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					                                          Americas Morning Summary
                                          October 19, 2010



The Goldman Sachs Group, Inc.
                                           Focus Items
This document contains comments
related to the following stocks:           Fluor Corp. (FLR): Execution risk to create share overhang; Downgrade to
                                                                                                                                                                                  1
                                           Neutral
Accenture Plc (ACN)                        Americas: Medical Technology: Life Science Tools & Diagnostics: Expect solid
                                                                                                                                                                                  2
Affymetrix Inc. (AFFX)                     3Q2010 earnings in Life Science Tools
Agilent Technologies (A)
Alexander & Baldwin, Inc. (ALEX)           Americas: Healthcare Services: CROs: P&L more of a focus in 3Q; Top-picks
                                                                                                                                                                                  3
AMB Property Corp. (AMB)                   remain PRXL and PPDI
Apartment Investment &                     Americas: Healthcare Services: Distributors: Slow dental recovery reflected in
Management (AIV)                                                                                                                                                                  4
AvalonBay Communities Inc. (AVB)
                                           shares; Neutral on PDCO and HSIC
B2W (BTOW3.SA)                             Americas: Building - Homebuilders: Mortgage putback implications for
BMC Software, Inc. (BMC)                                                                                                                                                          5
                                           homebuilders
Boston Properties, Inc. (BXP)
BRE Properties, Inc. (BRE)
Brookdale Senior Living Inc. (BKD)         Key Data Changes
Brookfield Properties Corp. (BPO)
Bruker corp. (BRKR)                        Investment List Additions
CA, Inc. (CA)                              Company                                                 Ticker                            Investment List Additions
Camden Property Trust (CPT)
                                           Drogasil                                           DROG3.SA                                    Americas Sell List
CB Richard Ellis Group Inc. (CBG)
CBD (Pão de Açúcar) (PCAR5.SA)             Marfrig S.A.                                       MRFG3.SA                                    Americas Sell List
CBL & Associates Properties (CBL)
Charles River Laboratories (CRL)           Investment List Removals
CME Group Inc. (CME)                                                                                                             Investment List Removals
                                           Company                                           Ticker
Columbia Sportswear Company
(COLM)                                     Fluor Corp.                                       FLR                                    Americas Buy List
CommVault Systems, Inc. (CVLT)
Cousins Properties Incorporated            Initiations
(CUZ)                                                                                     Rating/
                                           Company                          Ticker                            Price Target         Current Year        Next Year     Fiscal y/e
                                                                                       Coverage view
Covance Inc. (CVD)
Crown Holding, Inc. (CCK)                  Patterson Companies, Inc.        PDCO             N/A                  $30.00              $1.92             $2.13          Apr
D.R. Horton, Inc. (DHI)
Developers Diversified Realty              Rating and price target changes
(DDR)                                                                                   Rating/
                                                                                                                  Price Target                           Estimates
The Walt Disney Company (DIS)                                                        Coverage view
                                           Company                        Ticker      New     Old           New        Old        % chg Current Year Next Year Fiscal y/e
DreamWorks Animation SKG, Inc.
(DWA)                                      B2W                           BTOW3.SA     N/N     unch     ↑ R$33.60 R$32.70          2.8%        R$0.53       R$0.60        Dec
Drogasil (DROG3.SA)                        Brookfield Properties Corp.     BPO        B/N     unch     ↑ $19.00      $17.00      11.8%        $1.35         $1.24        Dec
Duke Realty Corp. (DRE)
                                           CBD (Pão de Açúcar)           PCAR5.SA     N/N     unch     ↑ R$70.00 R$65.00          7.7%        R$2.04       R$2.51        Dec
Equity Residential (EQR)
Essex Property Trust, Inc. (ESS)           CME Group Inc.                  CME        N/N     unch     ↑ $300.00 $290.00          3.4%        $15.25       $16.50        Dec
Federal Realty Invmt Trust (FRT)
                                           Drogasil                      DROG3.SA    ↓ S/N     N/N     ↑ R$40.10 R$40.00          0.3%        R$1.45       R$1.88        Dec
Fluor Corp. (FLR)
Forest City Enterprises (FCE__A)           Fluor Corp.                     FLR       ↓ N/N     B/N     ↓ $53.00      $57.00      (7.0%)       $2.35         $3.55        Dec
General Growth Properties (GGP)
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
Halliburton Company (HAL)             Hasbro, Inc.                    HAS       B/A     unch     ↑ $62.00    $57.00      8.8%           $2.70          $3.55       Dec
Hasbro, Inc. (HAS)
HCP, Inc. (HCP)                       Henry Schein, Inc.              HSIC      N/A     unch     ↑ $60.00    $55.00      9.1%           $3.48          $3.83       Dec
Health Care REIT, Inc. (HCN)          Hypermarcas                   HYPE3.SA    B/N     unch     ↑ R$31.80 R$30.80       3.2%          R$0.67          R$0.84      Dec
Henry Schein, Inc. (HSIC)
                                      ICON plc (ADR)                  ICLR      N/N     unch     ↓ $25.00    $29.00     (13.8%)         $1.45          $1.55       Dec
The Hershey Co. (HSY)
The Home Depot, Inc. (HD)             Kendle International Inc.      KNDL       S/N     unch      ↓ $8.50    $11.00     (22.7%)         $0.36          $0.67       Dec
Hovnanian Enterprises, Inc. (HOV)     Kimco Realty Corp.              KIM       N/N     unch     ↑ $14.00    $13.00      7.7%           $1.16          $1.15       Dec
Hypermarcas (HYPE3.SA)
ICON plc (ADR) (ICLR)                 Lojas Americanas              LAME4.SA    N/N     unch     ↑ R$17.20 R$15.30       12.4%         R$0.33          R$0.41      Dec
Illumina Inc (ILMN)                   Lojas Renner                  LREN3.SA    N/N     unch     ↑ R$69.00 R$61.30       12.6%         R$2.47          R$2.83      Dec
Infinera Corp. (INFN)
                                      Marfrig S.A.                  MRFG3.SA    S/N     NR       R$15.10        --            --       R$0.92          R$0.38      Dec
Infosys Technologies Ltd. (ADR)
(INFY)                                Mattel, Inc.                    MAT       N/A     unch     ↑ $25.00    $24.00      4.2%           $1.69          $1.76       Dec
Jones Lang LaSalle Inc. (JLL)         Natura                        NATU3.SA    N/N     unch     ↑ R$52.10 R$47.90       8.8%          R$1.72          R$2.09      Dec
KB Home (KBH)
Kendle International Inc. (KNDL)      Patterson Companies, Inc.      PDCO       N/A         --    $30.00        --            --        $1.92          $2.13       Apr
Kimco Realty Corp. (KIM)              Public Storage, Inc.            PSA       N/N     unch     ↑ $104.00   $92.00      13.0%          $4.37          $5.26       Dec
The Estee Lauder Companies Inc.
                                      Regency Centers Corporation     REG       S/N     unch     ↑ $35.00    $34.00      2.9%           $2.36          $2.42       Dec
(EL)
Lennar Corp. (LEN)                    Simon Property Group            SPG       B/N     unch     ↑ $105.00 $100.00       5.0%           $4.98          $6.44       Dec
Liberty Property Trust (LRY)          Taubman Centers, Inc.           TCO       B/N     unch     ↑ $49.00    $44.00      11.4%          $2.76          $2.81       Dec
Life Technologies Corporation
(LIFE)                                The Macerich Co.                MAC       N/N     unch     ↑ $41.00    $38.00      7.9%           $2.67          $2.73       Dec
Lojas Americanas (LAME4.SA)           VMware, Inc.                    VMW       B/A     unch     ↓ $100.00 $105.00       (4.8%)         $0.86          $1.33       Dec
Lojas Renner (LREN3.SA)
Lowe's Companies, Inc. (LOW)          Estimate changes
M.D.C. Holdings, Inc. (MDC)                                                       Rating/                Current Year                        Next Year             Fiscal
Mack Cali Realty Corporation (CLI)                                               Coverage
                                                                                                                                                                    y/e
Marfrig S.A. (MRFG3.SA)               Company                         Ticker       view            New        Old     % chg          New        Old      % chg
Mattel, Inc. (MAT)                    B2W                            BTOW3.SA         N/N        ↑ R$0.53 R$0.50        6.1%       ↑ R$0.60 R$0.58        2.8%     Dec
Meritage Homes Corp. (MTH)
                                      CBD (Pão de Açúcar)            PCAR5.SA         N/N        ↓ R$2.04 R$2.06      (1.3%)       ↓ R$2.51 R$2.83 (11.5%)         Dec
Mettler-Toledo International Inc.
(MTD)                                 Cousins Properties
                                                                       CUZ            N/N         ↓ $0.43    $0.45    (4.7%)       ↓ $0.52     $0.55     (5.7%)    Dec
                                      Incorporated
Microsoft Corp. (MSFT)
                                      DreamWorks Animation SKG,
Mylan Inc. (MYL)                                                       DWA            N/N         ↑ $1.69    $1.65      2.3%        $2.20       unch       --      Dec
                                      Inc.
Natura (NATU3.SA)
NVR, Inc. (NVR)                       Drogasil                       DROG3.SA         S/N        ↓ R$1.45 R$1.51      (4.2%)       ↓ R$1.88 R$1.93       (2.4%)    Dec
Oracle Corp. (ORCL)                   Federal Realty Invmt Trust       FRT            N/N         ↓ $3.83    $3.85    (0.5%)        $4.17       unch       --      Dec
Packaging Corp. of America (PKG)
                                      Fluor Corp.                      FLR            N/N         ↓ $2.35    $3.05    (23.0%)       $3.55       unch       --      Dec
Parexel International Corp. (PRXL)
Patterson Companies, Inc. (PDCO)      Halliburton Company              HAL            B/N         ↓ $2.01    $2.04    (1.5%)        $2.75       unch       --      Dec
Pharmaceutical Product Dev.           Hasbro, Inc.                     HAS            B/A         ↑ $2.70    $2.58      4.7%       ↑ $3.55     $3.50      1.3%     Dec
(PPDI)
Post Properties Inc. (PPS)            Henry Schein, Inc.               HSIC           N/A         ↓ $3.48    $3.55    (2.0%)       ↓ $3.83     $4.09     (6.4%)    Dec
ProLogis (PLD)                        The Hershey Co.                  HSY            S/C         ↑ $2.53    $2.51      0.9%        $2.75       unch       --      Dec
Public Storage, Inc. (PSA)
                                      Hypermarcas                    HYPE3.SA         B/N        ↓ R$0.67 R$0.74      (9.3%)       ↑ R$0.84 R$0.82        2.1%     Dec
PulteGroup, Inc. (PHM)
Regency Centers Corporation           ICON plc (ADR)                   ICLR           N/N         ↓ $1.45    $1.49    (2.7%)       ↓ $1.55     $1.70     (8.8%)    Dec
(REG)                                 Infinera Corp.                   INFN           S/N         ($0.35)    unch        --        ↓ ($0.42) ($0.29) (42.4%)       Dec
Sigma-Aldrich Corp. (SIAL)
Simon Property Group (SPG)            Kendle International Inc.       KNDL            S/N         ↓ $0.36    $0.41    (12.2%)      ↓ $0.67     $0.77     (13.0%)   Dec
SL Green Realty Corp (SLG)            Lojas Americanas               LAME4.SA         N/N        ↑ R$0.33 R$0.29      12.4%        ↑ R$0.41 R$0.37       10.7%     Dec
Symantec Corp. (SYMC)
                                      Lojas Renner                   LREN3.SA         N/N        ↑ R$2.47 R$2.32        6.2%       ↑ R$2.83 R$2.69        5.2%     Dec
Tanger Factory Outlet Centers, Inc.
(SKT)                                 Marfrig S.A.                   MRFG3.SA         S/N        ↓ R$0.92 R$0.93      (1.2%)       ↓ R$0.38 R$0.84 (54.5%)         Dec
Taubman Centers, Inc. (TCO)
                                      Natura                         NATU3.SA         N/N        ↓ R$1.72 R$1.74      (1.5%)       ↓ R$2.09 R$2.15       (2.7%)    Dec
The Macerich Co. (MAC)
The Ryland Group, Inc. (RYL)          Packaging Corp. of America       PKG            N/N         ↓ $1.63    $1.65    (1.2%)       ↓ $2.15     $2.25     (4.5%)    Dec
Thermo Fisher Scientific Inc. (TMO)   Patterson Companies, Inc.       PDCO            N/A          $1.92      --         --         $2.13        --        --       Apr
Toll Brothers, Inc. (TOL)
UDR, Inc. (UDR)                       Post Properties Inc.             PPS            S/N         ↑ $0.60    $0.45    31.6%         $1.38       unch       --      Dec
Under Armour, Inc. (UA)               SL Green Realty Corp             SLG            N/N         ↑ $4.75    $4.14    14.7%         $4.15       unch       --      Dec
Viacom Inc. (VIA__B)
                                      Taubman Centers, Inc.            TCO            B/N         ↑ $2.76    $2.70      2.5%        $2.81       unch       --      Dec
VMware, Inc. (VMW)
Vornado Realty Trust (VNO)
Waters Corporation (WAT)            VMware, Inc.                 VMW         B/A       ↑ $0.86   $0.85   0.9%   ↓ $1.33   $1.35   (0.9%)   Dec
Weingarten Realty Investors (WRI)

