GS main uno 0726 by palmoni

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									                                          Americas Morning Summary
                                          July 26, 2010



The Goldman Sachs Group, Inc.
                                           Focus Items
This document contains comments
related to the following stocks:           Europe: Banks: Stress test: more than meets the headlines, a conditional thumbs
                                                                                                                                                                                  1
                                           up
Acme Packet, Inc. (APKT)                   Americas: Healthcare: Generic Lovenox approval a major event with broad
                                                                                                                                                                                  2
Advanced Energy Industries, Inc.           implications
(AEIS)
Advanced Micro Devices, Inc.               Americas: Healthcare: Specialty Pharmaceuticals: Specialty pharma 2Q preview:
                                                                                                                                                                                  3
(AMD)                                      AGN, MYL, CEPH, and PRGO in focus
Air Products & Chemicals Inc.              CBOE Holdings, Inc. (CBOE): Positioned for secular growth, but facing
(APD)                                                                                                                                                                             4
Airgas Inc. (ARG)
                                           aggressive competition
Allergan, Inc. (AGN)                       Chico's FAS, Inc. (CHS) Sell: Adding Chico's to the Conviction Sell List                                                               5
Altera Corp. (ALTR)
Analog Devices, Inc. (ADI)
Applied Materials, Inc. (AMAT)             Key Data Changes
Aruba Networks, Inc. (ARUN)
athenahealth, Inc. (ATHN)                  Investment List Additions
Atmel Corporation (ATML)                   Company                                         Ticker                             Investment List Additions
Baker Hughes Inc. (BHI)                    Chico's FAS, Inc.                                   CHS                           Americas Conviction Sell List
Biovail Corp. (BVF)
The Boeing Company (BA)                    Investment List Removals
Broadcom Corporation (BRCM)
Broadsoft, Inc. (BSFT)                     Company                                         Ticker                             Investment List Removals
Bucyrus International Inc. (BUCY)          Kimberly-Clark Corporation                          KMB                           Americas Conviction Sell List
CBOE Holdings, Inc. (CBOE)
Cephalon, Inc. (CEPH)                      Initiations
Chico's FAS, Inc. (CHS)                                                               Rating/
                                           Company                      Ticker                           Price Target         Current Year              Next Year    Fiscal y/e
Clean Harbors, Inc. (CLH)                                                          Coverage view
CommVault Systems, Inc. (CVLT)             Broadsoft, Inc.              BSFT             N/N               $10.00                   ($0.21)              $0.34         Dec
Corning Inc. (GLW)
Cytec Industries (CYT)                     CBOE Holdings, Inc.          CBOE             N/N               $30.00                   $1.35                $1.75         Dec
Dover Corp. (DOV)
DreamWorks Animation SKG, Inc.             Rating and price target changes
(DWA)                                                                                 Rating/
                                                                                                              Price Target                               Estimates
                                                                                   Coverage view
Endo Pharmaceuticals Holdings Inc.         Company                        Ticker   New     Old          New        Old       % chg      Current Year       Next Year Fiscal y/e
(ENDP)
Financial Engines, Inc. (FNGN)             Aruba Networks, Inc.           ARUN     B/N         unch   ↑ $20.00   $17.50      14.3%            ($0.15)        $0.09       Jul
Ford Motor Company (F)                     Baker Hughes Inc.               BHI     N/N         unch   ↑ $51.00   $45.00      13.3%            $2.56          $3.30       Dec
FormFactor, Inc. (FORM)
                                           Broadsoft, Inc.                 BSFT    N/N          --     $10.00       --         --             ($0.21)        $0.34       Dec
General Dynamics Corp. (GD)
Goodrich Corp. (GR)                        CBOE Holdings, Inc.            CBOE     N/N          --     $30.00       --         --             $1.35          $1.75       Dec
Hexcel Corp. (HXL)                         Cytec Industries                CYT     S/N         unch   ↑ $45.00   $40.00      12.5%            $3.70          $4.20       Dec
Honeywell International Inc. (HON)
Host Hotels & Resorts, Inc. (HST)          Dover Corp.                     DOV     B/A         unch   ↑ $60.00   $58.00      3.4%             $3.30          $4.00       Dec
Impax Laboratories, Inc. (IPXL)            Financial Engines, Inc.        FNGN     N/N         unch   ↓ $17.00   $18.00      (5.6%)           $0.31          $0.37       Dec
Ingersoll-Rand PLC (IR)
For further product information,
contact:

New York Investment Research
(212) 902-1000

Analysts employed by non-US                The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research
affiliates are not registered/qualified    reports. As a result, investors should be aware that the firm may have a conflict of interest that could
as research analysts with FINRA in         affect the objectivity of this report. Investors should consider this report as only a single factor in making
the U.S.                                   their investment decision. For Reg AC certification, see the end of the text. Other important disclosures
                                           follow the Reg AC certification, or go to www.gs.com/research/hedge.html.
Global Investment Research
Intel Corp. (INTC)                    Ford Motor Company               F       B/A     unch    ↑ $16.00    $14.00     14.3%        $1.85             $1.92        Dec
International Rectifier Corp. (IRF)
Intersil Corp. (ISIL)                 Johnson Controls, Inc.          JCI      N/A     unch    ↑ $32.00    $31.00     3.2%         $1.96             $2.42        Sep
Johnson Controls, Inc. (JCI)          Kimberly-Clark Corporation      KMB      S/N     unch    ↑ $62.00    $58.00     6.9%         $4.80             $5.10        Dec
Kimberly-Clark Corporation (KMB)
                                      LSI Corp.                       LSI      N/A     unch    ↓ $6.00      $6.50     (7.7%)       $0.42             $0.50        Dec
King Pharmaceuticals, Inc. (KG)
KLA-Tencor (KLAC)                     Penn National Gaming, Inc.      PENN     S/N     unch    ↑ $23.00    $22.00     4.5%         $1.16             $1.28        Dec
Lam Research Corp. (LRCX)             Royal Caribbean Cruises Ltd.    RCL      N/N     unch    ↑ $28.00    $25.00     12.0%        $1.91             $2.57        Dec
Linear Technology Corp. (LLTC)
LSI Corp. (LSI)                       Estimate changes
Marvell Technology Group Ltd.
                                                                                  Rating/                Current Year                      Next Year
(MRVL)                                                                                                                                                          Fiscal y/e
                                      Company                         Ticker   Coverage view     New          Old       % chg     New         Old      % chg
Maxim Integrated Products (MXIM)
Medicis Pharmaceutical Corp.          Air Products & Chemicals Inc.   APD            NR         ↓ $4.98      $5.05      (1.3%)    $5.70      unch        --       Sep
(MRX)                                 Airgas Inc.                     ARG            NR         ↑ $3.25      $3.03      7.2%     ↑ $3.70     $3.50     5.6%       Mar
Microchip Technology Inc. (MCHP)
Micron Technology Inc. (MU)           Aruba Networks, Inc.            ARUN           B/N       ↑ ($0.15)    ($0.16)     1.1%     ↑ $0.09     $0.06     52.6%       Jul
MKS Instruments, Inc. (MKSI)          athenahealth, Inc.              ATHN           N/N        ↓ $0.55      $0.60      (8.0%)   ↓ $0.97     $1.06     (8.7%)     Dec
Motorola, Inc. (MOT)
                                      Baker Hughes Inc.                BHI           N/N        ↑ $2.56      $2.07      23.6%    ↑ $3.30     $2.92     12.9%      Dec
Mylan Inc. (MYL)
National Semiconductor Corp.          Broadsoft, Inc.                 BSFT           N/N        ($0.21)        --         --      $0.34       --         --       Dec
(NSM)                                 CBOE Holdings, Inc.             CBOE           N/N         $1.35         --         --      $1.75       --         --       Dec
Newfield Exploration (NFX)
Novellus Systems Inc. (NVLS)          Cytec Industries                CYT            S/N        ↑ $3.70      $2.65      39.9%    ↑ $4.20     $3.05     38.1%      Dec
Nvidia Corp. (NVDA)                   Dover Corp.                     DOV            B/A        ↑ $3.30      $3.05      8.0%     ↑ $4.00     $3.90     2.5%       Dec
ON Semiconductor Corp. (ONNN)
                                      Financial Engines, Inc.         FNGN           N/N        ↓ $0.31      $0.34      (9.6%)   ↓ $0.37     $0.40     (7.8%)     Dec
Par Pharmaceutical Cos., Inc.
(PRX)                                 Ford Motor Company                F            B/A        ↑ $1.85      $1.40      31.5%    ↑ $1.92     $1.60     20.0%      Dec
Penn National Gaming, Inc. (PENN)     Honeywell International Inc.    HON            N/A        ↓ $2.60      $2.65      (2.0%)   ↓ $3.10     $3.20     (2.9%)     Dec
Perrigo Co. (PRGO)
PMC-Sierra, Inc. (PMCS)               Host Hotels & Resorts, Inc.     HST            N/A        ↑ $0.70      $0.68      2.2%     ↓ $0.96     $1.00     (3.6%)     Dec
Precision Castparts Corp. (PCP)       Johnson Controls, Inc.           JCI           N/A        ↑ $1.96      $1.94      0.9%     ↑ $2.42     $2.35     2.7%       Sep
ProLogis (PLD)
                                      Kimberly-Clark Corporation      KMB            S/N        ↑ $4.80      $4.65      3.1%     ↑ $5.10     $4.96     2.8%       Dec
Quest Software, Inc. (QSFT)
Republic Services, Inc. (RSG)         Newfield Exploration            NFX            B/N        ↑ $4.61      $4.58      0.5%     ↑ $5.52     $5.28     4.5%       Dec
Rockwell Collins Corp. (COL)          Penn National Gaming, Inc.      PENN           S/N        ↓ $1.16      $1.17      (0.7%)   ↑ $1.28     $1.26     1.4%       Dec
Royal Caribbean Cruises Ltd. (RCL)
SanDisk Corporation (SNDK)            ProLogis                        PLD            S/N        ↑ $0.58      $0.52      11.1%    ↑ $0.82     $0.74     9.9%       Dec
Schlumberger, Ltd. (SLB)              Royal Caribbean Cruises Ltd.    RCL            N/N        ↑ $1.91      $1.77      8.0%     ↑ $2.57     $2.16     18.6%      Dec
Semtech Corporation (SMTC)
Sherwin-Williams Company (SHW)        Schlumberger, Ltd.               SLB           NR         ↓ $2.85      $2.86      (0.1%)   ↑ $3.96     $3.95     0.2%       Dec
SolarWinds, Inc. (SWI)                Sherwin-Williams Company        SHW            S/N        ↓ $4.60      $4.65      (1.1%)    $5.25      unch        --       Dec
Spirit AeroSystems Holdings, Inc.
                                      Verizon Communications           VZ            N/N        ↑ $2.24      $2.22      1.2%      $2.31      unch        --       Dec
(SPR)
Stericycle, Inc. (SRCL)
Teradyne, Inc. (TER)
Teva Pharmaceuticals (TEVA)
                                      Other Headlines
Texas Instruments Inc. (TXN)          Basic Materials
Textron Inc. (TXT)
Varian Semi Equipment Assoc.          West Fraser Timber Co., Ltd. (WFT.TO): Strong 2Q10 EPS but lower prices to impact 3Q10;
                                                                                                                                                                          6
(VSEA)                                remain Neutral
Verigy Ltd. (VRGY)
                                      Americas: Chemicals: Weekly earnings recap: updating our estimates                                                                  7
Verizon Communications (VZ)
VMware, Inc. (VMW)
Warner Chilcott Ltd. (WCRX)           Consumer Cyclicals
Waste Connections, Inc. (WCN)         Ford Motor Company (F): Cycle of upward estimate revisions continues post 2Q results                                                8
Waste Management, Inc. (WM)
Watson Pharmaceuticals, Inc. (WPI)    DreamWorks Animation SKG, Inc. (DWA): DWA preview: Waiting for a catalyst; 2Q2010 is
                                                                                                                                                                          9
West Fraser Timber Co., Ltd.          probably not it
(WFT.TO)                              Johnson Controls, Inc. (JCI): Expect a sequential improvement in FY4Q; maintain Neutral                                            10
XILINX Corp. (XLNX)
                                      Financial Engines, Inc. (FNGN): Looking through market declines, underlying growth intact in 2Q                                    11
                                      Royal Caribbean Cruises Ltd. (RCL): Updating estimates after 2Q2010 earnings                                                       12
                                      Penn National Gaming, Inc. (PENN): Updating estimates after 2Q earnings; maintain Sell                                             13
Host Hotels & Resorts, Inc. (HST): Updating estimates after 2Q2010 results                        14

Consumer Staples
United States: Food: July grocery data shows food trends continue to remain soft                  15
Kimberly-Clark Corporation (KMB): Remove from Conviction Sell list on better cash flow, opex
                                                                                                  16
trends

Energy
Americas: Energy: Oil Services: Mid-2Q update: balanced risk/reward after recent N.A. driven
                                                                                                  17
rally
Newfield Exploration (NFX): Stock a relative beneficiary in diverse scenarios; reiterate CL-Buy   18

Financial Services
ProLogis (PLD): Finding bottom vs. recovery is our concern; Maintain Sell w/ $11 PT               19

Healthcare
athenahealth, Inc. (ATHN): 2Q2010 follow-up; adjusting 2010-2012 EPS estimates                    20

Industrials
Americas: Aerospace & Defense: Aerospace in Pictures: July 2010                                   21
Bucyrus International Inc. (BUCY): Buy: Still in the early stages of order recovery, merger
                                                                                                  22
integration
Honeywell International Inc. (HON): Executing well, late-cycle appeal, looking for improved
                                                                                                  23
valuation
Ingersoll-Rand PLC (IR): Solid - if unspectacular - 2Q; remain Neutral                            24
Americas: Environmental Services: Waste Management: Trading Update: Warming up to solid
                                                                                                  25
waste companies into 2Q2010 results
Dover Corp. (DOV): Under-appreciated structural change story                                      26
Americas: Multi-Industry: What we have learned from 2Q earnings thus far                          27

Technology
Americas: Technology: Software: Earnings a study in contrasts so far (VMW, CVLT, QSFT, SWI)       28
Americas: Communications Technology: GS CommTech Weekly: GLW and MOT previews;
                                                                                                  29
China sub adds update
Americas: Technology: Semiconductors: GS US Semi & SPE Weekly: Week 3 earnings previews           30
Broadsoft, Inc. (BSFT): Pure-play on VoIP transition; initiating with a Neutral rating            31
Americas: Technology: Software: The Weekly Catalyst: Earnings onslaught, Microsoft FAM            32

Telecom Services
Verizon Communications (VZ): Calming wireline margin fears; upside requires revenue progress      33

Utilities
Americas: Utilities: Diversified: Pipeline & MLP Essentials: SXL, EPD, and WMB to reveal 2Q
                                                                                                  34
themes

Other
Latin America Weekly Kickstart: The view from Rio                                                 35

Reports Published
Americas Morning Summary                                                                                                            July 26, 2010




Focus Items

Europe: Banks: Stress test: more than meets the headlines, a conditional thumbs up                                                             1

                                 Jernej Omahen (London): jernej.omahen@gs.com, +44(20)7774-6324
                                 Goldman Sachs International
                                 Aaron Ibbotson, CFA (London): aaron.ibbotson@gs.com, +44(20)7774-6661
                                 Goldman Sachs International
                                 Frederik Thomasen (London): frederik.thomasen@gs.com, +44(20)7552-9363
                                 Goldman Sachs International
                                 Domenico Vinci (London): domenico.vinci@gs.com, +44(20)7552-9360
                                 Goldman Sachs International
                                 Jean-Francois Neuez (London): jean-francois.neuez@gs.com, +44(20)7552-9362
                                 Goldman Sachs International
                                 Pawel Dziedzic (London): pawel.dziedzic@gs.com, +44(20)7774-1279
                                 Goldman Sachs International
                                 Heiner Luz (London): heiner.luz@gs.com, +44(20)7051-2264
                                 Goldman Sachs International
                                 Louise Pitt (New York): louise.pitt@gs.com, (212) 902-3644
                                 Goldman Sachs & Co.

