delivering industry specific solutions was possible but not always cost-effective. In the cloud computing world the cost of building, delivering, selling and service niche industry markets has dropped significantly. We think this means there will be more, not less focused software vendors. This will be driven by both major horizontal process areas moving to the cloud but also industry specific business issues.



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Data Clouds We believe 2014 will mark the entrance of a brand new category of cloud computing solutions that we are calling Data Clouds. What is a data cloud? A data cloud is an online-hosted database-like service providing information for applications, business intelligence, or other specific use cases like vertical industries. The information can be both structured or unstructured, aggregated, curated, anonymized, syndicated, user generated and even crowd sourced. In the consumer world, Wikipedia is a collaboratively edited online encyclopedia. LinkedIn has become a data cloud for resumes. In the business world, online credit scoring databases have been used by other systems for credit making decisions for years. Data clouds are often aggregated databases of information generated from users, websites, mobile data, apps, or other forms of curated data. These data clouds typically offer data that’s useful for building new applications, benchmarking, or reporting. Data clouds can be both net new services as well as replacements for silos of redundant, on premise database systems. Some examples of on premise systems turning into new data cloud offerings are categories like storage, document/content management, website analytics, master data management, and integration. New areas include API management, mobile analytics, social data, and ecommerce. In many cases they can be a second order service from a cloud application. For example, a cloud app like Salesforce.com or Concur could easily offer anonymized benchmarking data from their aggregated collection of data as a service. Companies that are offering and/or building data cloud services range from some of the established incumbents to new upstarts in the markets. Data cloud offerings are emerging for both horizontal services as well as specific functional problems for various industries. Offerings like Google Analytics and Adobe’s Omniture were early examples of website analytic offerings. Dropbox and Box.com are both providing cloud storage for a wide range of unstructured data likes photos and files. New business intelligence vendors such as Anaplan, Domo, and Good Data can be a source for new analytic apps or even dashboards built on both user and 3rd party information. In the master data management (MDM) world a whole new wave of offerings is likely to emerge. Life Sciences CRM provider Veeva Systems, for example, is providing an MDM service called the Veeva Network for the life sciences field. Strevus is a new vendor that is building MDM for the financial services industry. B/DNA is building a data cloud called Technopedia. It’s a categorized repository of information on enterprise software and hardware and very useful for IT asset management and service desk applications. We expect to see many more data cloud offerings to emerge over 2014.



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Required Disclosures

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Amazon.com Inc. (AMZN) 3-yr. Price PerformanceAmazon.com Inc. (AMZN) 3-yr. Price Performance

Date

Date Publication Price ($) Rating Code Val. Rng. Low Val. Rng. High Close Price ($) 2/7/2011 Nemer

2/7/2011 176.35 1 197.00 226.00 176.43 7/27/2011 214.18 1 200.00 239.00 222.52 2/1/2012 194.44 1 197.00 230.00 179.46 7/27/2012 220.01 1 221.00 250.00 237.32 1/30/2013 260.35 1 313.00 345.00 272.76 4/25/2013 274.70 1 306.00 337.00 274.70 7/25/2013 303.40 1 302.00 332.00 303.40 10/24/2013 332.21 1 349.00 380.00 332.21

Source: Wells Fargo Securities, LLC estimates and Reuters data

Symbol Key Rating Code Key

Rating Downgrade Initiation, Resumption, Drop or Suspend 1 Outperform/Buy SR Suspended Rating Upgrade Analyst Change 2 Market Perform/Hold NR Not Rated Valuation Range Change Split Adjustment 3 Underperform/Sell NE No Estimate

Additional Information Available Upon Request

I certify that: 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report. Wells Fargo Securities, LLC maintains a market in the common stock of Equinix, Inc., Amazon.com Inc., Rackspace Hosting, Inc. Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in

the next three months from Rackspace Hosting, Inc., Amazon.com Inc., Equinix, Inc. Wells Fargo Securities, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of

Rackspace Hosting, Inc. Equinix, Inc., Amazon.com Inc. currently is, or during the 12-month period preceding the date of distribution of the research

report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to Equinix, Inc., Amazon.com Inc.

Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from Amazon.com Inc., Equinix, Inc. in the past 12 months.

Wells Fargo Securities, LLC or its affiliates has a significant financial interest in Equinix, Inc., Amazon.com Inc., Rackspace Hosting, Inc.


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Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC’s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not limited to investment banking revenue. STOCK RATING 1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL

SECTOR RATING O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.

VOLATILITY RATING V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.

As of: January 10, 2014

48% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform.

Wells Fargo Securities, LLC has provided investment banking services for 46% of its Equity Research Outperform-rated companies.

48% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Market Perform.

Wells Fargo Securities, LLC has provided investment banking services for 37% of its Equity Research Market Perform-rated companies.

4% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underperform.

Wells Fargo Securities, LLC has provided investment banking services for 11% of its Equity Research Underperform-rated companies.

Important Information for Non-U.S. Recipients

EEA – The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited (“WFSIL”). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Conduct Authority. For the purposes of Section 21 of the UK Financial Services and Markets Act 2000 (“the Act”), the content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive 2007. The FCA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients.

AMZN: Risks include a deceleration in eCommerce growth, increased competition, and external factors facing eCommerce (sales tax, increased shipping costs). EQIX: Risks: Potential for a weak economy to impact IT spend, increasing power/cooling requirements, and competition. RAX: Risks include competition from larger players, high capital intensity, and potential data center performance issues.


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Australia – Wells Fargo Securities, LLC is exempt from the requirements to hold an Australian financial services license in respect of the financial services it provides to wholesale clients in Australia. Wells Fargo Securities, LLC is regulated under U.S. laws which differ from Australian laws. Any offer or documentation provided to Australian recipients by Wells Fargo Securities, LLC in the course of providing the financial services will be prepared in accordance with the laws of the United States and not Australian laws.

Hong Kong – This report is issued and distributed in Hong Kong by Wells Fargo Securities Asia Limited (“WFSAL”), a Hong Kong incorporated investment firm licensed and regulated by the Securities and Futures Commission to carry on types 1, 4, 6 and 9 regulated activities (as defined in the Securities and Futures Ordinance, “the SFO”). This report is not intended for, and should not be relied on by, any person other than professional investors (as defined in the SFO). Any securities and related financial instruments described herein are not intended for sale, nor will be sold, to any person other than professional investors (as defined in the SFO).

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The ratings stated on the document are not provided by rating agencies registered with the Financial Services Agency of Japan (JFSA) but by group companies of JFSA-registered rating agencies. These group companies may include Moody’s Investors Services Inc, Standard & Poor’s Rating Services and/or Fitch Ratings. Any decisions to invest in securities or transactions should be made after reviewing policies and methodologies used for assigning credit ratings and assumptions, significance and limitations of the credit ratings stated on the respective rating agencies’ websites.

About Wells Fargo Securities, LLC Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Institutional Securities, LLC, a member of FINRA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, Wells Fargo Bank, N.A. and Wells Fargo Securities International Limited, authorized and regulated by the Financial Conduct Authority.

Wells Fargo Securities, LLC is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp.

This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information. The information in this report has been obtained or derived from sources believed by Wells Fargo Securities, LLC, to be reliable, but Wells Fargo Securities, LLC, does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of Wells Fargo Securities, LLC, at this time, and are subject to change without notice. For the purposes of the U.K. Financial Conduct Authority's rules, this report constitutes impartial investment research. Each of Wells Fargo Securities, LLC, and Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks.. Copyright © 2014 Wells Fargo Securities, LLC.

SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

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