                                    Other Headlines
                                    Basic Materials
                                    Packaging Corp. of America (PKG): 3Q10 EPS strong, but beat driven by lower tax rate; remain
                                                                                                                                                  6
                                    Neutral

                                    Consumer Cyclicals
                                    Americas: Toys: 3Q Toys Wrap-up: Raise HAS estimates, remain Street low for MAT                               7
                                    Brazil: Retail: 3Q2010 preview: Set-up remains favorable into back-half of 2010, but also fully
                                                                                                                                                  8
                                    priced
                                    Americas: Textile, Apparel & Footwear: Athletic 3Q Preview: Expect good early indications for
                                                                                                                                                  9
                                    2011
                                    Americas: Retail: Impact of new foreclosure challenge looks contained for DIY Retail                         10
                                    DreamWorks Animation SKG, Inc. (DWA): Moving towards a more positive outlook near the end
                                                                                                                                                 11
                                    of the year
                                    Americas: Entertainment: Viacom takes early buy-out on Marvel distribution deal                              12

                                    Consumer Staples
                                    The Hershey Co. (HSY): 3Q10 EPS could beat consensus, but see growing risk as FY11 nears                     13
                                    Marfrig S.A. (MRFG3.SA) Sell: Old challenges remain, Keystone adds complexity; reinstate at
                                                                                                                                                 14
                                    Sell
                                    Drogasil (DROG3.SA) Sell: Tactical step back as growth and margin pressures loom; Sell                       15
                                    The Estee Lauder Companies Inc. (EL): Takeaways from the CEW cosmetics industry panel                        16

                                    Energy
                                    Halliburton Company (HAL): Int'l recovery still slow going; stick with best-in-class HAL and SLB             17

                                    Financial Services
                                    CME Group Inc. (CME): CME IRS platform a reality, usage/cross margining key focus items                      18
                                    United States: Real Estate: REITs: US REIT View: 3Q preview - Earnings take a back seat to
                                                                                                                                                 19
                                    credit trends, demand for yield

                                    Healthcare
                                    Mylan Inc. (MYL): PI loss on Paxil CR a manageable set-back, remain buyers                                   20

                                    Industrials
                                    Crown Holding, Inc. (CCK): First Take: Beats consensus estimates on better operating results                 21

                                    Technology
                                    VMware, Inc. (VMW): First Take: Strong revenues & EPS; deferred less than we expected                        22
                                    Global: Technology: Internet: Global Internet Notables - Week of October 18, 2010                            23
                                    Americas: Technology: Key takeaways from IBM earnings and implications across TMT                            24
                                    Microsoft Corp. (MSFT): Ozzie departure potentially negative for Cloud positioning                           25
                                    Infinera Corp. (INFN): Reiterate Sell on continued downside to Street estimates                              26
                                    VMware, Inc. (VMW): Strong quarter despite fewer large deals; strong pipeline for 4Q                         27
Americas Morning Summary                                                                                                                       October 19, 2010




Focus Items

Fluor Corp. (FLR): Execution risk to create share overhang; Downgrade to Neutral                                                                             1

FLR, $51.87                                  Joe Ritchie (New York): joseph.ritchie@gs.com, (212) 357-8914
Market cap                    $9,244 mn
                                             Goldman Sachs & Co.
                                             Chaitra Purushotham (Bangalore): chaitra.purushotham@gs.com, (212) 934-6330
Target price                       $53.00
                                             Goldman Sachs India SPL
Fiscal y/e Dec            2010E    2011E     Gregory Elek (New York): gregory.elek@gs.com, (212) 357-7503
EPS ($)                    2.35      3.55    Goldman Sachs & Co.
P/E                       22.1X     14.6X