                                 Stress-test potential for confidence-building
                                 The European bank stress test fell short of expectations (as expressed by our survey) by identifying a €3.5 bn
                                 capital shortfall vs. €37.6 bn expected. However, the credibility of the exercise will ultimately be determined
                                 by its underlying assumptions and associated disclosure. We assess the assumptions – Tier 1 hurdle,
                                 sovereign risk, macro/loss assumptions and pre-provision profit – and new disclosure, concluding that the
                                 test represents a substantial step forward.
                                 Capital hurdle; 6% subject to assumptions
                                 While the minimum Tier 1 hurdle set in the test (6%) is above current regulatory minimums (4%) and in line
                                 with the US test (4% Tier 1 common), some may take the view that it is not sufficiently conservative.
                                 However, the stress test provides market participants with sufficient information to locate capital shortfalls
                                 against the capital ratio of their choosing. Our analysis suggests scaling the capital hurdle to 7% increases
                                 capital shortfall from €3.5 bn to €11.3 bn, and number of banks with a capital shortfall from 7 to 24, for
                                 example.
                                 Sovereign exposures; disclosure is king
                                 Only the trading books were stressed. However, investors now have the information to gauge the impact from
                                 various scenarios on their own. For example, marking all sovereign exposure in South Europe and Ireland
                                 would increase the capital shortfall to €16 bn. On Greece, exposures seem well distributed and manageable,
                                 in our view.
                                 Macro and loss assumptions reflect cycle
                                 The headline macro assumptions of the European stress test seem less severe than the US; a closer
                                 comparison shows a different picture as: (i) Europe is one year further into the credit cycle, and (ii)
                                 assumptions employed for countries facing particularly challenging macro conditions (Greece, Spain, Ireland)
                                 are severe, in our view.
                                 Pre-impairment income below GS estimates
                                 Pre-impairment income assumptions under the adverse scenario are more conservative than our GS base-
                                 case estimates for most banks; however, there are multiple outliers.



Americas: Healthcare: Generic Lovenox approval a major event with broad implications                                                           2

                                 Jami Rubin (New York): jami.rubin@gs.com, (212) 357-7536
                                 Goldman Sachs & Co.
                                 Randall Stanicky, CFA (New York): randall.stanicky@gs.com, (212) 357-3292
                                 Goldman Sachs & Co.
                                 Asad Haider, CFA (New York): asad.haider@gs.com, (212) 902-0691




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                            July 26, 2010



                                 Goldman Sachs & Co.
                                 Robert P. Jones (New York): robert.p.jones@gs.com, (212) 357-3336
                                 Goldman Sachs & Co.
                                 Stephan Stewart (New York): stephan.stewart@gs.com, (212) 934-4218
                                 Goldman Sachs & Co.
                                 Baneesh Banwait (Bangalore): baneesh.banwait@gs.com, (212) 934-6193
                                 Goldman Sachs India SPL

                                 Generic Lovenox approval has implications across multiple sectors
                                 On July 23, 2010 Momenta (with Sandoz) announced FDA approval and immediate launch of its generic
                                 Lovenox (Sanofi’s $2.7 bn anticoagulant therapy). By way of background, Lovenox (a biologic) was approved
                                 before the Biologic Licensing Application (BLA) pathway was established; hence, it was approved under a
                                 New Drug Approval (NDA) pathway. This allowed generics to pursue the ANDA pathway for approval - an
                                 equivalent process does not yet exist for biologic drugs. The generic Lovenox applications were filed from
                                 early to mid-2000, and the approval process has been closely watched, as it is considered reflective of what
                                 the FDA is willing to do with generic biologics.
                                 Biotech and pharma – negative implications, greater long-term risk
                                 The approval accelerates the risk of sector convergence (pharma / biotech / generics) with the perception
                                 that the biotech product “tail” will now likely be truncated. Pharma’s low valuation already reflects this. We
                                 would also expect to see reignited interest in pharma company investments in biosimilar, such as from MRK,
                                 PFE, SAN, and NVS.
                                 Generics – mixed long-term but near-term read through negative
                                 Within generics the focus is on TEVA (NR) where the near-term negative read is two-fold: (1) the lack of a
                                 competing generic Lovenox from TEVA, which we have estimated could have added roughly $0.25 in annual
                                 (~5% to EPS), and (2) now greater investor focus on potential FDA approval of TEVA’s innovator MS drug,
                                 Copaxone (14% in US revenue). Longer-term, for generics we see a positive opportunity from more generic
                                 opportunities (including follow-on biologics) which would, to some degree, be offset by product opportunities
                                 that currently see less competition (or none).
                                 Supply Chain – incremental positive for the Distributors
                                 Generic Lovenox is a significant launch for ABC (Buy), MCK (CL-Buy), and CAH (Neutral), given: (1) Sizable
                                 annual brand sales of $2.7 bn; (2) minimal pricing discount - less than 30% per our checks; and (3) quick
                                 expected generic conversion given FDA deemed Sandoz/Momenta’s version as substitutable (AB-rated).
                                 While profit will be somewhat limited given only one generic approved, and Distributors have more leverage
                                 with 2-3 generics, we see this approval as a positive sign that the FDA is more willing to approve more
                                 complex, higher profit generics.



Americas: Healthcare: Specialty Pharmaceuticals: Specialty pharma 2Q preview: AGN, MYL, CEPH, and                                              3
PRGO in focus

                                 Randall Stanicky, CFA (New York): randall.stanicky@gs.com, (212) 357-3292
                                 Goldman Sachs & Co.
                                 Gregory Waterman, CFA (New York): gregory.waterman@gs.com, (212) 855-7725
                                 Goldman Sachs & Co.
                                 Stephan Stewart (New York): stephan.stewart@gs.com, (212) 934-4218
                                 Goldman Sachs & Co.

                                 Key themes to focus on in 2Q across Generics and Specialty
                                 We expect the second quarter 2010 earnings season to come with several important updates that could bring
                                 a broader read, given a variety of uncertainties that have weighed on the sector. Specifically, with TEVA
                                 kicking earnings off on Tuesday, we would expect early focus on (1) the impact of European price cuts and
                                 (2) expectations around potential for greater FDA approval activity on more challenging products. We also
                                 expect several updates to outlook where variability around FX and updated synergy assumptions from recent
                                 sector M&A will matter. Finally, we expect several important product updates within specialty pharma, most
                                 notably from Allergan on Botox for migraine.
                                 Key updates from four companies: AGN, MYL, CEPH, and PRGO
                                 Allergan (AGN, CL-Buy): We expect a solid 2Q result consistent with recent positive comments at our
                                 healthcare conference in mid-June. That said, the stock will be heavily linked to the FDA decision on Botox




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                         July 26, 2010



                                           for migraine which is expected before the end of July (2Q to be reported on August 2). We continue to view a
                                           potential approval here and the most important near-term catalyst around earnings with our 2011-2013 EPS
                                           moving 3%-5% higher should we see approval ahead of 2011, given our 70% risk adjustment.
                                           Mylan (Buy): We continue to like shares and see an attractive 2H2010 setup. While 2Q is not viewed as a
                                           catalyst, expectations are low and we believe an in-line result with reaffirmed outlook and positive tone could
                                           alleviate concerns and set shares up for a rally. Shares are off 23% (vs. -6% for S&P 500) since early April on
                                           a host of concerns around earnings despite recent support from (1) accretive Bioniche acquisition (2)
                                           improved FX and
                                           (3) recent high value approvals (i.e., Catapres-TTS, Wellbutrin XL).
                                           Cephalon (Neutral): The preannounced second quarter brought expected upside but magnitude to full year is
                                           unclear. Updated guidance will come with results July 27 and likely to move Street numbers meaningfully
                                           higher. The source and importantly sustainability to the upside drivers will be the focus with a broad range
                                           around consensus forecasts in the out years.
                                           Perrigo (Sell): We see negative risk/reward consistent with our recent downgrade (7/19) on three primary
                                           concerns: (1) near-term earnings risk, (2) potential for prolonged manufacturing overhang, and (3) premium
                                           valuation. The August 17 earnings update will bring clarity around the first two concerns which will be
                                           reflected in first time fiscal 2011 guidance.



CBOE Holdings, Inc. (CBOE): Positioned for secular growth, but facing aggressive competition                                                                4

CBOE, $27.15                               Daniel Harris, CFA (New York): daniel.harris@gs.com, (212) 357-7512
Market cap                  $2,524 mn
                                           Goldman Sachs & Co.
                                           Jason Harbes, CFA (New York): jason.harbes@gs.com, (212) 357-4319
Target price                     $30.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E

EPS ($)                   1.35     1.75    Investment view
P/E                    20.1X      15.5X    We initiate coverage of CBOE Holdings (CBOE) with a Neutral rating and a $30 price target, implying 11%
                                           upside to current levels. CBOE is a unique options franchise with a fairly defensive set of characteristics in its
EPS Quarter/Interim*      0.36     0.30
                                           index option trading segment, with a more competitive but very liquid position in single-name equity option
Investment Lists                           trading. While we expect the growth rate in options to slow over the next few years versus a 10-year average
                                 Neutral   growth rate of 19%, we view options as possessing secular growth characteristics driven by growth in retail
Coverage view                    Neutral
                                           interest and new products/clients. We expect continued industry competition, but see value in CBOE at these
                                           levels.
*Current and a year ago
                                           Core drivers of growth
                                           Equity options are one of the most material capital markets growth areas, and we expect industry options to
                                           grow at an 11% CAGR over the next three years. Specific to CBOE, we see three major growth drivers:
                                           (1) C2 launch in 4Q2010 could double SPX index volumes over the next three years based on an analysis of
                                           prior electronification events where volumes have increased at a 3-year average rate of 124%.
                                           (2) Access fees: traders will require similar exposure to CBOE liquidity as they did when CBOE was a
                                           member-driven exchange, which is expected to drive access fees up 92% versus 2009. The risk is falling
                                           market share in equities, which limits the need to trade on the CBOE for a premium fee.
                                           (3) VIX license to CME: broadening the exposure of VIX methodology to other liquid asset classes
                                           (energy/ags to start) could double revenues.
                                           Risks to the investment case
                                           Downside: lower industry volumes, market share, and pricing pressure. Upside: growth in index options,
                                           improving margins, M&A activity.
                                           Valuation
                                           We value CBOE based on three factors: P/E, PEG, and SOTP, plus an M&A premium. Our 12-month price
                                           target is $30, implying 11% upside.