EPS Quarter/Interim
                      *
                          (0.09)     0.89
                                             What happened
                                             FLR announced Oct. 18 that it has incurred a $163 mn charge ($0.90/share) in 3Q10 on the Greater
Investment Lists                             Gabbard Offshore Wind Project. While we believe core earnings remain intact, we are downgrading FLR to
                                   Neutral   Neutral from Buy as we expect uncertainty surrounding future write-downs to suppress FLR’s multiple. We
Coverage view                      Neutral   have lowered our 12-month price target to $53 from $57, which is based on 15.0X 2011 EPS (16.0X
                                             previously). Since we added FLR to the Americas Buy List on May 27, 2010, FLR shares are up 8.5% vs.
*Current and a year ago
                                             S&P 500 up 6.6%. Over the last 12 months, FLR shares are up 1.9% vs. S&P 500 up 7.3%.
                                             Current view
                                             We are downgrading FLR to Neutral from Buy as we believe execution issues on this project are likely to
                                             persist, dampening FLR’s multiple. History suggests that when E&C companies begin taking write-downs,
                                             these issues continue until project completion. Our concern with this project is that it is outside of FLR’s core
                                             business (first foray into offshore wind), lump sum, and only roughly 50% complete (about $1bn left in
                                             backlog). Longer-term, we believe FLR’s core earnings are intact. We continue to like FLR’s leverage to
                                             favorable end markets (e.g., global mining), international presence (72% of backlog), and key catalysts. We
                                             also believe 2011 expectations for FLR’s core business are too low (GS $3.55 vs. Consensus $3.29). As we
                                             previewed in our Oct. 12 note “3Q10 Preview: Stay selective on energy; tactically positive on civil”, we expect
                                             FLR to issue 2011 EPS guidance of $3.20-$3.50 (assuming no additional charges). This view has not
                                             changed and was bolstered by FLR raising its 2010 guidance (ex-charges) today to $3.10-$3.40 from $2.90-
                                             $3.20.
                                             We are increasing our 2010 EPS (ex-charges) to $3.25 from $3.05 to reflect strong orders, consistent with
                                             new management guidance. We retain our above-consensus 2011/2012 EPS estimates of $3.55/$3.85.
                                             Risks: Upside: solid awards, improved execution on Greater Gabbard; Downside: cost overruns, award
                                             delays, margin pressure.




Americas: Medical Technology: Life Science Tools & Diagnostics: Expect solid 3Q2010 earnings in Life                                                         2
Science Tools

                                             Isaac Ro (New York): isaac.ro@gs.com, (212) 902-6393
                                             Goldman Sachs & Co.
                                             Jeff Ares (New York): jeff.ares@gs.com, (212) 902-5166
                                             Goldman Sachs & Co.

                                             Expect a solid quarter, but we remain selective
                                             We expect a solid 3Q2010 earnings season across the Life Science Tools (LST) group based on stable end-
                                             markets, positive management commentary at recent investor conferences and, in our opinion, achievable
                                             earnings estimates. With LST trading at a 25% premium to the S&P 500 and a 39% premium the broader
                                             healthcare industry, we view multiple expansion as limited.
                                             Investor sentiment remains strong; focus on A, ILMN
                                             Based on investor discussions since our launch on October 5, we believe sentiment for the LST group is
                                             positive ahead of 3Q2010 earnings, particularly in comparison to the broader MedTech sector. Within LST,
                                             Illumina (ILMN) continues to draw the most interest as investors seek to grasp the market potential for next-
                                             generation sequencing and current valuation. We continue to believe the Street is underestimating the
                                             earnings potential of the current HiSeq product cycle. Agilent (A) has proven to be another investor favorite
                                             and a topic of frequent conversation, as investors are bullish on the near-term potential for LTE wireless roll-




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                          October 19, 2010



                                 out to boost growth in the electronic measurement business. We are more cautious, however, and believe
                                 positive management commentary around 4Q2010 results and FY2011 guidance is already reflected in the
                                 current valuation.
                                 Post earnings, focus will likely shift to mid-term elections
                                 With the prospect of strong GOP gains in the November elections, and current OMB recommendations for a
                                 5% cut in non-discretionary, non-military funding programs, we believe investor attention will quickly shift to
                                 the FY2012 NIH budget outlook following 3Q earnings. The NIH budget has seen a yoy decline only once in
                                 the last 40 years, but it may be vulnerable in a more conservative post-election environment, in our view.
                                 Remain buyers of ILMN and WAT
                                 ILMN and Waters (WAT) remain our top ideas, and we anticipate 3Q2010 beats from both companies. On
                                 ILMN, recent due diligence has shown the company continues to gain share in the next-generation
                                 sequencing market, and based on recent scientific publications the array market appears stable. With WAT,
                                 discussions with industry contacts support our view that H-class traction remains strong and migration of
                                 production to Singapore is on track.



Americas: Healthcare Services: CROs: P&L more of a focus in 3Q; Top-picks remain PRXL and PPDI                                                     3

                                 Robert P. Jones (New York): robert.p.jones@gs.com, (212) 357-3336
                                 Goldman Sachs & Co.
                                 Randall Stanicky, CFA (New York): randall.stanicky@gs.com, (212) 357-3292
                                 Goldman Sachs & Co.
                                 Verdell Walker (New York): verdell.walker@gs.com, (212) 902-8446
                                 Goldman Sachs & Co.
                                 Baneesh Banwait (Bangalore): baneesh.banwait@gs.com, (212) 934-6193
                                 Goldman Sachs India SPL

                                 Greater attention will be placed on P&L performance in 3Q
                                 Upcoming earnings for the CROs kick-off Thursday with ICLR and unlike recent quarters, we expect
                                 investors’ focus to be more on the financial performance and outlook rather than bookings. Specifically, there
                                 has been much made of the pace at which CROs are able to translate recent strong bookings into revenue
                                 and whether cost structures need to rise to meet the level of new business being seen, particularly on the
                                 clinical side. Our view is that too much has been made about conversion rates where we are not convinced
                                 there really is a pronounced slow-down. Furthermore, even if conversion slows we see the worst outcome as
                                 revenue coming through a few quarters later. The bottom-line is we believe we are seeing a shift in Pharma’s
                                 approach to outsourcing where the larger global names are winning a disproportionate amount of business at
                                 the expense of the smaller players and this should not be overlooked because of questions around the timing
                                 of revenue recognition. The two names where we see the most upside is CL-Buy rated PRXL and Buy rated
                                 PPDI.
                                 Continue to prefer clinical stage; still like PRXL and PPDI
                                 We maintain our CL-Buy on PRXL and Buy rating on PPDI and do not expect a change in either’s financial
                                 guidance. In addition, we expect another quarter of solid bookings, supported by the strategic deals both
                                 companies have with Glaxo, and PRXL’s deal with Eli Lilly. We regard revenue conversion concerns for
                                 PRXL as overdone (shares down 9% in October vs S&P up 4%), which, in our view, is less important than the
                                 fact that PRXL is emerging as a market leader capable of winning strategic deals. We see more risk to ICLR
                                 and KNDL estimates given trailing-12-month book-to-bills and management commentary, therefore we lower
                                 our 2010-2012E EPS estimates and cut our respective price targets to $25 (from $29) and $8.50 (from $11).
                                 Preclinical weakness expected and well-understood
                                 Our quarterly channel checks indicate to us that preclinical fundamentals remain weak, and that pricing may
                                 have eroded from 2Q levels. We expect the preclinical market will continue to be challenged. However, we
                                 also believe that investors anticipate continued weakness, and that these expectations are already priced into
                                 Neutral-rated Covance (CVD) and Charles River (CRL). For CVD, we look for commentary around potential
                                 capacity reductions resulting from its recently announced deal with Sanofi-Aventis.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                        October 19, 2010




Americas: Healthcare Services: Distributors: Slow dental recovery reflected in shares; Neutral on PDCO                                        4
and HSIC

                                 Robert P. Jones (New York): robert.p.jones@gs.com, (212) 357-3336
                                 Goldman Sachs & Co.
                                 Randall Stanicky, CFA (New York): randall.stanicky@gs.com, (212) 357-3292
                                 Goldman Sachs & Co.
                                 Verdell Walker (New York): verdell.walker@gs.com, (212) 902-8446
                                 Goldman Sachs & Co.
                                 Baneesh Banwait (Bangalore): baneesh.banwait@gs.com, (212) 934-6193
                                 Goldman Sachs India SPL