                                           Industry context




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                         July 26, 2010




Chico's FAS, Inc. (CHS) Sell: Adding Chico's to the Conviction Sell List                                                                                    5

CHS, $10.24                                  Michelle Tan, CFA (New York): michelle.tan@gs.com, (212) 902-3099
Market cap                   $1,807 mn
                                             Goldman Sachs & Co.
                                             Nicole Shevins (New York): nicole.shevins@gs.com, (212) 902-9884
Target price                        $8.00
                                             Goldman Sachs & Co.
Fiscal y/e Jan            2011E    2012E     Kamal Suri (Bangalore): kamal.suri@gs.com, (212) 934-6797
EPS ($)                    0.65      0.76    Goldman Sachs India SPL
P/E                       15.7X     13.6X

EPS Quarter/Interim
                      *
                           0.17      0.10
                                             Source of opportunity
                                             We are adding CHS to the Conviction Sell list as we skew our exposure towards defensive/late cycle and
Investment Lists                             remove KMB. Our current apparel Sell calls focus on names with company specific drivers of above-trend
          Americas Conviction Sell List      results that we believe are now fading. We see these stories as more vulnerable to a combination of macro
                    Americas Sell List       slowdown and company specific mean reversion. CHS has been through a major turnaround since early
Coverage view                      Neutral   2009 thanks to new mgmt that has capitalized on big cost, process and product opportunities. However as
*Current and a year ago
                                             these improvements are being lapped, we see notable risk that momentums slows faster than investors
                                             anticipate.
                                             Catalyst
                                             We see the shares as vulnerable to a combination of (1) High expectations – consensus implies CHS will
                                             sustain mid-single digit comp sales through 2H10-FY2011 and post c. 400bps of EBIT margin expansion vs.
                                             less than 100bps expected for peers; and (2) A sharper than expected deceleration in momentum – Though
                                             still very good on an absolute basis, CHS already reported surprisingly weak relative results in 1Q10 as the
                                             first stages of its turnaround were lapped. While 1Q comps outpaced peers, gross margin was up only
                                             160bps vs. the sector average of 330bps, and EBIT expansion fell short of peers. As CHS anniversaries a
                                             more significant leg of its turnaround with much tougher compares in July, we see signs that momentum is
                                             slowing further. Chico’s ran 6 different offers this July vs. 3 last year. Most notably, the key July VIP event
                                             started early this year and ran from Monday-Sunday vs. Thursday-Sunday last year.
                                             Valuation
                                             Our estimates are unchanged and stand 9% and 20% below consensus for 2010/2011; Our $8 6-m, multiple-
                                             based target implies c. 20% downside.
                                             Key risks
                                             Stronger response to Fall product; Acceleration in broader spending trends


Other Headlines
Basic Materials

West Fraser Timber Co., Ltd. (WFT.TO): Strong 2Q10 EPS but lower prices to impact 3Q10; remain Neutral                                                      6

WFT.TO, C$35.00                              Richard Skidmore, CFA (New York): richard.skidmore@gs.com, (212) 357-5509
Market cap                  C$1,502 mn
                                             Goldman Sachs & Co.
                                             Alex Ovshey (New York): alex.ovshey@gs.com, (212) 902-6751
Target price                      C$38.00
                                             Goldman Sachs & Co.
Fiscal y/e Dec            2010E    2011E     Usha Chundru (Bangalore): usha.chundru@gs.com, (212) 934-5057
EPS (C$)                   2.95      3.65    Goldman Sachs India SPL
P/E                       11.9X      9.6X

EPS Quarter/Interim*       1.73     (1.50)
                                             What's changed
                                             West Fraser (WFT.TO) reported 2Q2010 EPS from continuing operations of C$1.73 (excluding FX translation
Investment Lists                             loss on long-tem debt of C$0.27) vs. our estimate of C$1.64 and consensus of C$1.03. The upside to our
                                   Neutral   forecast was driven by higher non-operating income (from a reversal of equity compensation due to share
Coverage view                      Neutral   price decline in the quarter) and a lower effective tax rate of 24% vs. our 28% estimate (+ $0.10 EPS impact)
                                             partially offset by a lower EBITDA margin and higher interest expense.
*Current and a year ago
                                             Implications
                                             West Fraser’s improved 2Q2010 operating results were driven by stronger lumber shipments to China (up
                                             30% q/q) and higher lumber and pulp prices. However, Pulp and Paper segment’s operating margin was




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                             July 26, 2010



                                 lower than expected at 16% vs. our 21% estimate. We forecast pulp and lumber prices to turn lower in
                                 2H2010, which we expect to negatively impact WFT’s 3Q2010 results. Lumber prices are currently 19%
                                 lower than the average 2Q level, and we estimate pulp prices will decline 3% q/q in 3Q10. Further, we expect
                                 WFT’s pulp exports to China to moderate in 2H2010 as Chinese pulp buyers await prices to roll over.
                                 Valuation
                                 We maintain our FY2010/2011/2012 EPS estimates despite the strong 2Q201EPS beat, given lower
                                 estimated pulp segment profitability. Our 12-month target price remains unchanged at C$38 implying 9%
                                 upside and based on our 2011 EBITDA forecast (C$472 mn) and cash EPS forecast of C$3.51. Our price
                                 target is based on our 2011 cash EPS and EBITDA estimates and 10.8X and 4.0X multiples, respectively.
                                 We maintain our Neutral rating on shares of WFT.TO, as we see better upside for the other names in our
                                 coverage and lumber and pulp prices are moving lower.
                                 Key risks
                                 Lower (higher) lumber prices, sharper (slower) US housing starts recovery, and weaker (stronger) pulp
                                 prices.



Americas: Chemicals: Weekly earnings recap: updating our estimates                                                                              7

                                 Robert Koort, CFA (Houston): robert.koort@gs.com, (713) 654-8480
                                 Goldman Sachs & Co.
                                 Amy Zhang (New York): nan.zhang@gs.com, (212) 902-0291
                                 Goldman Sachs & Co.
                                 Brian Maguire (New York): brian.maguire@gs.com,
                                 Goldman Sachs & Co.
                                 Luisa Hermann (Houston): luisa.hermann@gs.com, (713) 654-8482
                                 Goldman Sachs & Co.

                                 Industry context
                                 In the past week, several chemical names including CYT, ARG, APD, and SHW reported earnings. Overall,
                                 the results and commentary reflected a favorable environment of continued end market demand recovery,
                                 benefits from cost reductions, and, in most cases, relatively benign but rising input cost inflation. Companies
                                 exposed to manufacturing, industrial, and technology end markets are seeing a continuation of positive
                                 trends into late July, while companies with construction exposure saw trends deteriorate as the quarter
                                 progressed and provided a more subdued outlook for 2H2010.
                                 Most stocks reacted favorably to the earnings reports. CYT shares, up 22.0% vs. the S&P 500’s 3.5% gain,
                                 were the big winner for the week. APD gained 4.0%, while ARG, which is tethered to a buyout price, was up
                                 less than 1%. Meanwhile, SHW shares fell 0.6% on the back of cautious commentary on second half
                                 demand.
                                 Source of opportunity
                                 Regionally, Asia and Latin America continue to lead the way. Despite mixed macro data from those regions,
                                 management commentary did not express expectations for a meaningful slowdown. Excluding construction,
                                 the North American recovery appears to be progressing with expectations for slower (on tougher comps), but
                                 steady growth ahead. We were particularly impressed by strong demand from the aerospace/defense,
                                 manufacturing, and consumer electronics markets.
                                 Cost inflation appears to be heating up with temporary shortages reported by some companies. We expect
                                 manageable raw material cost inflation in 2010 with most companies able to pass costs along via higher
                                 prices.
                                 Revising estimates
                                 We are tweaking our estimates for APD, ARG, CYT, and SHW.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                          July 26, 2010



Consumer Cyclicals

Ford Motor Company (F): Cycle of upward estimate revisions continues post 2Q results                                                                         8

F, $12.72                                   Patrick Archambault, CFA (New York): patrick.archambault@gs.com, (212) 902-2817
Market cap                  $43,388 mn
                                            Goldman Sachs & Co.
                                            Aditya Oberoi (New York): aditya.oberoi@gs.com, (212) 357-7617
Target price                      $16.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E

EPS ($)                    1.85     1.92    What's changed
P/E                        6.9X     6.6X    Following much stronger than expected 2Q results we raise our 2010/2011/2012 EPS estimates to $1.85,
                      *                     $1.92 and $2.13 from $1.40, $1.60 and $1.85 previously. The increase reflects the impact of the 2Q beat, a
EPS Quarter/Interim        0.34     0.26
                                            more favorable pricing assumption for North America, better cost performance in Europe, and a higher
Investment Lists                            operating run rate in Asia vis-à-vis our previous forecasts. Our 12 month price target rises to $16 from $14.
                    Americas Buy List       Implications
          Americas Conviction Buy List
                                            While we were encouraged by 2H results, we believe 2H10 margins will be less robust due to a sequential
Coverage view                 Attractive    downtick in volumes primarily in NA and Europe; slightly back-end loaded headwinds from commodities and
*Current and a year ago                     structural costs, and a weaker earnings outlook at FMCC.
                                            That said, we believe on a full-year basis Ford should be able to sustainably grow automotive margins and
                                            overall EPS from 2010 levels. While the days of large structural cost cuts have likely passed, in our view we
                                            are in the early stages of a rebound in auto sales, and with NA and Europe payroll cost increases likely to be
                                            fairly modest over the next several years, there remains a significant untapped leverage opportunity. We also
                                            believe Ford’s favorable product cycle and inventory management coupled with rising industry capacity
                                            utilization should help sustain (albeit more modest) price increases over the next several years.
                                            Accordingly, despite the $1bn FMCC headwind we forecast next year, we still see EPS of $1.92 by 2011, a
                                            level of profitability we believe is not reflected in the shares as implied by their forward multiple of less than
                                            7x.
                                            Valuation
                                            We value Ford using multiples of P/E and EV/EBITDA adjusted for pension and OPEB expense net of
                                            service cost.
                                            Key risks
                                            Key risks are the pace of auto sales in Europe and NA.
                                            Impact on related securities



DreamWorks Animation SKG, Inc. (DWA): DWA preview: Waiting for a catalyst; 2Q2010 is probably not it                                                         9

DWA, $31.10                                 Ingrid Chung (New York): ingrid.chung@gs.com, (212) 902-2360
Market cap                   $2,717 mn
                                            Goldman Sachs & Co.
                                            James Mitchell, CFA (New York): james.mitchell@gs.com, (212) 357-1849
Target price                      $35.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Fred Krom (New York): fred.krom@gs.com, (212) 902-8618
EPS ($)                    1.57     2.21    Goldman Sachs & Co.
                                            Jordan Monahan (New York): jordan.monahan@gs.com, (212) 902-1879
P/E                       19.8X    14.1X
                                            Goldman Sachs & Co.
                      *
EPS Quarter/Interim        0.23     0.30

Investment Lists
                                            What's changed
                                  Neutral   We expect DreamWorks Animation to report in-line 2Q2010 earnings on 7/27. We expect the company to
Coverage view                     Neutral   report revenue, EBITDA, and EPS of $121 mn, $28 mn, and $0.23. Consensus revenue and EPS are $137
                                            mn and $0.26. We believe 2Q2010 results were driven chiefly by “How to Train Your Dragon” international
*Current and a year ago
                                            box office, “Shrek Forever After” consumer products and “Monster vs. Aliens” television revenue. While our
                                            2010 EPS estimate remains $1.57, we have shifted some earnings from 2Q into 3Q due to international box
                                            office timing.
                                            Implications
                                            Over the longer term, we believe our thesis regarding franchises providing a higher level of and more
                                            consistent earnings is largely intact and we fully expect “Shrek 4,” which is increasingly behind us, to be




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                       July 26, 2010



                                           significantly profitable. However, we believe that positive catalysts for shares at this point are still several
                                           months away, beyond possible “Megamind” and home video risk in the near term. We do not see 2Q2010
                                           earnings as a catalyst for shares as management warned on 6/17 that 2Q EPS would be “meaningfully” lower
                                           than 2Q2009 results, when the company reported $0.30 in EPS.
                                           Valuation
                                           At our 6-month normalized EPS and DCF derived price target of $35, DWA shares would be trading at 15X
                                           our 6-month normalized EPS of $2.35.
                                           Key risks
                                           CGI and 3D competition; home video challenges; 3D rollout pace; and FX.



Johnson Controls, Inc. (JCI): Expect a sequential improvement in FY4Q; maintain Neutral                                                                 10

JCI, $29.11                                Patrick Archambault, CFA (New York): patrick.archambault@gs.com, (212) 902-2817
Market cap                 $19,911 mn
                                           Goldman Sachs & Co.
                                           Aditya Oberoi (New York): aditya.oberoi@gs.com, (212) 357-7617
Target price                     $32.00
                                           Goldman Sachs & Co.
Fiscal y/e Sep         2010E     2011E

EPS ($)                   1.96     2.42    What's changed
P/E                    14.9X      12.0X    JCI reported 3QFY10 EPS of $0.54 vs. our estimate of $0.52 and consensus of $0.55. The company also
                                           revised its full year outlook for FY 2010 from $1.90-$1.95 to approximately $1.95, below the Street estimate
EPS Quarter/Interim*      0.56     0.52
                                           of $2.00. We are adjusting our 2010/2011/2012 EPS estimates to $1.96/$2.42/$2.78 from $1.94/$2.35/$2.69.
Investment Lists                           As a result, our six-month price target goes to $32 from $31. Our new forecasts reflect: (1) the impact of the
                                 Neutral   3Q beat vs. our expectations (2) a higher proportion of high-margin power solution revenue vs. our previous
Coverage view                Attractive
                                           forecasts, and (3) greater margin expansion in power solutions on the back of increased vertical integration.
                                           Implications
*Current and a year ago
                                           Even though JCI’s EBIT margin for the quarter was disappointing relative to expectations, we forecast a
                                           sequential uptick as we move into FY4Q. FY4Q is seasonally weak for JCI, but it should benefit from non-
                                           recurrence of a cacophony of 1X items such as a $15 mn investment in services, work stoppages at a Mexico
                                           facility, impairment charges in Asia, a late start to the cooling season, and timing issues related to customer
                                           recoveries.
                                           For the out years, we expect margins in the interiors segment to benefit from operating leverage as volumes
                                           improve globally partially offset by headwinds from still high launch costs in Europe. We expect operating
                                           income in Building Efficiency to see a boost as new business recovers in NA and from sustained growth in
                                           emerging markets. We expect the power solution segment to benefit from improved manufacturing costs from
                                           greater vertical integration as two smelting facilities come on line.
                                           Valuation
                                           Our new six-month price target of $32 is based on normalized through-the- cycle estimates and probability of
                                           default as implied by 5 yr CDS.
                                           Key risks
                                           Largest risk would relate to growth of Europe/NA non-res construction.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                     July 26, 2010




Financial Engines, Inc. (FNGN): Looking through market declines, underlying growth intact in 2Q                                                       11

FNGN, $14.75                                Brian Karimzad (New York): brian.karimzad@gs.com, (212) 357-1745
Market cap                   $660.9 mn
                                            Goldman Sachs & Co.
                                            Grace Huan (New York): grace.huan@gs.com, (212) 357-8280
Target price                      $17.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E

EPS ($)                    0.31     0.37    What's changed
P/E                       47.3X    40.2X    T Rowe price released its 2Q target date fund assets under management (AUM) data Friday, which we have
                      *                     found is a helpful indicator of 401K market trends impacting Financial Engines. Market declines stalled T
EPS Quarter/Interim        0.06     0.05
                                            Rowe AUM growth in 2Q, though net flows were healthy. We adjust our FNGN estimate to reflect the impact
Investment Lists                            of 2Q market declines, but positive net customer additions. We see 2Q AUM similar to 1Q and 2010/11/12
                                  Neutral   period end AUM of $33/$45/$56bn vs. $35/$46/$59bn prior. Our financial estimates flow the change
Coverage view                     Neutral
                                            accordingly and we remain Neutral rated. We lower our 2010E/2011E/ 2012E EPS to $0.31/$0.37/$0.46 (vs.
                                            $0.34/$0.40/$0.50 prior). We believe guidance can remain intact – management notes a sustained ~10%
*Current and a year ago                     decline in the market vs. Mar 30 levels would impact EBITDA by ~10% on an annual basis. The gap between
                                            the low and midpoint of guidance is ~8%.
                                            Implications
                                            Both T Rowe and broader industry data show 401K market resilient. T Rowe target date fund AUM declined
                                            to $46bn in 2Q from $48bn in 1Q, but 2Q net flows were +$1.6bn, in line with the average net flows seen
                                            during 2009’s rebound. This and similar broader industry data imply no material impact on the secular trends
                                            supporting managed 401K products.
                                            Financial Engines’ asset mix, customer gains offer better performance We note during periods of market
                                            stress (4Q08/1Q09) FNGN’s AUM trends outperformed what was implied by T Rowe and broader target date
                                            AUM balances. This is a function of Financial Engines’ more precise risk management platform limiting
                                            market losses, more share taking opportunities, and possibly lower relative voluntary cancellation rates.
                                            Valuation
                                            Our new $17 ($18 prior) 12-m PT is based on 40X 2011E EPS of $0.37 (1X PEG) plus $1/share NOL and
                                            15% takeout probability, checked against a DCF.
                                            Key risks
                                            Market fluctuation, slowing addition of company sponsors.



Royal Caribbean Cruises Ltd. (RCL): Updating estimates after 2Q2010 earnings                                                                          12

RCL, $28.12                                 Steven Kent, CFA (New York): steven.kent@gs.com, (212) 902-6752
Market cap                   $6,085 mn
                                            Goldman Sachs & Co.
                                            Neil Portus, CFA (New York): neil.portus@gs.com, (212) 902-2077
Target price                      $28.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Afua Ahwoi (New York): afua.ahwoi@gs.com, (212) 902-1760
EPS ($)                    1.91     2.57    Goldman Sachs & Co.
P/E                       14.7X    11.0X

EPS Quarter/Interim*       1.55     1.07
                                            What's changed
                                            We are updating our 2010-2012 EPS estimates for Royal following 2Q2010 earnings results. For 2010, our
Investment Lists                            new EPS estimate is $1.91 (from $1.77) as we pass through the 2Q beat and raise the back half slightly on
                                  Neutral   lower operating costs offset somewhat by the company’s tempered 2010 net yield forecast (we are now
Coverage view                     Neutral   assuming 3.6% from 5.3% previously). Our 2011-2012 estimates move to $2.57 (from $2.16) and $3.42 (from
                                            $2.32). Our 2011-2012 EPS estimates move higher as we now base our fuel estimates off the West Texas
*Current and a year ago
                                            Intermediate forward curve to be more in line with the methodology used by the Street. Our new EPS
                                            estimates are roughly in line with consensus estimates. We had previously used our GS energy team’s crude
                                            oil forecast which called for materially higher yoy crude prices. We are also introducing 2011E quarterly
                                            estimates of $0.22, $0.38, $1.91 and $0.06 for 1Q11E, 2Q11E, 3Q11E and 4Q11E, respectively.
                                            Implications
                                            Royal continues to manage cost effectively despite foreign exchange headwinds to net yield growth. Contrary
                                            to recent comments from competitors Carnival Cruise Lines and privately held Norwegian Cruise Lines,
                                            Royal did not speak to any recent deceleration in business trends. Management indicated that booking




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                   July 26, 2010



                                           volumes coming into call centers remain strong. We continue to hold a balanced view on shares of Royal as
                                           stable business trends are encouraging but we see the new ship premium providing less of a net yield boost
                                           as we get close to their anniversary into the fleet.
                                           Valuation
                                           Our 12-month, P/E-based price target moves to $28 from $25, based on our revised 2011 EPS estimates
                                           (our 11X target multiple is unchanged).
                                           Key risks
                                           Upside: Better-than-expected net yield growth and cost control efforts. Downside: Booking volumes slowing,
                                           new ship build announcements.



Penn National Gaming, Inc. (PENN): Updating estimates after 2Q earnings; maintain Sell                                                              13

PENN, $27.22                               Neil Portus, CFA (New York): neil.portus@gs.com, (212) 902-2077
Market cap                  $2,162 mn
                                           Goldman Sachs & Co.
                                           Steven Kent, CFA (New York): steven.kent@gs.com, (212) 902-6752
Target price                     $23.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E     Eli Hackel (New York): eli.hackel@gs.com, (212) 902-9672
EPS ($)                   1.16     1.28    Goldman Sachs & Co.
                                           Afua Ahwoi (New York): afua.ahwoi@gs.com, (212) 902-1760
P/E                    23.4X      21.3X
                                           Goldman Sachs & Co.
EPS Quarter/Interim*      0.31     0.23    Sinu Padmanabhan (Bangalore): sinu.padmanabhan@gs.com, (212) 934-8950
Investment Lists                           Goldman Sachs India SPL
                   Americas Sell List

Coverage view                    Neutral   What's changed
*Current and a year ago
                                           We maintain our Sell rating on Penn shares and have updated estimates following the company’s 2Q results.
                                           In our view, 2Q’s in-line EBITDA results and the company’s tepid outlook suggest that trends across the
                                           regional markets will continue to remain challenged. On the call, management commented that trends remain
                                           “very sluggish,” as it is still observing the same kind of consumer trends seen in prior quarters.
                                           Our new 2010-2012 EBITDA forecasts (after corporate and stock comp expense) are $567 mn, $600 mn,
                                           and $603 mn from $569 mn, $595 mn, and $604 mn. Our 2010-2012 EPS estimates move to $1.16, $1.28,
                                           and $1.19 from $1.17, $1.26 and $1.23. We are also introducing 2011 quarterly estimates of $0.33, $0.33,
                                           $0.35, and $0.28 for 1Q11E, 2Q11E, 3Q11E, and 4Q11E, respectively.
                                           Implications
                                           We remain sellers of Penn as we continue to be concerned about the slow pace of recovery in the near term,
                                           as sustained levels of high unemployment weigh on customer purse strings, and longer-term pressures from
                                           supply/cannibalization hold back valuation.
                                           Valuation
                                           Based on our new estimates, our 12-month price target goes to $23 from $22 (blended 8X 2011E
                                           EV/EBITDA multiple and DCF analysis).
                                           Key risks
                                           Key risks to our price target and Sell rating include better-than expected improvement in regional gaming
                                           results and a better employment outlook.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                             July 26, 2010




Host Hotels & Resorts, Inc. (HST): Updating estimates after 2Q2010 results                                                                                    14

HST, $14.21                                 Steven Kent, CFA (New York): steven.kent@gs.com, (212) 902-6752
Market cap                   $9,218 mn
                                            Goldman Sachs & Co.
                                            Eli Hackel (New York): eli.hackel@gs.com, (212) 902-9672
Target price                      $15.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Sinu Padmanabhan (Bangalore): sinu.padmanabhan@gs.com, (212) 934-8950
EPS ($)                    0.70     0.96    Goldman Sachs India SPL
P/E                       20.4X    14.8X

EPS Quarter/Interim
                      *
                           0.12     0.09
                                            What's changed
                                            We are updating our estimates after Host’s 2Q2010 results and announced acquisitions/investments. Our
Investment Lists                            new FFO estimates for 2010E, 2011E and 2012E are $0.70, $0.96 and $1.08 changed from $0.68, $1.00 and
                                  Neutral   $1.10 respectively. We are introducing our 2011 quarterly estimates of $0.14, $0.31, $0.18, and $0.13,
Coverage view                 Attractive    respectively. Our 2010 FFO estimate is moving higher to take into account the beat in 2Q. However, our
                                            2011/2012 FFO estimates are moving lower, as we are now including the shares associated with Host’s two
*Current and a year ago
                                            converts in the diluted share count, as, given the level of earnings, they are dilutive. Even though we are
                                            adding back the associated interest expense, it has a slightly dilutive effect. Our 2011/2012 EBITDA
                                            estimates are constant at $1.0 bn/$1.1 bn.
                                            Implications
                                            The company delivered a strong quarter and gave solid guidance for the year. As a pure owner of hotels and
                                            not a manager or franchiser, the company may increasingly benefit as US supply growth slows and RevPAR
                                            increases. In addition, its recent acquisitions/investments are a positive sign that the transaction market is
                                            starting to improve. We retain our Neutral rating at this time, however, as we believe it is still too early to be in
                                            the hotel owners and would prefer to be in a company such as Marriott or Starwood that has a manager and
                                            franchising component.
                                            Valuation
                                            We are maintaining our 12-month blended price target of $15. Our price target is based on 14X 2011E
                                            EBITDA.
                                            Key risks
                                            An upside risk to our price target is better-than-expected RevPAR growth. Downside risks to our price target
                                            include worse-than-expected performance/synergies of newly acquired properties and worse-than-expected
                                            RevPAR growth.



Consumer Staples

United States: Food: July grocery data shows food trends continue to remain soft                                                                              15

                                            Judy E. Hong (New York): judy.hong@gs.com, (212) 902-0490
                                            Goldman Sachs & Co.
                                            Tyler Walling (New York): tyler.walling@gs.com, (212) 934-0495
                                            Goldman Sachs & Co.

                                            Food sales show modest improvement in key categories
                                            Nielsen data for the four weeks ending July 10, 2010 (FDM, ex Wal-Mart and convenience) for the key
                                            categories we track indicates 0.7% sales growth, up modestly from last month’s 0.2% increase. Overall,
                                            volume trends improved to +0.9% which is similar to last month’s trend of +0.7%. Pricing was flat, which is in
                                            line with last month’s -0.5%.
                                            Sales trend remain sluggish for most companies
                                            SLE and HSY saw dollar sales increase in the July scanner data while CPB, GIS, K, SJM, and Dole saw a
                                            decline. SLE sales increased 1%, in line with prior trends. Sausage and lunch meat sales were up 5% and
                                            2% with +80bps and -10bps of share change. Bread remains soft, down 2% on soft pricing and weak
                                            pricing/share. HSY sales were up 2%, in line with last month. Chocolate candy sales increased, with the 4%
                                            gain driven entirely by volume growth. GIS sales decreased 4% as price fell 4%. Gains in yogurt (+6%) were
                                            more than offset by weak cereal sales (-7%). Share trends were mixed with cereal -80bps, yogurt -260bps
                                            and soup -200bps. CPB sales declined 4%, similar to last month’s -4%, as volume remained sluggish. Soup




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    July 26, 2010



                                           trends remain soft with sales -10% on volume -8% and pricing -2%. K trends remain sluggish with no
                                           improvement in sales with sales down 6% on -5% volumes and -1% pricing. Cereal sales declined 9% driven
                                           by weak volumes (-7%) and pricing (-2%) with 150bps of share loss. Crackers were down 3% with 70bps of
                                           share loss. KFT sales declined 1% with cheese -2%, crackers -1%, and cookies -1%, with share down
                                           110bps, 40bps, and 40bps respectively. Coffee sales were weak, down 3%, driven by -1% volume and
                                           140bps of share loss. SJM sales were -5% on -6% volumes and +1% pricing. Coffee sales were -4% on -4%
                                           volumes and 0% pricing with share down 140bps. Peanut butter and fruit spread share was up 130bps and
                                           60bps for the month. DOLE sales declined 10% as packaged salad sales remain down 14% with volume
                                           softness and 310bps of share loss.
                                           Favor beverages over food given fundamentals continue to diverge
                                           We prefer beverage stocks (PEP and HANS rated Buy) over food names as fundamentals continue to show
                                           improvement versus food, where we believe lackluster sales trends will persist.



Kimberly-Clark Corporation (KMB): Remove from Conviction Sell list on better cash flow, opex trends                                                  16

KMB, $63.64                                Andrew Sawyer, CFA (New York): andrew.sawyer@gs.com, (212) 902-5488
Market cap                 $26,678 mn
                                           Goldman Sachs & Co.
                                           Stephanie Whited (New York): stephanie.whited@gs.com, (212) 855-9812
Target price                     $62.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E

EPS ($)                   4.80     5.10    What happened
P/E                    13.3X      12.5X    We are removing KMB from the CL-Sell list. Our CL-Sell call was based on risk to EPS from higher input
                                           costs and soft demand. KMB’s FY10 budget did deteriorate for input costs (-$100 mn) and volume (-100 bp)
EPS Quarter/Interim*      1.27     1.40
                                           since reporting 1Q; however, our call for negative revisions appears wrong. KMB has gotten profit offsets
Investment Lists                           from strong cost productivity and better cash flow used for buybacks. We raise our FY10 estimate by $0.15 to
                   Americas Sell List      $4.80 to reflect these offsets and now match consensus. Since our downgrade to CL-Sell on 3/16/10, KMB
Coverage view                    Neutral
                                           shares are up 5.1% vs. a 4.9% decline for the S&P 500. Over the last 12 months, KMB is up 10.1% vs. a
                                           12.9% rise in the S&P.
*Current and a year ago
                                           Current view
                                           We see limited downside to both consensus earnings and the stock, but maintain our relative Sell rating for
                                           three reasons:
                                           (1) Sales remain soft – We see 2% FY organic sales growth that is at the low-end of the peer group range
                                           (the peer set is averaging 5%). KMB has relatively high exposure to weak industry back-drops in the
                                           US/Europe.
                                           (2) Competition remains an overhang – Promotional activity remains elevated in the Tissue category. We
                                           also expect P&G to maintain high levels of spending on Pampers. The need to respond could limit margin
                                           recovery even amidst a pull-back in pulp prices.
                                           (3) Relative valuation is moderately above historic averages – Kimberly is trading at 13-14X our 2010
                                           estimate, or at parity to the S&P 500. This is above the stock’s historic average of a 10% discount to the
                                           market. We see limited likelihood of relative P/E expansion with sales growth still sub-par.
                                           We raise our estimates to $4.80/$5.10/$5.48 from $4.65/$4.96/$5.35 to reflect strong cost savings efforts,
                                           higher levels of share repurchase, and a modestly lower tax rate. We also raise our 12-month P/E and DCF-
                                           based price target by $4 to $62. This is 12X our higher 2H11/1H12 EPS estimates, or a 10% discount to the
                                           S&P. Key risks include a sharp fall-off in pulp prices or improved category demand.