                                 Dental market recovery well-understood; prefer PDCO
                                 With this report, we initiate coverage of Patterson Companies (PDCO) with a Neutral rating and a $30, 12-
                                 month price target. In addition, Robert P. Jones assumes primary coverage of Henry Schein (HSIC) with
                                 Neutral rating and a $60, 12-month price target. Recent trends and survey work point to a gradual recovery in
                                 the demand for dental supplies and equipment, which we believe is contemplated in expectations for
                                 Patterson Companies (PDCO) and Henry Schein (HSIC). With dental expenditures linked more to
                                 discretionary spending than other areas in healthcare, we believe a pick-up in dental spending will lag
                                 improvements in the broader economy. That said, we believe company outlooks and Street forecasts
                                 incorporate a measured improvement. Between the two dental distributors, we favor Patterson given: (1)
                                 better leverage to dental equipment, which we believe is impeded less by the economy than consumables;
                                 (2) better growth prospects from medical distribution segment; and (3) near-two-point P/E multiple discount
                                 on our 2012 estimates.
                                 Patterson Companies (PDCO) – Initiate at Neutral, $30 price target
                                 Looking beyond the current downturn, we believe Patterson is well positioned given its dental equipment and
                                 rehab supply businesses. While equipment has suffered along with consumables, we believe demand will
                                 return sooner as dentists update their practices and adopt newer technologies – we see exclusive US rights
                                 to Sirona’s CEREC as a key differentiator. On the medical side, we see upside opportunity for Patterson due
                                 to the nature of its underlying markets (rehab and long-term care) which we believe are less levered to
                                 utilization trends. We introduce FY 2011-13E EPS of $1.92, $2.13, and $2.40. Looking ahead, a faster-than-
                                 expected acceleration in equipment sales could make us more positive.
                                 Henry Schein (HSIC) – Maintain Neutral rating, set $60 price target
                                 On a relative basis we view Henry Schein’s business as more linked to an economic recovery given its higher
                                 dental consumable exposure and ties to the physician office through its medical segment. However, we only
                                 see slight downside to current Street top- and bottom-line forecasts. We have revised our 2010-2012E EPS
                                 to $3.48, $3.83, $4.26 from $3.55, $4.09, $4.63. We also introduce our 2013E EPS of $4.76. Going forward,
                                 improvement in dental equipment-to-consumables ratio and further M&A could make us more constructive on
                                 HSIC.



Americas: Building - Homebuilders: Mortgage putback implications for homebuilders                                                             5

                                 Joshua Pollard (New York): joshua.pollard@gs.com, (212) 902-6716
                                 Goldman Sachs & Co.
                                 Anto Savarirajan (New York): anto.savarirajan@gs.com, (646) 446-1758
                                 Goldman Sachs & Co.

                                 Putbacks could be sizable for some builders, but we believe the issue is controlled
                                 The potential size of the mortgage putback issue for some homebuilders could be large but the issue is
                                 contained in our view. Three things are clear from our analysis: (1) this is not a new issue for homebuilders
                                 as they have been taking charges since 2007; (2) almost all homebuilders use historical rescission
                                 experience to estimate current reserve levels, so as investor rescissions rise so should putback expenses for
                                 the group; (3) based on our reviews of the companies’ filings and company conversations, the putback
                                 liability and debt at the homebuilders’ financial subsidiaries that originated the mortgages are generally
                                 classified as non-recourse. As a result, if the putbacks become overly onerous, the parent company could
                                 choose whether to send cash to its mortgage subsidiary to fund them, based on its assessment of the value




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                 October 19, 2010



                                           of the mortgage subsidiary to its homebuilding operations. If builders choose not to fund their mortgage
                                           subsidiaries we would suspect litigation to ensue.
                                           Sizing the potential losses
                                           Using varying assumptions for prime vs. non-prime loans we estimate the loss potential for our coverage
                                           universe to be roughly $2.4 bn or 15% of current equity for the group. That said, the distribution of losses
                                           across our coverage varies widely with Meritage at 0% exposure vs. 25% for Pulte.
                                           Biggest concern is Pulte given Centex’s size
                                           Across our universe Pulte’s exposure to mortgage putbacks is most concerning. First, the sheer size of
                                           Pulte’s and Centex’s combined mortgage issuance from 2004-2008 at $80 bn is twice that of the next largest
                                           builder. Under our standardized assumptions Pulte’s overall putback exposure could be $850 mn or 25% of
                                           current equity. Second, Centex’s operations were significantly more complex than other builders: nearly two-
                                           thirds of the primary mortgage business was facilitating non-Centex home purchases while the company
                                           issued $20 bn in home equity loans in 2001-2006.
                                           Buy-rated Meritage is best positioned if putbacks grow further
                                           Meritage is the sole builder in our coverage universe without a financial subsidiary. If mortgage putbacks
                                           continue to drive performance across the sector we think Meritage is best positioned.


Other Headlines
Basic Materials

Packaging Corp. of America (PKG): 3Q10 EPS strong, but beat driven by lower tax rate; remain Neutral                                                   6

PKG, $24.35                                Richard Skidmore, CFA (New York): richard.skidmore@gs.com, (212) 357-5509
Market cap                  $2,493 mn
                                           Goldman Sachs & Co.
                                           Alex Ovshey (New York): alex.ovshey@gs.com, (212) 902-6751
Target price                     $26.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E     Usha Chundru (Bangalore): usha.chundru@gs.com, (212) 934-5057
EPS ($)                   1.63     2.15    Goldman Sachs India SPL
P/E                    15.0X      11.3X

EPS Quarter/Interim*      0.53     0.16
                                           What's changed
                                           Packaging Corp. (PKG) reported 3Q2010 EPS of $0.60, modestly ahead of our and consensus estimates of
Investment Lists                           $0.59 and $0.58, respectively. The upside relative to our estimate stems from a lower tax rate, which more
                                 Neutral   than offset slightly weaker operating margins. Overall, in our view 3Q10 results were strong as PKG reported
Coverage view                    Neutral   record quarterly results (i.e. revenues, EPS) owing to higher containerboard prices, solid demand, and strong
                                           execution. PKG’s box shipments grew 4.3% yoy in 3Q10, with per day box shipments in September stronger
*Current and a year ago
                                           than July and August. We view this as a positive read across for other containerboard producers:
                                           International Paper and Temple-Inland. Looking ahead, PKG expects 4Q2010 EPS to be $0.53, with the qoq
                                           decline due to three less shipping days, seasonally higher wood and energy costs, and rising recycled fiber
                                           (OCC) costs.
                                           Implications
                                           We modesty lower our 2010-2012 EPS estimates to $1.63, $2.15, and $2.50 from $1.65, $2.25, and $2.60,
                                           respectively, reflecting modestly higher OCC costs, which increased $12.50 to $147/ton in October vs
                                           September. We like PKG’s exposure to containerboard (our preferred paper grade), its low cost position,
                                           strong balance sheet, and solid dividend yield. However, we rate the stock Neutral as we see more
                                           compelling value in International Paper ($23.55) and Temple-Inland ($20.43) – both rated Buy.
                                           Valuation
                                           Our 12-month $26 price target is unchanged, which is based on our 2011 cash EPS and EBITDA forecasts
                                           and implied forward multiples. Our modestly lower 2011 EPS estimate is offset by lower cash taxes, which
                                           we forecast will be lower than previously expected in 2011 as PKG will receive greater cellulosic biofuel tax
                                           credits than we had been modeling.
                                           Key risks
                                           Weaker (stronger) box demand, less supply discipline in containerboard, more significant margin expansion
                                           vs. peers owing to cost savings.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                       October 19, 2010



Consumer Cyclicals

Americas: Toys: 3Q Toys Wrap-up: Raise HAS estimates, remain Street low for MAT                                                              7

                                 Michael Kelter (New York): michael.kelter@gs.com, (212) 934-4252
                                 Goldman Sachs & Co.
                                 Andrew Sawyer, CFA (New York): andrew.sawyer@gs.com, (212) 902-5488
                                 Goldman Sachs & Co.
                                 Stephanie Whited (New York): stephanie.whited@gs.com, (212) 855-9812
                                 Goldman Sachs & Co.