Energy

Americas: Energy: Oil Services: Mid-2Q update: balanced risk/reward after recent N.A. driven rally                                                   17

                                           Daniel Boyd, CFA (New York): daniel.boyd@gs.com, (212) 357-1804
                                           Goldman Sachs & Co.
                                           Dimitry Dayen, CFA (New York): dimitry.dayen@gs.com, (212) 855-0497
                                           Goldman Sachs & Co.
                                           Kyle Jenke (New York): kyle.jenke@gs.com, (917) 343-3196
                                           Goldman Sachs & Co.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                       July 26, 2010




                                            Neutral on the sector; limited near-term catalysts left
                                            We are Neutral on the oil service/drilling sector and see balanced risk/reward following the recent rally.
                                            Earnings season has so far been the positive catalyst that we expected for companies with leverage to
                                            strength in US land such as Buy rated HAL. N.A. margins have quickly moved from trough to mid-cycle in just
                                            3 quarters and are likely to trend higher (ex. the impact of the US Gulf) and activity appears to be more
                                            sustainable than the prior cycle given the mix shift towards oil and liquids.
                                            International markets on the other hand are recovering more slowly off of the 1Q10 trough with upside and
                                            pricing power being pushed into late 2010 from previous expectations of 3Q. While our Energy team is bullish
                                            on oil prices in 2011, we see range bound commodity prices in the near-term. This suggests to us that
                                            multiple expansion may be challenged given that valuation relative to the S&P is just in-line with the hist.
                                            premium of 20%.
                                            While we see limited upside to the group on average, a bifurcation remains between Buy-rated favorites
                                            exposed to US onshore and international which have 16% upside versus Sell-rated deepwater driller stocks
                                            which have 13% downside. Overall, the sector may be a bit directionless in the near-term, but we still like our
                                            core key themes of long onshore/ international and short deepwater drillers. Our favorite stocks are CAM
                                            (CL-Buy), NBR, HAL, ESV, HP and BRS. We are Sell-rated on DO, ATW, and TDW.
                                            Mid-2Q takeaways: HAL the best; SLB has room to improve
                                            HAL (Buy) delivered the best results so far driven by US land and solid execution internationally and remains
                                            one of our favorites. SLB’s (NR) international results were a little soft and N.A. beat but by less than HAL.
                                            However, SLB may have the most upside potential in N.A. relative to expectations post the restructuring in
                                            3Q. We adjusted our 2010-2012 estimates for SLB by less than 1% post 2Q results on Friday. WFT (Neutral)
                                            posted positive FCF driven by N.A. but international expectations were lowered.
                                            BHI could post $0.58 in 2Q2010 vs. consensus of $0.42
                                            We are raising our 2Q estimate for BHI to $0.58 from $0.47 and our 2010E-2012E EPS by 23%/13%/4% to
                                            $2.56/$3.30/$3.91 based on peer results thus far. BHI has outperformed and we continue to think that
                                            investors should take profits on the back of a 2Q beat as we are less positive on its international margins in
                                            2011. We see just 4% upside to our new six-month, $51 price target (from $45).



Newfield Exploration (NFX): Stock a relative beneficiary in diverse scenarios; reiterate CL-Buy                                                         18

NFX, $51.50                                 Brian Singer, CFA (New York): brian.singer@gs.com, (212) 902-8259
Market cap                   $6,842 mn
                                            Goldman Sachs & Co.
                                            Pavan Hoskote (New York): pavan.hoskote@gs.com, (917) 343-9044
Target price                      $64.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Andre Benjamin (New York): andre.benjamin@gs.com, (212) 855-0470
EPS ($)                    4.61     5.52    Goldman Sachs & Co.
P/E                       11.2X     9.3X

EPS Quarter/Interim
                      *
                           1.08     1.58
                                            What's changed
                                            Newfield reported 2Q 2010 adjusted EPS of $1.06, vs. our estimate of $1.07 and consensus $1.08.
Investment Lists                            Production was 801 MMcfe/d, vs. our 782 MMcfe/d. Realized oil prices were $79.90/bbl, vs. our $82.59/bbl.
                    Americas Buy List       Realized gas prices were $5.47/Mcf, vs. our $5.25/Mcf. Total costs were $4.36/Mcfe, vs. our $4.19/Mcfe. We
          Americas Conviction Buy List      have revised our 2010-12E EPS to $4.61/$5.52/$6.21 from $4.58/$5.28/$5.98 due to changes to
Coverage view                     Neutral   production/costs/prices.
*Current and a year ago                     Implications
                                            We continue to rate Newfield a Buy (on Conviction List) as we see the potential for the stock to outperform in
                                            a range of scenarios. We see Newfield as: (1) a near-term as well as a secular winner – we see shares
                                            finding favor with investors in the near/medium term with a number of catalysts in its various plays (Granite
                                            Wash, Eagle Ford Shale, Southern Alberta Basin, etc). At the same time we see NFX as a secular winner as
                                            we expect its improving asset base to translate into a higher multiple over time; (2) a beneficiary from both
                                            execution and exploration – we expect exploration upside from new completions in the Southern Alberta
                                            Basin and from wells drilled in the Eagle Ford Shale (oil), while at the same time we see the Granite Wash
                                            (gas/liquids), Monument Butte (oil), Bakken (oil) and potentially Woodford Shale (gas) driving near-term
                                            growth with upside risk to guidance/production expectations; and (3) providing oil/gas optionality – we see
                                            NFX having the ability to grow gas production as needed if the price environment improves ($5.50+/MMBtu)
                                            from the Woodford Shale and other plays or shift capital into its liquids/oil projects at lower gas prices.
                                            Valuation




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    July 26, 2010



                                           NFX currently trades at 4.6x 2011 EV/EBITDA versus 5.1x average for NBL, FST, PXP, QEP and PXD. We
                                           see 24% potential upside to our 6-month DCF and multiples-based target of $64.
                                           Key risks
                                           Commodity prices, drilling results, cost pressures, gov’t pronouncements.



Financial Services

ProLogis (PLD): Finding bottom vs. recovery is our concern; Maintain Sell w/ $11 PT                                                                  19

PLD, $10.97                                Sloan Bohlen (New York): sloan.bohlen@gs.com, (212) 902-2796
Market cap                  $5,211 mn
                                           Goldman Sachs & Co.
                                           Conor Fennerty (New York): conor.fennerty@gs.com, (212) 902-4227
Target price                     $11.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E     Jonathan Habermann (New York): jonathan.habermann@gs.com, (917) 343-4260
EPS ($)                   0.58     0.82    Goldman Sachs & Co.
P/E                    19.1X      13.4X

EPS Quarter/Interim*      0.19     0.14
                                           What's changed
                                           Global industrial REIT ProLogis reported 2Q2010 FFO/share of $0.15, including $0.02/share of asset sale
Investment Lists                           gains. The result was in line with our $0.13/share estimate, and management’s FY FFO outlook remained
                   Americas Sell List      unchanged at $0.70 to $0.78. Relative to expectations, the results were generally positive but fundamentals
Coverage view                    Neutral   remain soft, which was our key concern heading into results. Key takeaways include: (1) SS NOI declined
                                           -6.6% vs. -6.4% last quarter, occupancy in the core portfolio dropped about 50 bp to 89.2% and rent spreads
*Current and a year ago
                                           were -16% vs. -12% in 1Q; (2) PLD plans to sell $1.0-$1.3 bn of assets by year-end, which we view positively
                                           given tightening in asset prices (cap rates likely in the 7-8% range). We look for updates on use of proceeds
                                           between deleveraging vs. investment spending; (3) The leased rate of PLD’s development portfolio rose
                                           nearly 5%, which is a positive but we note net effective rents were likely weaker.
                                           Implications
                                           We keep our Sell rating and believe 1H results support our thesis that soft 2010 fundamentals combined with
                                           dilutive future deleveraging should drag on FFO growth. Again, we support PLD’s strategy but believe shares
                                           may relatively underperform REITs with better near-term growth and fewer refinancing headwinds. We raise
                                           our 2010E FFO/share to $0.58 (from $0.52) based on asset sale gains. Our 2011/12E FFO/share are
                                           $0.82/$0.90.
                                           Valuation
                                           We maintain our 12-month target of $11 based on our forward NAV. Currently, our target implies 5.7% upside
                                           and we again clarify that our Sell rating represents our view of relative underperformance. To become more
                                           constructive we would like to see a firming of SS growth vs. the negative sequential trends through 1H.
                                           Key risks
                                           Upside risks include better rent growth and less dilutive debt reduction.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                       July 26, 2010



Healthcare

athenahealth, Inc. (ATHN): 2Q2010 follow-up; adjusting 2010-2012 EPS estimates                                                                          20

ATHN, $27.01                                Daryn Miller, CFA (New York): daryn.miller@gs.com, (917) 343-3219
Market cap                   $921.2 mn
                                            Goldman Sachs & Co.
                                            Matthew Borsch, CFA (New York): matthew.borsch@gs.com, (212) 902-6784
Target price                      $29.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E

EPS ($)                    0.55     0.97    What's changed
P/E                       49.0X    27.8X    As follow-up to athenahealth’s 2Q2010 earnings report (athenahealth reported $0.12 in adjusted EPS which
                      *                     was $0.02 lower than our $0.14 estimate due to lower interest income and higher taxes) we lower our 2010-
EPS Quarter/Interim        0.17     0.12
                                            2012 EPS estimates to $0.55, $0.97, and $1.50 from $0.60, $1.06, and $1.64 based on (1) lower interest
Investment Lists                            income, (2) a higher tax rate, and (3) modestly higher operating expenses—partially offset by slightly better
                                  Neutral   gross margins. We maintain our Neutral rating and $29 six-month price target (we lower our EPS, but raise
Coverage view                     Neutral
                                            our target multiple reflecting decreased risk given stability in the quarter).
                                            Implications
*Current and a year ago
                                            The 22% move in the shares today was largely a function of very low expectations and high short interest
                                            heading into the quarter. While athenahealth executed below their long-term plan, the quarter did not show
                                            additional deceleration in the business—and did show improvement in some key areas, most notably the
                                            gross margin. That said, we anticipate the shares remain range-bound given the high level of uncertainty and
                                            high valuation with the stock trading at 31X consensus 2011 $0.86 estimate.
                                            Valuation
                                            Our price target is based on a blended PEG (60%), DCF (25%), and M&A (15%) valuation analysis.
                                            Key risks
                                            Key risks for athenahealth include lower levels of physician additions and higher than expected expense as
                                            the company increases sales and marketing and works to improve efficiency.



Industrials

Americas: Aerospace & Defense: Aerospace in Pictures: July 2010                                                                                         21

                                            Noah Poponak, CFA (New York): noah.poponak@gs.com, (212) 357-0954
                                            Goldman Sachs & Co.
                                            Chun-Yai Wang (New York): chun-yai.wang@gs.com, (212) 902-9610
                                            Goldman Sachs & Co.

                                            Industry context
                                            ”Aerospace in Pictures” aims to provide Aerospace investors with every data point they need to follow on a
                                            monthly basis, including commercial, business, freight, airport, airline, financing and economic data.
                                            Key themes this month
                                            Strong aircraft orders at Farnborough
                                            Boeing and Airbus collected a combined 275 firm orders, 126 MoUs and 26 options at the air show. This tally
                                            was stronger than most expected, and suggests the next order cycle may be underway earlier than expected.
                                            Air traffic growth continues to accelerate
                                            Airlines have reported strong June traffic, and our forecasting methodology (back-tested r-squared of 98%)
                                            predicts IATA will report 12.5% yoy growth when the data is released on July 28.
                                            Corporate bookings are recovering
                                            Int’l premium traffic grew a strong +18.7% yoy in May, suggesting a recovery in the more profitable portion of
                                            the aircraft.
                                            Other data points to consider
                                            Steady decline in parked aircraft
                                            Parked commercial aircraft as a percentage of the
                                            total fleet now stands at 6.3%, and has steadily
                                            declined for the past five months consecutively




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                      July 26, 2010



                                           from a peak of 7.5% in January.
                                           Acceleration in airline yield recovery
                                           US airline yields increased +23.2% yoy in June, an acceleration from the +18.7% increase in May. Yields
                                           were declining at a 20% clip during certain months in 2009.
                                           Freight recovery remains strong
                                           Int’l air freight traffic grew +34.3% yoy in May, an acceleration from +25.2% in April. That was the sixth
                                           consecutive month of growth greater than 20%.
                                           Airlines plan to continue capacity increases
                                           Looking out three months, global scheduled airline operations are currently set to grow +10.6% yoy in
                                           September, suggesting airline optimism for future air travel demand.