                                 Toy 3Q earnings season takeaways
                                 (1) HAS surprised the Street by outgrowing MAT – HAS grew sales 3% in 3Q2010, a bit better than MAT’s
                                 2% growth. This was surprising given MAT’s exposure to the Toy Story franchise and its addition of the
                                 WWE/Thomas contracts, while HAS is at the trough of its media-driven product cycle. MAT stated that its
                                 sales shortfall was due to retailers pushing holiday promotions out to 4Q2010; however, we are not sure this
                                 explains the bulk of MAT’s miss since HAS is not seeing the same dynamic.
                                 (2) Commodity inflation was manageable – MAT’s GM surprised to the upside, coming in roughly in line with
                                 year-ago despite some higher input costs. While HAS’s GM declined, this appears to primarily be from a
                                 temporary mix shift and non-recurring forex hedge in the year-ago period.
                                 (3) Continued balance sheet deployment – HAS continues to buy back shares at a rapid pace. It has bought
                                 back 10% of its float YTD and may buy back another 5-10% by the end of 2011. MAT slowed its repurchase
                                 program in 3Q2010, but has strong balance sheet optionality from here.
                                 Raising HAS estimates to reflect 3Q beat and the lower USD
                                 We maintain our Conviction Buy rating on HAS ($46.81)as we still see 30% upside potential in the shares
                                 even after the most recent run. (1) Hasbro is in the early stages of a renewed revenue growth cycle driven by
                                 leveraging its brands in media that could last through 2012, (2) We expect continued upward EPS revisions
                                 as we are 10-15% above consensus expectations, (3) The shares are attractively valued at only 11.5x our
                                 2012 estimates.
                                 We raise our 2010/2011/2012 EPS estimates to $2.70/$3.55/$4.11 from $2.58/$3.50/$4.02 to flow through
                                 the 3Q beat and to mark forex to spot. We raise our DCF and P/E-based target by $5 to $62 to reflect the
                                 higher estimates and as we roll our valuation methodology forward to 2012.
                                 MAT valuation undemanding, but expectations remain too high
                                 We maintain our guarded stance on MAT ($22.55; Neutral). On the surface, valuation may appear compelling
                                 at 11.5x our 2012 estimates vs. a 15x LT average. However, we see potential for an additional future EPS
                                 miss as our 2010/2011/2012 EPS estimates of $1.69/$1.76/$1.93 remain the Street low. We advise investors
                                 to look for a better entry once consensus expectations are rebased downward. We raise our DCF and P/E-
                                 based price target by $1 to $25 as we roll our valuation methodology to 2012.



Brazil: Retail: 3Q2010 preview: Set-up remains favorable into back-half of 2010, but also fully priced                                       8

                                 Irma Sgarz (Sao Paulo): irma.sgarz@gs.com, +55(11)3371-0728
                                 Goldman Sachs Brasil Bco Múlt S.A.
                                 Rachel Rodrigues (Sao Paulo): rachel.a.rodrigues@gs.com, +55(11)3371-0798
                                 Goldman Sachs Brasil Bco Múlt S.A.

                                 Growth continued in 3Q, strong setup for 4Q
                                 Brazilian consumers continued to benefit from a highly favorable macro backdrop during 3Q10, which should
                                 result in 23% sales growth, slowing from 31% in 1H. Looking ahead to 4Q10 and 2011, the set-up remains
                                 positive with pronounced real wage growth and controlled consumer leverage.
                                 Positive for LREN, LAME; CBD improving
                                 We expect good growth momentum to translate into margin gains from operating leverage for Lojas Renner
                                 and Lojas Americanas. CBD should see better margin trends than in 2Q, but we expect this to be more than
                                 offset by high financial expenses. We rate all three Neutral.
                                 Competition stings for Drogasil, B2W
                                 Drogasil (Sell) is poised for weaker performance, in our view, as sales should slow further and margins post




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                          October 19, 2010



                                 downward trends in 3Q2010.
                                 For B2W (Neutral), we forecast stabilization in EBITDA margins to come once more at the expense of market
                                 share, as growth remains sharply below the market (11% vs. 35%-40%).
                                 Lower margins no major concern for Hypermarcas and Natura
                                 Hypermarcas (Buy) and Natura (Neutral) should post lower margins on accelerated marketing spend (NATU)
                                 and mix effects from consolidating past M&A (HYPE), but offset by attractive growth.
                                 A closer look at store-opening plans
                                 A year after retailers announced a return to more aggressive store opening plans, we compare their returns
                                 profile and track record to highlight risks and opportunities. Lojas Americanas stands out for high returns and
                                 a strong track record in organic openings, but believe this is reflected in its valuation. Lojas Renner and
                                 Drogasil also screen favorably, while CBD lags on returns and past execution, highlighting risks of a shortfall
                                 and/ or potential further M&A (in food).
                                 Fine-tuning estimate, raising target prices
                                 We raise our 12-month blended DCF/ target multiple price targets by on avg 7%, as we fine-tune estimates
                                 by on avg -2%/-1%/2% for 2010/11/12 and update for a lower risk-free rate.



Americas: Textile, Apparel & Footwear: Athletic 3Q Preview: Expect good early indications for 2011                                              9

                                 Michelle Tan, CFA (New York): michelle.tan@gs.com, (212) 902-3099
                                 Goldman Sachs & Co.
                                 Nicole Shevins (New York): nicole.shevins@gs.com, (212) 902-9884
                                 Goldman Sachs & Co.

                                 Expect bullish 2011 outlooks from restocking + company initiatives
                                 We expect both UA and COLM to sound bullish on 2011 demand as: (1) Retailers reinvest in inventory to
                                 drive sales: With many retailers near/above peak gross margins, their focus is increasingly shifting to driving
                                 productivity. Their efforts include selectively reinvesting in inventory to the benefit of wholesalers, a theme
                                 reinforced in Sept by our Global Retail Conference and NKE's strong North America futures orders. (2)
                                 Company-specific growth initiatives drive share for key athletic wholesalers: Across our athletic wholesale
                                 coverage, brands are focused on driving growth by addressing company-specific opportunities. In the case of
                                 COLM, after undermanaging its assortment for the last decade, it is dramatically upping the penetration of
                                 technology in their product and retailer feedback is increasingly positive. In the case of UA, they are
                                 broadening out apparel to address the large non-compression market segment, taking back control of their
                                 lucrative bag and hat license, opening more outlets, and restarting their growth efforts in footwear.
                                 COLM (Neutral): Expect good Spring 2011 backlog
                                 At our conference, key retailers were particularly positive on COLM’s new product initiatives. This suggests
                                 Fall’s strong backlog (+16% FX neutral) was more than a single product hit and momentum can carry into
                                 Spring 2011 (backlog to be reported this qtr). While warm weather is likely hurting initial cold weather sell-
                                 through, retailers like DKS have implied that they were prepared for a later season. As a result, we would not
                                 expect to see major cancellation implications unless weather remains an issue through next month. Our EPS
                                 estimates are ahead of consensus at $1.56 (vs. FC $1.47) for 3Q and $2.37 (vs. FC $2.24) for the year. We
                                 remain Neutral on the stock given valuation and already high near-term expectations.
                                 UA (Neutral): Expect strong growth outlook
                                 Consistent with 3Q09, UA will likely provide some broad revenue and EPS growth goals for next year. With
                                 several 2011 initiatives (listed above), we expect this outlook to imply sales growth will accelerate vs. 2010’s
                                 mid-teens plan. Also, commentary at our conference suggested bottom-line leverage on key investments.
                                 Our estimates are ahead of consensus for this year (GS $1.19 vs. FC $1.16) and next. Our Neutral rating on
                                 the stock primarily reflects high expectations and some risk to valuation if reaccelerated footwear efforts
                                 (starting with Basketball this Fall) disappoint.




Americas: Retail: Impact of new foreclosure challenge looks contained for DIY Retail                                                          10

                                 Matthew J. Fassler (New York): matt.fassler@gs.com, (212) 902-6740




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    October 19, 2010



                                            Goldman Sachs & Co.
                                            Jonathan Baucom (New York): jonathan.baucom@gs.com, (212) 934-4213
                                            Goldman Sachs & Co.
                                            Ryan Brinkman (New York): ryan.brinkman@gs.com, (917) 343-9516
                                            Goldman Sachs & Co.
                                            Mark-Andre Saucier-Nadeau (New York): mark-andre.saucier-nadeau@gs.com, (212) 902-3668
                                            Goldman Sachs & Co.

                                            Foreclosure issues confusing but not decisive for earnings
                                            While recent uncertainty in the foreclosure market adds to the litany of challenges in the home improvement
                                            retail market, to the extent that we can quantify the impact of this discrete issue, it looks manageable.
                                            DIY retailers are coping with the challenges of fragile home prices, collapsing housing turnover in the wake of
                                            housing stimulus, fading appliance stimulus, and stiff compares in 4Q/1Q. We recently downgraded HD to
                                            Neutral, while retaining our Buy rating on LOW.
                                            In assessing the new issues related to foreclosures, we see two issues:
                                            (1) The status of certain foreclosures in a number of states is being questioned on the certification of
                                            foreclosure documentation. This issue looks short-term in nature, and limited in impact, as documents are
                                            reprocessed, albeit at some expense to banks and mortgage serving firms.
                                            Assuming 25% decline in foreclosure sales over the course of one quarter in the states impacted by this
                                            issue would yield an incremental 2.7% decline in housing turnover, and quarterly sales and EPS hits of ~1%
                                            and $0.01, respectively, for each of HD and LOW, reducing annual EPS by 0.5% for HD and 0.7% for LOW
                                            based on quarter of impact.
                                            (2) Several title insurance companies have decided to withdraw from offering policies on foreclosed
                                            properties due to concerns around documentation and legal title. While our financials team sees this problem
                                            as technical in nature, and our ECS team thinks it is smaller in scope than the issue cited above, it could
                                            reduce foreclosure sales until legal precedents are established.
                                            Damage on issue looks overdone; Buy on LOW, Neutral on HD
                                            Macro data on home improvement is daunting, though we have noted a diminished correlation between
                                            sector sales and housing turns of late. We maintain our Buy rating on LOW, which is confronting the
                                            environment with unusual discipline after having invested into the teeth of the downturn in recent years; we
                                            believe that LOW, which trades at a discount to HD, is poised to outperform HD over the next two quarters.
                                            We remain Neutral on HD. We believe that the damage done to these stocks in recent days – HD has fallen
                                            2.8% since October 12, (vs. the market’s 1.3% increase), and LOW has fallen (4.5%) – exceeds the risk to
                                            earnings from foreclosure problems, based on the analysis cited above.



DreamWorks Animation SKG, Inc. (DWA): Moving towards a more positive outlook near the end of the                                                        11
year

DWA, $33.23                                 Ingrid Chung (New York): ingrid.chung@gs.com, (212) 902-2360
Market cap                   $2,910 mn
                                            Goldman Sachs & Co.
                                            James Mitchell, CFA (New York): james.mitchell@gs.com, (212) 357-1849
Target price                      $36.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Fred Krom (New York): fred.krom@gs.com, (212) 902-8618
EPS ($)                    1.69     2.20    Goldman Sachs & Co.
P/E                       19.7X    15.1X

EPS Quarter/Interim
                      *
                           0.44     0.23
                                            What's changed
                                            We raise our DreamWorks Animation 3Q2010 estimates due to a higher ultimate IBO estimate for “Shrek
Investment Lists                            Forever After” at $500 mn, up from $450 mn previously. We now expect DWA to report revenue, EBITDA,
                                  Neutral   and EPS of $158 mn, $55 mn, and $0.44, up from $135 mn, $44 mn, and $0.36. Consensus revenue and
Coverage view                     Neutral   EPS are $161 mn and $0.39. Our 2010 EPS is now $1.69 (vs. $1.65), while our 2011/2012 EPS estimates
                                            remain $2.20/$2.69.
*Current and a year ago
                                            We recently conducted meetings with management. Highlights include: (1) no one has digital streaming rights
                                            until the end of the HBO output deal in 2014; (2) the change of control penalty in the Paramount distribution
                                            agreement is not an insurmountable obstacle to a potential acquisition of DWA; (3) a new distribution
                                            agreement could be different for US vs. international; and (4) ancillary revenue streams may be less
                                            predictable than expected.
                                            Implications




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                          October 19, 2010



                                 Over the longer term, we believe our thesis regarding franchises providing a higher level of and more
                                 consistent earnings is largely intact. We believe that DreamWorks Animation is entering a pivotal period with
                                 the launch of “How to Train Your Dragon” on DVD on 10/15, the release of “Megamind” theatrically on 11/5,
                                 and the launch of “Shrek 4” home video on 12/7.
                                 We would not be buyers of DWA shares until we get through what we believe will be a “noisy” period for
                                 home video this quarter, despite the recent stability. We expect to become more constructive on shares
                                 coming out of this period of uncertainty, especially as we look to a strong slate in 2011: “Kung Fu Panda: the
                                 Kaboom of Doom” and “Puss in Boots”.
                                 Valuation
                                 At our 6-month normalized EPS and DCF derived price target of $36, DWA shares would be trading at 15X
                                 our normalized EPS of $2.37.
                                 Key risks
                                 CGI and 3D competition; home video challenges; 3D rollout pace; and FX.



Americas: Entertainment: Viacom takes early buy-out on Marvel distribution deal                                                               12

                                 Drew Borst (New York): drew.borst@gs.com, (212) 902-7906
                                 Goldman Sachs & Co.
                                 James Mitchell, CFA (New York): james.mitchell@gs.com, (212) 357-1849
                                 Goldman Sachs & Co.
                                 Brian Karimzad (New York): brian.karimzad@gs.com, (212) 357-1745
                                 Goldman Sachs & Co.
                                 Grace Huan (New York): grace.huan@gs.com, (212) 357-8280
                                 Goldman Sachs & Co.

                                 Viacom’s deal to distribute Marvel films to end early
                                 Disney and Viacom agreed to end the Marvel distribution agreement earlier than originally planned. Disney
                                 will pay Viacom a minimum of $115 mn in exchange for the worldwide distribution rights for “Avengers”
                                 (5/4/12) and “Iron Man 3” (5/13/13). Viacom will still distribute “Thor” (5/6/11) and “Captain America”
                                 (7/22/11), as per the original agreement. The pre-existing distribution deal, which pre-dated Disney ownership
                                 of Marvel, originally covered all four Marvel films.
                                 Disney paying up to control Marvel distribution and marketing
                                 We estimate that Disney is paying approximately a 15% premium to incent Viacom to relinquish the
                                 distribution rights to the final two Marvel films. Whereas Viacom received an 8% distribution fee on all
                                 previous Marvel films and will do so on “Avengers”, Viacom will earn a superior 9% fee on “Iron Man 3”.
                                 Viacom also retained the pay TV rights (for Epix) for “Avengers.” The benefits to Disney are: 1) it can more
                                 fully integrate the Marvel films into other Disney assets (i.e., parks, consumer products), and 2) it can exert
                                 more control over the marketing.
                                 Viacom to recognize a one-time benefit in 1QFY11
                                 Viacom will recognize the NPV of the $115 mn payment, or about $100 mn, in 1QFY11. Nonetheless, given
                                 the volatility in film earnings we are leaving our FY2011 studio estimate unchanged at $236 mn. The
                                 remaining $15 mn will be recognized in subsequent periods, along with any benefit if the films outperform the
                                 estimates embedded in the $115 mn minimum payment. Viacom will need to replace the lost profits from
                                 distributing these films in 2012 and 2013 (about $50 mn per film) with profits from self-produced films. In
                                 general, self-produced films come with more earnings risk than distribution-only films.
                                 Limited impact on Disney’s P&L
                                 For Disney, the minimum payments will be amortized against the revenue from the two films. Disney should
                                 be able to distribute the two movies at low incremental cost given its existing distribution infrastructure, and
                                 presumably aims to improve merchandising and other revenue.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                       October 19, 2010



Consumer Staples

The Hershey Co. (HSY): 3Q10 EPS could beat consensus, but see growing risk as FY11 nears                                                                   13

HSY, $51.62                                  Judy E. Hong (New York): judy.hong@gs.com, (212) 902-0490
Market cap                  $11,768 mn
                                             Goldman Sachs & Co.
                                             Jason English (New York): jason.english@gs.com, (212) 902-3293
Target price                       $44.00
                                             Goldman Sachs & Co.
Fiscal y/e Dec            2010E    2011E

EPS ($)                    2.53      2.75    What's changed
P/E                       20.4X     18.7X    Hershey reports 3Q10 earnings on Thursday, October 21. Based on our 2H SG&A analysis, we raise our
                      *                      estimates ahead of the print and now foresee a modest beat this quarter. We expect preliminary FY11
EPS Quarter/Interim        0.80      0.73
                                             guidance and we foresee no surprises with regards to next year’s outlook.
Investment Lists
                                             Implications
                      Americas Sell List     We are raising our 3Q10 EPS estimate to $0.80, from $0.76, and we are now 2c above consensus this
Coverage view                  Cautious      quarter. Our FY10 estimate goes to $2.53, from $2.51—in line with consensus and slightly above HSY’s
                                             $2.47-$2.52 guidance range. We are $0.02 below consensus in 4Q, however, as we expect higher SG&A
*Current and a year ago
                                             (partially to support a December innovation launch) to subdue earnings in 4Q. HSY shares have been strong
                                             of late, suggesting to us that the market anticipates a beat, and we believe shares may give back the recent
                                             gain if 3Q beat does not flow through the year.
                                             We expect management to reiterate its long-term growth targets when offering preliminary FY11 guidance
                                             (3%-5% sales growth and 6%-8% EPS growth). The consensus estimate currently calls for 4.3% sales
                                             growth and 8.3% EPS growth. We believe the likely FY11 guidance might be close enough to expectations to
                                             be seen as a non event.
                                             We maintain our Sell rating on HSY despite our raised 3Q outlook. We believe that HSY’s lofty valuation
                                             premium will close through 2011 as sales and margin growth slows, concern mounts over what we see as
                                             early signs of heightened competitive aggression and the company’s beat and raise cycle comes to a close.
                                             Valuation
                                             We maintain our $44 12-month price target which assumes a 15x multiple on our 2012 estimate.
                                             Key risks
                                             More benign competition, muted inflation, effective innovation.