Bucyrus International Inc. (BUCY): Buy: Still in the early stages of order recovery, merger integration                                                 22

BUCY, $61.68                               Jerry Revich, CFA (New York): jerry.revich@gs.com, (212) 902-4116
Market cap                  $4,969 mn
                                           Goldman Sachs & Co.
Target price                     $70.00
                                           What's changed
Fiscal y/e Dec         2010E     2011E
                                           We maintain our 2010-12 EPS of $4.12/$5.77/$7.11 as 2Q10 EPS revealed:
EPS ($)                   4.12     5.77    (1) Solid execution on the Terex Mining acquisition, with margins 240 bps ahead of our estimates driven by
P/E                    15.0X      10.7X    overhead cost cuts & aftermarket penetration. We expect purchasing & distributor rationalization savings to
                                           emerge in 2H2010, with plant & distributor rationalization benefits in 2011.
EPS Quarter/Interim*      1.12     1.21
                                           (2) Emerging cross selling opportunities for Terex Mining products through legacy Surface distribution. In
Investment Lists                           addition to a previously announced potential $300 million order in India, Bucyrus sold a truck and excavator
                   Americas Buy List       package to Vale for the first time in the second quarter.
                                           (3) Strong 2Q bookings as $609mn of new equipment orders were 35% above our estimate and represent a
Coverage view                    Neutral
                                           1.4X book to bill – including a 1.8x book to bill in Underground, 1.2x in Terex Mining and Surface.
*Current and a year ago                    (4) Improved Underground margins (+80 bps vs GS) driven by strong cost control and greater absorption
                                           benefit on higher production.
                                           (5) Strong 2Q2010 EPS of $1.04 was below our $1.05 estimate but above consensus of $0.97, with
                                           operating profit 3% above our forecast (+$0.04).
                                           Implications
                                           We reiterate our Buy rating on BUCY as we believe (1) we’re in the early stages of the mining equipment
                                           order recovery, (2) we see 15% upside to consensus 2011-12 estimates that we believe underestimate cost
                                           cutting opportunities on the Terex Mining integration, (3) rising high cost mine production will drive
                                           accelerating aftermarket sales in 2011, and (4) valuation is compelling even after recent outperformance.
                                           Valuation
                                           We maintain our 12-month price target of $70 prior based on 7.6x 2011 EV-EBITDA. BUCY is trading at 6.9x
                                           2011 EV-EBITDA and 10.7x P-E, discounts of 5%/ 26% to our coverage.
                                           Key risks
                                           Lower commodity prices and merger execution.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                      July 26, 2010




Honeywell International Inc. (HON): Executing well, late-cycle appeal, looking for improved valuation                                                  23

HON, $43.50                                 Terry Darling (New York): terry.darling@gs.com, (212) 357-0379
Market cap                  $33,800 mn
                                            Goldman Sachs & Co.
                                            Adam Samuelson (New York): adam.samuelson@gs.com, (212) 902-6764
Target price                      $50.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Eddie Szeto (New York): eddie.szeto@gs.com, (212) 357-3320
EPS ($)                    2.60     3.10    Goldman Sachs & Co.
                                            Ankit Rastogi (Bangalore): ankit.rastogi@gs.com, (212) 934-6798
P/E                       16.8X    14.0X
                                            Goldman Sachs India SPL
                      *
EPS Quarter/Interim        0.64     0.80

Investment Lists
                                            What's changed
                                  Neutral   HON reported 2Q EPS of $0.60 vs. GS/consensus $0.62/$0.57, with revenue +1%, segment profit +2% on
Coverage view                 Attractive    stronger Specialty Materials performance, and corporate and repositioning expense 11% higher than our
                                            estimate. Specialty Materials revenues were +7% vs. GS on broad-based portfolio strength, with margins
*Current and a year ago
                                            +220 bp on better volume leverage and Fluorine pricing (legacy refrigerant supply constraints). ACS margins
                                            were flat sequentially on 4% revenue growth, -40 bp vs. GS with higher labor costs (absence of furloughs,
                                            etc) a 120 bps headwind. Underlying ACS yoy incrementals on 7% organic revenue growth were closer to
                                            40%. Aero was in line and 9% sequential commercial spares order growth points to building 2H aftermarket
                                            momentum. HON raised 2010 EPS guidance 3% at midpoint to $2.40-$2.50 vs. prior GS/consensus
                                            $2.65/$2.48 on sales 2% higher at midpoint, with stronger organic growth at ACS, Turbo, and SM. FCF
                                            guidance was raised 8%, largely on Narco trust funding delays.
                                            Implications
                                            We lower our 2010-2012 EPS estimates to $2.60/$3.10/$3.90 from $2.62/$3.20/$4.00 on acquisition dilution
                                            in 2010 and higher pension expense in 2011-2012 but maintain our 12-month target price of $50 (16X 2011
                                            P/E vs. 15.3X previous) as strong cash flow and signs of a turn in HON’s later-cycle businesses support a
                                            10% premium to the group at this point in the cycle, in our view, vs. +3% assumed previously. We retain our
                                            Neutral rating, as 15% upside to target is in line with our coverage on average, though we continue to have a
                                            positive view of organic growth prospects (new products), execution and cash generation.
                                            Valuation
                                            HON is trading at 16.8X /14.0X 2010E/2011E P/E, +5% / +7% vs. MI peers.
                                            Key risks
                                            Upside: sharper commercial l aero and refining market recoveries.
                                            Downside: pricing, deeper non-res construction downturn.



Ingersoll-Rand PLC (IR): Solid - if unspectacular - 2Q; remain Neutral                                                                                 24

IR, $37.29                                  Terry Darling (New York): terry.darling@gs.com, (212) 357-0379
Market cap                  $12,207 mn
                                            Goldman Sachs & Co.
                                            Adam Samuelson (New York): adam.samuelson@gs.com, (212) 902-6764
Target price                      $43.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Eddie Szeto (New York): eddie.szeto@gs.com, (212) 357-3320
EPS ($)                    2.40     3.00    Goldman Sachs & Co.
                                            Ankit Rastogi (Bangalore): ankit.rastogi@gs.com, (212) 934-6798
P/E                       15.6X    12.4X
                                            Goldman Sachs India SPL
EPS Quarter/Interim*       0.77     0.70

Investment Lists
                                            What's changed
                                  Neutral   IR 2Q10 EPS of $0.76 was at the high end of the pre-announced range of $0.74-$0.76 and +13% vs. initial
Coverage view                 Attractive    guidance of $0.62-$0.72. Variances vs. our $0.75 estimate were (1) Climate -$0.05 on weaker Commercial
                                            HVAC margins, (2) Security +$0.02 on stronger margins, (3) Residential +$0.02, (4) Industrial +$0.01, (5)
*Current and a year ago
                                            Other income +$0.02, and (6) higher tax rate
                                            -$0.01. Other highlights include (1) IR believes US commercial HVAC has bottomed – in line with UTX
                                            comments – although a sharp rebound in demand remains uncertain, in our view; (2) 2Q results were
                                            impacted by $0.06 of supply chain inefficiencies that are not expected to recur;
                                            (3) pricing was flat vs. an expected increase ($0.02 headwind), though IR expects pricing to improve in 2H




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                           July 26, 2010



                                 based on company initiatives – not market dynamics; (4) Refrigerated Trailer revenues rose 30%, with orders
                                 +22%; (5) stationary refrigeration cases revenues in N America rose 5% vs. DOV +15%. IR raised 2010 EPS
                                 from continuing operations excluding 1Q tax items 5% at mid-point to $2.18-$2.38, with the high-end +1% vs.
                                 previous on slightly higher revenues.
                                 Implications
                                 We maintain our Neutral rating, 2010-2012 EPS estimates of $2.40/ $3.00/ $3.70 and 12-month price target
                                 of $43 (14.3X 2011E EPS) for 15% upside potential. We remain positive on internal efficiency improvement
                                 initiatives and improving balance sheet optionality in 2011 and beyond but also cautious on a robust recovery
                                 in non-residential construction demand (about 50% of revenues) in 2011 sufficient enough to drive significant
                                 upside to consensus estimates.
                                 Valuation
                                 IR is trading at 15.5X/12.4X 2010E/2011E P/E, -3%/-5% to MI peers.
                                 Key risks
                                 Upside: stronger end market demand and balance sheet optionality. Downside: inability to meet cost cutting
                                 targets, pricing pressure.



Americas: Environmental Services: Waste Management: Trading Update: Warming up to solid waste                                               25
companies into 2Q2010 results

                                 Richard Skidmore, CFA (New York): richard.skidmore@gs.com, (212) 357-5509
                                 Goldman Sachs & Co.
                                 Alex Ovshey (New York): alex.ovshey@gs.com, (212) 902-6751
                                 Goldman Sachs & Co.
                                 Usha Chundru (Bangalore): usha.chundru@gs.com, (212) 934-5057
                                 Goldman Sachs India SPL

                                 Expecting 2Q10 EPS to be mostly in line with consensus; We like CLH into the quarter
                                 Our 2Q2010 EPS estimates for the sector are in line with consensus for most companies. We see the most
                                 upside to consensus in Clean Harbors (CLH), which should benefit significantly from the Gulf Coast oil spill
                                 cleanup and improved economic activity in the quarter. We like CLH (Neutral) into 2Q10 results as we see
                                 upside to 2010 estimates as CLH updates its revenue outlook from its efforts in the Gulf Coast cleanup.
                                 Becoming more constructive on municipal solid waste (MSW) stocks
                                 We are becoming more positive on the MSW companies heading into 2H2010. The MSW sector historically
                                 outperforms as US industrial activity slows, given its significant exposure to non-cyclical residential waste
                                 collection, track-record of achieving cost savings to the bottom line, and strong FCF profile. We expect MSW
                                 volumes to turn positive on a yoy basis in 3Q2010, driving greater operating margins as companies leverage
                                 leaner cost structures. We expect pricing trends to gradually improve as landfill volumes recover.
                                 MSW volumes expected to turn positive in 2H2010; pricing to up be modestly
                                 After two years of yoy volume declines, we expect MSW volumes to turn positive in 3Q10 on easier yoy
                                 comparisons combined with improved US economic activity. Industry pricing has slowed due to CPI
                                 adjustments; we expect pricing to accelerate as landfill volumes recover.
                                 Maintain our Neutral sector view as sector has outperformed year to date
                                 Although more positive on sector fundamentals and MSW companies, we maintain our Neutral coverage view
                                 as valuation multiples near historical averages. We continue to rate Stericycle Buy, given favorable long-term
                                 fundamentals in medical waste, but the stock is nearing reasonable value, in our view, with 5% upside to our
                                 target price. Among the MSW companies, we like Waste Management (Neutral), given its relative share price
                                 underperformance, revenue growth opportunities, and valuation.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    July 26, 2010




Dover Corp. (DOV): Under-appreciated structural change story                                                                                         26

DOV, $47.74                                Terry Darling (New York): terry.darling@gs.com, (212) 357-0379
Market cap                   $8,894 mn
                                           Goldman Sachs & Co.
                                           Eddie Szeto (New York): eddie.szeto@gs.com, (212) 357-3320
Target price                      $60.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E    Adam Samuelson (New York): adam.samuelson@gs.com, (212) 902-6764
EPS ($)                    3.30     4.00   Goldman Sachs & Co.
                                           Ankit Rastogi (Bangalore): ankit.rastogi@gs.com, (212) 934-6798
P/E                       14.5X   11.9X
                                           Goldman Sachs India SPL
                      *
EPS Quarter/Interim        0.91     0.58

Investment Lists
                                           What's changed
                      Americas Buy List    DOV reported arguably the best 2Q performance across our coverage relative to expectations, with EPS of
Coverage view                 Attractive   $0.91 vs. GS/ consensus of $0.80/ $0.78 on 6% stronger revenues and 13% better EBIT. 2010 EPS
                                           guidance was raised 12% at mid-point to $3.05-$3.25, with implied 2H guidance 5% above our prior
*Current and a year ago
                                           estimates and still conservative, in our view. Segment variances vs. GS (1) Fluid +$0.04 led by Energy, (2)
                                           Industrial +$0.04 led by Material Handling, (3) Electronics +$0.01, and (4) Engineered Systems +$0.01.
                                           Organic revenues were +24% yoy vs. GS +12%, with segment outperformance broad-based and later cycle
                                           Fluid (+32% yoy vs. GS +21%) and Industrial (+21% yoy vs. GS +10%) now exceeding expectations, aided
                                           by apparent share gains. Strong 2Q orders +40% yoy, book-to-bill of 1.08X and a strong start to July
                                           supports guidance for 2H organic growth similar to 1H even as the economy decelerates. Segment
                                           incremental margins were 37% and supply chain initiatives will add momentum in 2H2010 and 2011. We
                                           raise 2010E/2011E EPS to $3.30/$4.00/ from $3.05/ $3.90 on flow-through and expected better margins
                                           even as we lower our macro economic and balance sheet assumptions. As a result, we raise our 12-month
                                           price target to $60 (14.9X 2011E EPS) from $58 for 26% upside vs. our coverage average of 15%.
                                           Implications
                                           Buy-rated DOV remains an under-appreciated structural change story, with new management still early in
                                           centralizing certain functions (e.g. supply chain) to drive multi-year cost savings to augment strong base
                                           leverage from the cyclical recovery underway. Recent underperformance, further upside to consensus and
                                           potentially accretive 2H2010 acquisitions (15% net debt-to-cap) should also increase investor interest in
                                           2H2010-11.
                                           Valuation
                                           DOV is trading at 14.5X/11.9X 2010E/2011E P/E, -8%/-8% to peers.
                                           Key risks
                                           Loss of market share, price/ cost pressure and dilutive acquisitions.



Americas: Multi-Industry: What we have learned from 2Q earnings thus far                                                                             27

                                           Terry Darling (New York): terry.darling@gs.com, (212) 357-0379
                                           Goldman Sachs & Co.
                                           Adam Samuelson (New York): adam.samuelson@gs.com, (212) 902-6764
                                           Goldman Sachs & Co.
                                           Eddie Szeto (New York): eddie.szeto@gs.com, (212) 357-3320
                                           Goldman Sachs & Co.
                                           Ankit Rastogi (Bangalore): ankit.rastogi@gs.com, (212) 934-6798
                                           Goldman Sachs India SPL

                                           2Q results, outlook and stock reactions have been stronger
                                           Through Friday, 12 of 21 Multi-Industry companies we cover have reported 2Q and results, outlook and stock
                                           reactions have been stronger than we expected (MI +8.2% last week vs. S&P +3.5%).
                                           Key takeaways: (1) revenues have been 0%-6% stronger than expected and margin improvement has been
                                           even better, with 11 of 12 beating GS estimates for revenue, 10 beating EBIT, and 9 beating EPS (2)
                                           numerous company-specific items, including stronger buy-back, resulted in smaller cuts to 2011 estimates
                                           than we expected even as we have adjusted for a more conservative macro outlook, (3) the outlook for
                                           commercial aero OE – as highlighted by stronger air show orders – has improved, though upside from the




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                           July 26, 2010



                                 aftermarket recovery has yet emerge and 2011 R&D expense for engine makers is considerably higher than
                                 expected, (4) signs of a bottom in N American commercial construction have emerged, namely positive
                                 orders for Carrier and Otis at UTC and Trane at IR, though comps are very easy and the pace of a sustained
                                 recovery could be anemic, (5) consistent with recent US housing data, guidance of 5-7% yoy 2H2010
                                 revenue growth for resi HVAC at Carrier and Trane is less robust than some expected, (6) orders in
                                 consumer electronics have exceeded expectations (e.g. book-to-bill of 1.14X for Dover Electronics),
                                 suggesting a more sustainable upturn, (7) Energy-related orders were modestly stronger, notably for GE and
                                 DOV, (8) buy-backs were larger than anticipated for GWW, UTX, and 3M, a signal of strong management
                                 confidence in fundamentals. GE’s dividend increase and resumption of share repurchase announced Friday
                                 was six months earlier than we expected, (9) pricing remains lackluster in parts of N America electrical
                                 markets, and remains an area to watch. Overall, we believe the mosaic continues to support our Attractive
                                 sector view and Buy ratings on 3M, DOV, UTX, GE, ITW, ROP and DHR.
                                 The week ahead: positive on ROK, cautious on KMT, PNR
                                 ROP, ROK, TYC, PNR, KMT, and ITT report this week. We are positive ahead of results for ROK and more
                                 cautious on KMT and PNR. For ROK, we believe set-up is favorable with valuation now inline to the group vs.
                                 a premium normally and we believe end market demand is holding up well. For KMT we believe initial
                                 FY2011 guidance can disappoint while 2H resi softness may limit an expected guidance increase for PNR.



Technology

Americas: Technology: Software: Earnings a study in contrasts so far (VMW, CVLT, QSFT, SWI)                                                 28

                                 Derek R. Bingham (San Francisco): derek.bingham@gs.com, (415) 249-7435
                                 Goldman Sachs & Co.
                                 Gonzalo Cavenaghi (San Francisco): gonzalo.cavenaghi@gs.com, (415) 249-7438
                                 Goldman Sachs & Co.
                                 Geo John (Bangalore): geo.john@gs.com, (212) 934-6386
                                 Goldman Sachs India SPL

                                 Earnings results so far affirm weakness in government and Europe, show contrasting strength of
                                 secular winners
                                 VMware’s (Buy) robust 2Q results contrasted with a couple of other large enterprise-facing businesses that
                                 showed some early signs of macro softening (e.g., EMC and IBM), and underscore our preference for high-
                                 growth secular winners in the current decelerating macro environment. Two small-caps in our coverage –
                                 CommVault (Neutral) and SolarWinds (Neutral) – suffered substantial license shortfalls in 2Q. In both cases
                                 federal spending and European business were highlighted, though CommVault had the added disruption of a
                                 sales re-organization in the period. Bellwethers continue to point to emerging markets as very strong.
                                 Dell’s acquisition of Ocarina Networks could presage headwinds for ISVs leveraging the Dell channel
                                 On July 19, Dell announced the acquisition of Ocarina Networks, a provider of compression and
                                 deduplication technology via appliance and software. While we do not believe deduplication is a large portion
                                 of the total revenue to CommVault (Neutral) or Symantec (Neutral) from Dell (the bulk is traditional backup
                                 and other data management software), this could dampen some of the longer-term growth opportunity for
                                 both vendors in the Dell channel as the company develops and extends its own in-house offerings. That said,
                                 we would expect the majority of CommVault backup customers to ultimately leverage CommVault’s own
                                 integrated software-based deduplication over time. Improved deduplication capabilities are expected to be
                                 the most important advancement of CommVault’s coming Simpana 9 platform, based on our checks.
                                 Strong Microsoft Server & Tools quarter a positive indication for Quest; longer-term outlook
                                 consistent with our model
                                 We view Microsoft (Buy) results as a useful indicator for Quest’s (Sell) Microsoft-based management tools,
                                 which make up roughly half of Quest’s revenue. The most cleanly Quest-applicable segment – Server and
                                 Tools – was up 12% sequentially (about normal seasonality) and 14% year over year in Microsoft’s June
                                 quarter. We expect fairly typical seasonality from Quest in 2Q. The company expects better-than-normal
                                 license seasonality in June (a sequential increase). We are more cautious, however, given macro risks and
                                 signs of weakness from select best-of-breed vendors in the period (i.e., CommVault and SolarWinds).




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                           July 26, 2010




Americas: Communications Technology: GS CommTech Weekly: GLW and MOT previews; China sub                                                    29
adds update

                                 Simona Jankowski, CFA (San Francisco): simona.jankowski@gs.com, (415) 249-7437
                                 Goldman Sachs & Co.
                                 Min Park (San Francisco): min.park@gs.com, (415) 249-7445
                                 Goldman Sachs & Co.
                                 Thomas D. Lee (New York): thomas.d.lee@gs.com, (212) 902-2066
                                 Goldman Sachs & Co.
                                 Erin Riley (San Francisco): erin.riley@gs.com, (415) 249-7453
                                 Goldman Sachs & Co.
                                 Mukul Garg (Bangalore): mukul.garg@gs.com, (212) 934-9960
                                 Goldman Sachs India SPL

                                 Weekly stock performance
                                 Our median stock was up 6% last week, outperforming the S&P 500 and the Nasdaq, up 4%. Our strongest
                                 performer was INFN, up 42%, while our weakest was QLGC, down 14%.
                                 GLW (Neutral): Expect strong quarter, potentially more cautious outlook; Specialty Materials may offer upside
                                 We expect Corning to report a slightly above-Street 2Q, at $1,664.6mn/$0.53 vs. the Street at
                                 $1,645.2mn/$0.52. However, recent panel pricing data and commentary out of LG Display’s 2Q earnings
                                 keep us cautious on the supply chain in 2H, though Specialty Materials may offer upside through increasing
                                 traction in Gorilla Glass.
                                 ARUN (Buy) Raising estimates for Aruba Networks
                                 We are raising our near and out period estimates for Aruba Networks given ongoing strength of enterprise
                                 demand and increasing penetration of wireless networks. We expect further upside to near term results and
                                 we are raising our 12-month price target to $20 ($17.50 prior).
                                 MOT (Not Rated): Expect inline quarter/solid guidance on strong smartphone shipments
                                 We expect Motorola to report solid results/guidance on the back of strong Droid/Droid X shipments, which is
                                 supported by our retail checks and Verizon’s positive comments. We are at $5,200.7mn/$0.08 vs. the Street
                                 at $5,190.8mn/$0.08. We expect smartphone shipments of 2.8mn for the quarter.
                                 China CDMA and WCDMA subscriber net adds remained strong in June
                                 Last week, China released its subscriber numbers for the month of June, providing an important read-across
                                 for Qualcomm. China Unicom added 1.0mn WCDMA net subs, while China Telecom added 3.0mn CDMA net
                                 subs in June, maintaining the strong pace from May.
                                 Valuation
                                 The median CommTech forward P/E was 15.3X last week, suggesting a 20% discount to its 1-year average
                                 of 19.1X. This compares to the S&P 500’s 13.5X. Relative valuation was at 1.1X the S&P, below the 1-year
                                 average of 1.3X.



Americas: Technology: Semiconductors: GS US Semi & SPE Weekly: Week 3 earnings previews                                                     30

                                 James Covello (New York): james.covello@gs.com, (212) 902-1918
                                 Goldman Sachs & Co.
                                 James Schneider, Ph.D. (New York): james.schneider@gs.com, (917) 343-3149
                                 Goldman Sachs & Co.
                                 Kate Kotlarsky (New York): kate.kotlarsky@gs.com, (212) 357-7956
                                 Goldman Sachs & Co.
                                 Ian Eigenbrod (New York): ian.eigenbrod@gs.com, (212) 902-0695
                                 Goldman Sachs & Co.
                                 Mark Delaney (New York): mark.delaney@gs.com, (212) 357-0535
                                 Goldman Sachs & Co.

                                 BRCM: Significant beat but limited upside in stock around quarter




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                       July 26, 2010



                                          We expect Broadcom to deliver very robust results and guidance, but we believe the stock’s significant
                                          outperformance (combined with the current trading volatility) will limit upside around the quarter. We think the
                                          biggest incremental benefit to Broadcom’s revenue over the next several quarters will be the continued ramp
                                          of single-chip baseband products at Samsung and Nokia, as well as in connectivity. We continue to view
                                          Broadcom as one of the most attractive large-cap growth holdings in tech, given our view of its market share
                                          gains in handsets and its exposure to growth themes such as the increase in mobile data and the adoption of
                                          smartphones and tablets.
                                          LRCX/KLAC/VSEA: We expect strong results and guidance
                                          Lam Research, KLA, and Varian report this week, and we expect that results and guidance will be above the
                                          Street for all threew companies, given capacity constraints and competitive dynamics at the foundries,
                                          increasing capex from Intel, and supply shortages in memory. We believe positive Street estimate revisions
                                          will serve as a catalyst in the coming quarters.
                                          TER: Expect strong 2Q results and 3Q10 guidance driven by SoC
                                          We expect Teradyne to report 2Q10 results at or above the high end of the company’s original expectations
                                          and guide 3Q10 sales and EPS above the Street, driven by strong trends in SoC and analog test. We think
                                          strong SoC revenues more than offset the lack of HDD business during the quarter, and expect meaningful
                                          upward Street estimate revisions post earnings.
                                          LSI: Enterprise strong but components weak on channel reduction
                                          We expect LSI to deliver strong results across its storage systems and networking businesses. However, we
                                          expect headwinds to 3Q guidance given weaker trends in hard drives and server-related storage
                                          components. We are lowering our price target. We prefer MRVL over LSI given stronger secular growth,
                                          more attractive valuation, and bearish sentiment.
                                          MXIM: Expect a solid 2Q10 but lead times are likely still extended
                                          We expect Maxim to report solid 2Q10 results and guide 3Q10 revenues above the Street, driven in part by
                                          strong industrial and computing trends, as well as the company’s recent acquisition of Teridian. However, we
                                          believe that lead times remain extended, which can limit growth in 2H10.



Broadsoft, Inc. (BSFT): Pure-play on VoIP transition; initiating with a Neutral rating                                                                  31

BSFT, $8.62                               Simona Jankowski, CFA (San Francisco): simona.jankowski@gs.com, (415) 249-7437
Market cap                 $166.7 mn
                                          Goldman Sachs & Co.
                                          Thomas D. Lee (New York): thomas.d.lee@gs.com, (212) 902-2066
Target price                    $10.00
                                          Goldman Sachs & Co.
Fiscal y/e Dec         2010E    2011E     Erin Riley (San Francisco): erin.riley@gs.com, (415) 249-7453
EPS ($)                (0.21)     0.34    Goldman Sachs & Co.
                                          Mukul Garg (Bangalore): mukul.garg@gs.com, (212) 934-9960
P/E                        --    25.7X
                                          Goldman Sachs India SPL
EPS Quarter/Interim*   (0.22)     0.00

Investment Lists
                                          Investment view
                                Neutral   We are positive on Broadsoft’s fundamentals over the next 2-3 years given the company’s 100% exposure to
Coverage view                   Neutral   voice over IP (VoIP) and specifically, the network transition from legacy TDM circuit-switched based networks
                                          to IP, which is one of the secular growth themes in our space. With VoIP penetration at around 5% and
*Current and a year ago
                                          Broadsoft’s strong position in the faster-growing enterprise portion of the market, we expect robust 20%+
                                          revenue growth for the company over the next two years. However, we also see intense pricing pressure in
                                          the consumer portion and increasing competition in enterprise, which keeps us Neutral.
                                          Core drivers of growth
                                          We forecast Broadsoft’s core end-market, voice application servers, to grow at a 10% CAGR over the next
                                          five years, with the enterprise segment growing at 21% but the consumer segment declining as steep price
                                          declines offset license volume growth. Given Broadsoft’s strong tilt toward the enterprise vertical (65% of
                                          sales) and share gains, we believe it can outgrow the VAS market. In addition, expanding gross margins and
                                          moderating opex growth should result in material operating margin expansion from -1% in 2009 to an
                                          estimated 15%/20% in 2011/2012.
                                          Risks to the investment case
                                          Upside risks are faster-than-expected consumer license growth and more benign pricing. Downside risks
                                          include increased competition.
                                          Valuation
                                          Our 12-month price target of $10 is based on a target GAAP P/E of 30X, based on an estimated 25% long-




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                              July 26, 2010



                                 term EPS CAGR and a PEG of 1.1X applied to our GAAP CY2011E EPS of $0.34 (with an M&A premium).
                                 Industry context
                                 We have a Neutral coverage view of the CommTech sector.



Americas: Technology: Software: The Weekly Catalyst: Earnings onslaught, Microsoft FAM                                                         32

                                 Sarah Friar (San Francisco): sarah.friar@gs.com, (415) 249-7436
                                 Goldman Sachs & Co.
                                 Derek R. Bingham (San Francisco): derek.bingham@gs.com, (415) 249-7435
                                 Goldman Sachs & Co.
                                 Stephanie Withers, CFA (San Francisco): stephanie.withers@gs.com, (415) 249-7470
                                 Goldman Sachs & Co.
                                 Gonzalo Cavenaghi (San Francisco): gonzalo.cavenaghi@gs.com, (415) 249-7438
                                 Goldman Sachs & Co.