Marfrig S.A. (MRFG3.SA) Sell: Old challenges remain, Keystone adds complexity; reinstate at Sell                                                           14

MRFG3.SA, R$16.60                            Gustavo Wigman (Sao Paulo): gustavo.wigman@gs.com, +55(11)3371-0839
Market cap                  R$5,760 mn
                                             Goldman Sachs Brasil Bco Múlt S.A.
                                             Claudio Lensing (Sao Paulo): claudio.lensing@gs.com, +55(11)3372-0101
Target price                      R$15.10
                                             Goldman Sachs Brasil Bco Múlt S.A.
Fiscal y/e Dec            2010E    2011E

EPS (R$)                   0.92      0.38    Source of opportunity
P/E                       18.1X     43.3X    We remove the Not Rated designation from Marfrig. We have a Sell rating and a price target of R$15.10. We
                      *                      continue to see Marfrig pressured by the same challenges highlighted previously: rising grain and cattle
EPS Quarter/Interim        0.13      0.75
                                             prices, high cash needs for beef capacity ramp-up, and Seara’s turnaround. Our updated analysis also
Investment Lists                             suggests the Keystone acquisition does not improve the outlook for Marfrig, as it is FCF dilutive in the next
                      Americas Sell List     five years and raises the company’s cost of debt by 140 bp. We estimate the NPV of Keystone’s cash flows
Coverage view                      Neutral
                                             over five years at negative R$140 mn. We lower our estimates after factoring in the Keystone acquisition and
                                             more conservative synergy estimates at Seara.
*Current and a year ago
                                             Catalyst
                                             (1) In the next 18 months, we estimate financing needs of R$1.9 bn to cope with negative cash flow from
                                             operations and ST debt commitments.
                                             (2) Marfrig is paying CDI+1%, or 13.75%, for 2011 on our estimates, on its recent bond with BNDES, its
                                             traditional source of cheaper financing. Marfrig’s marginal cost of debt, in our view, will face upward pressure.
                                             (3) We estimate recurring EBITDA for 2010 of R$1.1 bn, 20% below the low end of guidance, on a company-
                                             adjusted basis, and 18% below Bloomberg consensus. On our estimates, EV/EBITDA in 2011 is 7.9X.
                                             Valuation
                                             Our 12-month price target of R$15.10 is based on a blend of multiples and DCF. As a cross-check, our price




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                       October 19, 2010



                                             target is at a 10% discount to our SOTP valuation of R$16.8 per share, which we think is consistent with the
                                             lack of synergies and returns enhancement from the group structure.
                                             Key risks
                                             Lowering of barriers to Brazilian beef could trigger synergies between Marfrig’s downstream operations
                                             abroad and upstream assets in Brazil. Lower grain prices in 2011 would also be positive for the stock.



Drogasil (DROG3.SA) Sell: Tactical step back as growth and margin pressures loom; Sell                                                                     15

DROG3.SA, R$48.29                            Irma Sgarz (Sao Paulo): irma.sgarz@gs.com, +55(11)3371-0728
Market cap                  R$2,869 mn
                                             Goldman Sachs Brasil Bco Múlt S.A.
                                             Rachel Rodrigues (Sao Paulo): rachel.a.rodrigues@gs.com, +55(11)3371-0798
Target price                      R$40.10
                                             Goldman Sachs Brasil Bco Múlt S.A.
Fiscal y/e Dec            2010E    2011E

EPS (R$)                   1.45      1.88    Source of opportunity
P/E                       33.3X     25.7X    We downgrade Drogasil shares to Sell from Neutral. We still like the drugstore retailer’s underlying structural
                                             growth story and its focus on growth with sustainable returns. However, we make a tactical call as recent
EPS Quarter/Interim*       0.35      0.34
                                             outperformance leaves valuation looking stretched, particularly as we believe upcoming quarters will show
Investment Lists                             further slowing in top-line growth and margin pressures from higher expenses. We lower our 2010/2011E
                      Americas Sell List     EBITDA and EPS by 3% to reflect this. Our new price target of R$40.10 (from R$40) implies 19% potential
Coverage view                      Neutral
                                             downside. Drogasil trades at 15.3X EV/EBITDA and 26.3X P/E in 2011E, above Brazilian small-cap peers
                                             offering similar growth expectations.
*Current and a year ago
                                             Catalyst
                                             Sluggish growth in mature stores, in part from intense competition, may hamper dilution of higher expenses
                                             and hurt margins in 3Q and 4Q2010. In our view this could prompt a correction in valuation following the
                                             stock’s recent run. Arguably, higher expenses from store openings are upfront investments for future growth.
                                             However, we believe this is not yet fully factored into consensus estimates, and therefore we see risk of
                                             downward revisions, making current multiples hard to justify. Evidence of intense competition, with some
                                             unlisted competitors using aggressive pricing to capture share, is also unlikely to help sentiment. Drogasil is
                                             due to report 3Q results on November 11; we expect SSS growth to slow to single digits, and see pressured
                                             margins. Our 2010E EBITDA is 6% below consensus.
                                             Valuation
                                             Our 12-month price target of R$40.10 is virtually unchanged and implies 19% downside. Our methodology
                                             remains based on a blend of a DCF valuation and a target multiple (unchanged at 12.5X forward
                                             EV/EBITDA).
                                             Key risks
                                             Earlier reacceleration in same-store sales growth resulting in faster dilution of pre-opening expenses and
                                             thus better margin performance.



The Estee Lauder Companies Inc. (EL): Takeaways from the CEW cosmetics industry panel                                                                      16

EL, $67.23                                   Andrew Sawyer, CFA (New York): andrew.sawyer@gs.com, (212) 902-5488
Market cap                  $13,293 mn
                                             Goldman Sachs & Co.
                                             Stephanie Whited (New York): stephanie.whited@gs.com, (212) 855-9812
Target price                       $60.00
                                             Goldman Sachs & Co.
Fiscal y/e Jun            2011E    2012E

EPS ($)                    3.05      3.58    News
P/E                       22.1X     18.8X    We attended the Cosmetic Executive Women’s Retail Roundtable, which included cosmetic experts from
                      *                      Macy’s, Sephora, Bluemercury, and The NPD Group. We came away with mixed-to-positive takeaways.
EPS Quarter/Interim        0.76      0.85
                                             Analysis
Investment Lists
                                             (1) Macy’s “Impulse” Beauty boutique an opportunity and challenge for EL – The new 1,000 square foot in-
                                   Neutral   store boutiques provide a platform for Macy’s to feature trendier niche brands that it previously did not sell. M
Coverage view                      Neutral   has rolled out Impulse to 50 store locations and plans to open the format in an additional 50 doors in 2011.
                                             On the minus side, this could cannibalize sales of the existing cosmetics counters where EL has a strong
*Current and a year ago
                                             presence with its more well-established brands. On the plus side, Macy’s effort could generate more
                                             cosmetics traffic for department stores that have been losing share to specialty cosmetics stores. Estee gets




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                     October 19, 2010



                                           some direct benefits as the Impulse boutiques include EL’s newly acquired Smashbox brand.
                                           (2) Bumble & Bumble brand performing well in Sephora – The panelists had a positive view of the
                                           relationship between EL’s Bumble & Bumble and Sephora. Bumble’s product addition has been driving store
                                           traffic and making Sephora more competitive with ULTA, which has hair salons.
                                           (3) Cautiously optimistic about holiday season – Panelists remain optimistic about this year’s holiday sales for
                                           prestige cosmetics, but the outlook was tempered some by uncertainties in the macro environment.
                                           Implications
                                           We are encouraged by the initiatives at US department stores to drive improved traffic, as these outlets still
                                           account for 25% of EL’s global sales. EL is also making solid tactical moves to build presence at specialty
                                           stores by purchasing Smashbox and expanding Bumble & Bumble. Even so, we remain Neutral-rated on the
                                           stock. The stock trades at 20X our CY2011 EPS forecast, which is a 30% premium to the peer group and
                                           appears to largely reflect the company’s early success with turnaround efforts.