                                 Microsoft (Buy): Financial Analyst Meeting (FAM) will center on Cloud and, from a Q&A perspective,
                                 tablets
                                 We expect Microsoft to center the discussion at FAM (July 29th) on its Cloud strategy, specifically highlighting
                                 the Azure platform, and Cloud initiatives around BPOS, SkyDrive, Office 2010, and Dynamics. We expect
                                 management to speak to Azure’s success to date and the strategy to sell more cloud-enabled services. Other
                                 topics of interest will include the Fall product launches of both Windows Phone 7 Series and Kinect; we are
                                 very bullish on the Kinect opportunity, but view mobile as very much a show-me story for the company. In
                                 addition, the announcement of an ARM architecture license sets the stage for discussion on tablets, and
                                 Microsoft’s lack of response to date. Capital allocation given a large (and growing) cash balance will be also
                                 be top of mind.
                                 SuccessFactors (Buy): Bookings growth will be the main focus; our 28% estimate looks achievable
                                 SuccessFactors will report earnings on Monday, July 26th. We expect a strong quarter, driven by momentum
                                 in the market for Performance & Talent management as well as continued top-notch execution by
                                 management. We expect the company to easily achieve the 28% bookings growth in our model. We note that
                                 both the CubeTree and Inform acquisitions closed in July, so we also expect more commentary on the
                                 contribution from those deals. We remain buyers of this secular growth story.
                                 Taleo (Buy): Expect upsell opportunity and continued momentum to outshine recently announced
                                 CFO departure
                                 We remain buyers into an expected strong quarter from Taleo on July 28th, with room for upside over the
                                 relatively low earnings bar the company set last quarter, driven by continued traction with their recruiting
                                 tools, but also good momentum upselling Performance & Talent Management. We expect management to
                                 guide to accelerating revenue growth in the back half, as deals signed in the first two quarters start to hit the
                                 revenue line.CFO Katy Murray recently announced her plans to move on from Taleo, which we did not view
                                 as surprising, as she was living, at least part time, in Texas, and we do not think her departure implies
                                 anything negative about the quarterly results. We expect a good June quarter should help allay any lingering
                                 concerns over her reasons for leaving.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                          July 26, 2010



Telecom Services

Verizon Communications (VZ): Calming wireline margin fears; upside requires revenue progress                                                               33

VZ, $28.02                                  Jason Armstrong, CFA (New York): jason.armstrong@gs.com, (212) 902-8156
Market cap                  $79,213 mn
                                            Goldman Sachs & Co.
                                            Matthew Niknam (New York): matthew.niknam@gs.com, (212) 357-3372
Target price                      $32.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Jonathan Hong (New York): jonathan.hong@gs.com, (212) 357-9111
EPS ($)                    2.24     2.31    Goldman Sachs & Co.
                                            Dan Pellegrinelli (New York): dan.pellegrinelli@gs.com, (212) 902-7516
P/E                       12.5X    12.1X
                                            Goldman Sachs & Co.
                      *
EPS Quarter/Interim        0.55     0.60    Lakshmi Venkateshwaran (Bangalore): lakshmi.venkateshwaran@gs.com, (212) 934-6022
Investment Lists                            Goldman Sachs India SPL
                                  Neutral

Coverage view                     Neutral   What's changed
*Current and a year ago
                                            Following 2Q10 earnings, our 2010 revenue and EBITDA estimates are now $107.0bn and $35.5bn
                                            (unchanged/+1.6%). Our 2010-2012 EPS estimates are now $2.24/$2.31/$2.52,from $2.22/$2.31/$2.54
                                            previously.
                                            Implications
                                            Quarter diminishes short and long-term fears. Short-term fears (and a bearish case for the stock) had
                                            centered around a worse than expected EPS reset owing to recent divestitures, while a core longer-term fear
                                            centered on constant declines in Wireline margins. Verizon cleared up mechanics around the short-term, with
                                            divestiture math and a 2H10 outlook pointing to a 2010 EPS range of $2.19-$2.24, matching existing
                                            consensus. The longer-term concern around Wireline margins may take a several quarter breather as
                                            Verizon substantially exceeded expectations in 2Q. Additionally, given sizeable force reductions, the
                                            company is positioned to deliver stronger Wireline margins for the balance of 2010.
                                            Sticking with our $2.31 estimate for 2011, which we believe will be above consensus. We believe the 5%-
                                            10% EPS growth rate exiting 2010 will extend to 2011, which on a Spinco adjusted 2010 EPS base of
                                            roughly $2.10, implies a range of $2.20 - $2.31.
                                            Upside still constrained though, as the multiple has little room for upside absent a significant improvement in
                                            the revenues. At nearly 13X earnings, multiple expansion will require stronger revenue growth (no growth
                                            currently), which is likely not achievable until the company reports a leveling out of the wholesale trajectory (-
                                            8.3%), and sizeable growth in Global Enterprise (slightly negative ex-CPE). We remain Neutral rated.
                                            Valuation
                                            Our $32, 12-month price target is the average of our DCF/SOP analysis.
                                            Key risks
                                            Upside: Improving macro, Wireline margins. Downside: rising competition



Utilities

Americas: Utilities: Diversified: Pipeline & MLP Essentials: SXL, EPD, and WMB to reveal 2Q themes                                                         34

                                            Theodore Durbin (New York): ted.durbin@gs.com, (212) 902-2312
                                            Goldman Sachs & Co.
                                            Michael Cerasoli, CFA (New York): michael.cerasoli@gs.com, (212) 357-1914
                                            Goldman Sachs & Co.

                                            Industry context
                                            This week will showcase 2Q earnings for one-third of our coverage universe, including Conviction Buy-rated
                                            Sunoco Logistics (SXL) and Buy-rated Enterprise (EPD) and Williams (WMB). For Diversified Pipelines
                                            (Attractive) we are 5% below consensus, though 2% above consensus for Energy MLPs (Neutral). Focus
                                            points for 2Q earnings will be:
                                            (1) Strong NGL volumes, resilient prices. We expect results to show strong natural gas liquids (NGLs)
                                            volumes and price resiliency during 2Q as the domestic economic recovery continued. However, we expect




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                           July 26, 2010



                                 questions to focus on the near-term NGL balance, as producers increasingly focus on “wet” plays over “dry”,
                                 which some fear could increase supply at a faster rate than demand. Longer-term we expect midstream
                                 companies will continue to invest in natural gas-derived NGL infrastructure, symbolized last week by Williams
                                 LP’s decision to exercise its option to raise its interest in the Overland Pass NGL pipeline to 50%.
                                 (2) Natural gas infrastructure. We expect a continued focus on “supply push” infrastructure, particularly in
                                 emerging natural gas shale plays that are infrastructure poor. In particular we expect development updates
                                 from (1) ONEOK in the Bakken Shale, (2) Spectra, Williams, and El Paso on gas in the Marcellus Shale, (3)
                                 Sunoco Logistics and Buckeye on NGLs, also in the Marcellus, and (4) Enterprise in the Haynesville and
                                 Eagle Ford shales.
                                 (3) Upside from asset acquisitions. Recent acquisitions by Magellan and Sunoco Logistics suggests this
                                 theme may be accelerating, and, as we have discussed previously, would be a source for significant upside
                                 risk to our cash flow growth estimates through the rest of the year and in 2011. We expect an overall update
                                 on the acquisition market, particularly auction processes being led by major oil companies seeking to
                                 rationalize assets.
                                 (4) Refined products recovery. Last week we mentioned strong volumes at Kinder Morgan likely has positive
                                 read across for those MLPs with refined products exposure and for domestic macroeconomic trends in
                                 general. Separately, the widening of crude oil contango spreads in 2Q should benefit those with storage
                                 marketing businesses.
                                 Risks
                                 Weaker infrastructure growth or energy prices; capital market volatility.



Other

Latin America Weekly Kickstart: The view from Rio                                                                                           35

                                 Stephen Graham (Sao Paulo): stephen.graham@gs.com, +55(11)3371-0831
                                 Goldman Sachs Brasil Bco Múlt S.A.
                                 Andre Rezende (Sao Paulo): andre.rezende@gs.com, +55(11)3371-0766
                                 Goldman Sachs Brasil Bco Múlt S.A.

                                 Our equity views
                                 We met last week with a sub-set of LatAm investors, Rio de Janeiro independent and hedge funds. There’s a
                                 distinctive approach within this group, often viewed in Brazil as thought leaders on the buy side. . In a
                                 relatively small equity world, these PMs compare choices almost only among Brazilian names, and tend to
                                 have in-depth knowledge on every important listing, in some cases including board seats or direct
                                 involvement in transactions.
                                 We discussed our view that the coming Petrobras mega equity issue will crimp all valuations until then. They
                                 agree, but questioned PBR’s inherent value creation and government intervention more than we hear from
                                 most clients outside Brazil. We suggested buying Brazil consumer themes via financials, insurance, and
                                 homebuilders rather than “consumer” names such as retailers, to avoid high multiples. They agreed, but
                                 extended the logic to the short side, pointing out the moderate trading volume of consumer names and the
                                 potential price impact if investors decide en masse to switch back to commodities.
                                 Equity performance
                                 Over the week, the MSCI Latin America gained 6.4% and the MSCI Emerging Markets 3.4%, both in dollars.
                                 Locally, Brazil rose 6.4% and Mexico 3.2%. Our Latin America research coverage is listed on page 8.
                                 Rates and currency
                                 The Brazilian Real gained 1.3% to 1.76/$ and the Mexican peso 1.4% to 12.73/$. Last week, the Brazil
                                 central bank hiked benchmark rate Selic by 50bp to 10.75%, less than the 75bp most expected. Our
                                 economists cut their forecast for cumulative rate hikes through Jan. 2011 from 450 bp to 400 bp, ending at
                                 12.75%.
                                 Valuation
                                 MSCI Brazil is trading at 10.0X next-12-month consensus earnings, with Mexico at 14.5X.
                                 LatAm Focus List
                                 Over the week (to Thursday), our Focus List lost 0.4% vs. MSCI LatAm and gained 0.9% vs. our Latin
                                 American coverage universe.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                            July 26, 2010



Reports Published


                                  US Economics Analyst: Squaring the Fiscal Circle: Could a Fiscal Rule Help?


Analyst Certification Disclaimer

Each equity and strategy research report excerpted herein was certified under Reg AC by the analyst primarily responsible for such report as follows: I, Name
of Analyst, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or
their securities. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views
expressed in this report.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                                  July 26, 2010




Investment Profile
The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and market.
The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several
methodologies to determine the stocks percentile ranking within the region's coverage universe.
The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:
Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various
return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF,
EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.

Quantum
Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth
analysis of a single company, or to make comparisons between companies in different sectors and markets.

Disclosures
Coverage group(s) of stocks by primary analyst(s)
Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this compendium
can be found in the latest relevant published research.

Company-specific regulatory disclosures
Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this compendium
can be found in the latest relevant published research.

Distribution of ratings/investment banking relationships
Goldman Sachs Investment Research global coverage universe
                                   Rating Distribution                                      Investment Banking Relationships
                          Buy             Hold                Sell                        Buy             Hold               Sell
Global                    31%             53%                 16%                         47%             44%               34%
As of July 1, 2010, Goldman Sachs Global Investment Research had investment ratings on 2,814 equity securities. Goldman Sachs assigns stocks as Buys
and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes
of the above disclosure required by NASD/NYSE rules. See 'Ratings, Coverage groups and views and related definitions' below.

Price target and rating history chart(s)
Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this compendium
can be found in the latest relevant published research.

Regulatory disclosures

Disclosures required by United States laws and regulations
See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-
manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public
offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs usually makes a market in fixed income
securities of issuers discussed in this report and usually deals as a principal in these securities.
The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals
reporting to analysts and members of their households from owning securities of any company in the analyst's area of coverage. Analyst
compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analyst as officer or
director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer, director,
advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be associated persons of
Goldman Sachs & Co. and therefore may not be subject to NASD Rule 2711/NYSE Rules 472 restrictions on communications with subject company, public
appearances and trading securities held by the analysts.
Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in prior periods,
above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachs website at
http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States
The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and
regulations. Australia: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations
Act. Canada: Goldman Sachs & Co. has approved of, and agreed to take responsibility for, this research in Canada if and to the extent it relates to equity
securities of Canadian issuers. Analysts may conduct site visits but are prohibited from accepting payment or reimbursement by the company of travel
expenses for such visits. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request from




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                             July 26, 2010



Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained from Goldman
Sachs (India) Securities Private Limited; Japan: See below. Korea: Further information on the subject company or companies referred to in this research may
be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. Russia: Research reports distributed in the Russian Federation are not advertising as defined in
the Russian legislation, but are information and analysis not having product promotion as their main purpose and do not provide appraisal within the meaning
of the Russian legislation on appraisal activity. Singapore: Further information on the covered companies referred to in this research may be obtained from
Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). Taiwan: This material is for reference only and must not be reprinted without permission.
Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons who
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in conjunction with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to
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Ratings, coverage groups and views and related definitions
Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an
Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned as a Buy or a Sell on an
Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional Investment Lists to a global guideline of 25%-35%
of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular coverage group may vary as determined by the
regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment recommendations focused on either the size of the
potential return or the likelihood of the realization of the return.
Return potential represents the price differential between the current share price and the price target expected during the time horizon associated with the price
target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated in each report adding or
reiterating an Investment List membership.
Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at
http://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst's investment outlook on the
coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12 months is favorable
relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12 months is neutral relative to
the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the
coverage group's historical fundamentals and/or valuation.
Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an advisory
capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has
suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for determining an investment rating or
target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage
Suspended (CS). Goldman Sachs has suspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or
Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore
excluded.

Global product; distributing entities
The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, and pursuant to certain
contractual arrangements, on a global basis. Analysts based in Goldman Sachs offices around the world produce equity research on industries and
companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated in Australia by Goldman Sachs
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& Co. (all other research); in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman
Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs JBWere (NZ) Limited on
behalf of Goldman Sachs; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in the
United States of America by Goldman Sachs & Co. Goldman Sachs International has approved this research in connection with its distribution in the United
Kingdom and European Union.
European Union: Goldman Sachs International, authorized and regulated by the Financial Services Authority, has approved this research in connection with its
distribution in the European Union and United Kingdom; Goldman Sachs & Co. oHG, regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht, may
also distribute research in Germany.

General disclosures
This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we consider
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irregular intervals as appropriate in the analyst's judgment.
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and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division. Goldman Sachs & Co.,
the United States broker dealer, is a member of SIPC (http://www.sipc.org).




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                                     July 26, 2010



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