Energy

Halliburton Company (HAL): Int'l recovery still slow going; stick with best-in-class HAL and SLB                                                         17

HAL, $34.09                                Daniel Boyd, CFA (New York): daniel.boyd@gs.com, (212) 357-1804
Market cap                 $31,090 mn
                                           Goldman Sachs & Co.
                                           Dimitry Dayen, CFA (New York): dimitry.dayen@gs.com, (212) 855-0497
Target price                     $40.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E     Kyle Jenke (New York): kyle.jenke@gs.com, (917) 343-3196
EPS ($)                   2.01     2.75    Goldman Sachs & Co.
P/E                    16.9X      12.4X

EPS Quarter/Interim*      0.63     0.28
                                           What's changed
                                           HAL reported adjusted 3Q10 EPS of $0.58 vs. our $0.59 and consensus of $0.55. Pressure pumping driven
Investment Lists                           N.A. results surprised to the upside (margins 24.1% vs. our 22.9%) while international operating income was
                   Americas Buy List       7% below expectations. We adjusted our 2010-2012 EPS estimates by -2%/0%/-1% to $2.01/ $2.75/ $3.07
Coverage view                    Neutral   due to stronger N.A. and weaker international. Our 6-month, EBITDA based target of $40 is unchanged.
*Current and a year ago
                                           Implications
                                           In our view, high expectations led to HAL selling off (down 4.8% vs. OSX -0.3%), but results were strong
                                           enough for us to keep our 9% above consensus EPS estimate unchanged for 2011. HAL's track record for
                                           execution has been the gold standard over the past few years (4Q is unlikely to be any different) and we
                                           expect it to generate the highest returns among peers over the next few years. Despite this, the stock is
                                           trading at a 10% discount, which is why we maintain our Buy rating. Key takeaways: (1) HAL’s results
                                           highlight fairly high expectations and suggest that there is growing risk to international results for peers. WFT
                                           reported even weaker international results after the close, but similar to HAL, this was offset by strength in
                                           N.A. In this environment, we prefer to stick with SLB, in additional to HAL. In our view, SLB is a high quality
                                           company, with potential to surprise to the upside in N.A., and appears to be one of the few companies with
                                           low expectations. (2) Int’l pricing should remain elusive. In order to absorb spare service capacity, the rig
                                           count needs to exceed prior high by 10-15% - a 2H11 event, in our view. (3) In N.A., HAL is sacrificing pricing
                                           in dry gas basins to increase utilization across product lines to help E&Ps maintain returns in a $3-$5/MMBtu
                                           gas price environment.
                                           Valuation
                                           HAL is trading at 2011 P/E of 12.4X vs. peers at 15.2X.
                                           Key risks
                                           Pace of rig count, pricing, capacity additions, commodity prices.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                        October 19, 2010



Financial Services

CME Group Inc. (CME): CME IRS platform a reality, usage/cross margining key focus items                                                                     18

CME, $280.87                                Daniel Harris, CFA (New York): daniel.harris@gs.com, (212) 357-7512
Market cap                  $18,477 mn
                                            Goldman Sachs & Co.
                                            Jason Harbes, CFA (New York): jason.harbes@gs.com, (212) 357-4319
Target price                      $300.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E    2011E

EPS ($)                   15.25     16.50   What's changed
P/E                       18.4X    17.0X    CME announced it has launched its interest rate swap clearing platform, with an initial focus on client
                      *                     clearing, as of today. The exchange noted it had already cleared some contracts, though we expect the ramp
EPS Quarter/Interim        3.56      3.35
                                            from here will likely be relatively slow and steady, as clients become engaged with FCM’s to clear new rate
Investment Lists                            swap contracts, and additional CME clearing members sign up to become interest rate swap clearing
                                  Neutral   members.
Coverage view                     Neutral   Implications
                                            With the launch and work required to sign up initial members/supporting clients now in the past, investor
*Current and a year ago
                                            focus will now turn to the economic return of CME’s investment to get interest rate swap clearing available to
                                            clients. We’ve previously estimated the USD, client cleared interest rate swap opportunity at $300-400 mn
                                            over time, though we note our 2011 estimates for CME include a conservative $25 mn from OTC clearing,
                                            not inclusive of CME’s successful Clearport platform. Dodd-Frank requires client clearing of swap contracts
                                            where possible, and while this is likely to be a long-term tailwind, the requirement for clients to clear positions
                                            is potentially 2-3 years out. Thus, the near and mid-term impact on CME as a result of this initiative will be
                                            dictated by clients that prefer to clear in advance of any regulatory requirement. We expect certain clients will
                                            want to clear early, such as some of CME’s initial buy-side clients, but that many will wait to clear until
                                            necessary, given initial margin requirements. Moreso, while dealer-to-dealer clearing is not a focus now,
                                            CME views this market as a longer-term growth opportunity should client-driven open interest build.
                                            Valuation
                                            We raise our 12-month, P/E-derived price target to $300 (from $290) given greater clarity around swap
                                            clearing and increasing industry multiples. Our 2011E target multiple moves to 18.2x from 17.6x.
                                            Key risks
                                            Higher/lower volumes, expenses and competition.



United States: Real Estate: REITs: US REIT View: 3Q preview - Earnings take a back seat to credit trends,                                                   19
demand for yield

                                            Jonathan Habermann (New York): jonathan.habermann@gs.com, (917) 343-4260
                                            Goldman Sachs & Co.
                                            Sloan Bohlen (New York): sloan.bohlen@gs.com, (212) 902-2796
                                            Goldman Sachs & Co.
                                            Conor Fennerty (New York): conor.fennerty@gs.com, (212) 902-4227
                                            Goldman Sachs & Co.
                                            Ji Young Kim (New York): jiyoung.kim@gs.com, (212) 902-4736
                                            Goldman Sachs & Co.

                                            Focus shifts to 2011 and return to positive growth
                                            We expect REIT earnings to be overshadowed by several factors, including still favorable credit trends,
                                            improving acquisition volumes, and demand for income (dividend ideas). Moreover, after two years of
                                            earnings declines, we expect a return to modest, positive FFO growth in 2011 and 2012, with growth of 7.5%
                                            and 5.3%, respectively, as REIT fundamentals bottomed earlier this year.
                                            Key factors driving REIT performance YTD
                                            (1) With interest rates now at multi-decade lows, higher quality REITs are raising debt at low rates, in the 4-
                                            5% range, below in-place costs of 5-6%.
                                            (2) Improving credit trends have helped fuel a pick-up in investment activity with several transactions recently,
                                            including acquisitions by SPG, EQR, PSA, VNO, UDR and AVB. Cap rates for class A assets have
                                            compressed 100bps YTD.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                   October 19, 2010



                                           (3) With a yield of 3.7%, we see demand for income supporting the group (“US REIT View: Making the case
                                           for Yield”, dated 9/15/2010).



                                           Our top Buy ideas for income /growth:
                                           SPG (CL-Buy) – A top operator of malls is attractive vs. the rest of the group with stronger fundamentals and
                                           may look to increase its dividend near term.Raise our PT to $105 fom $100.
                                           BPO (Buy) – Downtown office company with positive leasing spreads, stable growth and a discount to peers,
                                           trading at 14X 2011E FFO.
                                           TCO (Buy) – Class A mall owner that trades at a discount to the REIT average despite low leverage and an
                                           attractive 3.5% dividend yield.
                                           Our top Sell ideas:
                                           DRE (Sell) – Fundamentals remain under pressure and we remain cautious on dilutive headwinds from future
                                           refinancing/deleveraging.
                                           REG (Sell) – We remain cautious on strips as rent roll-downs should continue for the remainder of 2010.
                                           PPS (Sell) – Trends have improved but Southeast and ATL-focused apt REIT seems overvalued at 18X and
                                           lacks external growth opportunities.



Healthcare

Mylan Inc. (MYL): PI loss on Paxil CR a manageable set-back, remain buyers                                                                             20

MYL, $18.94                                Randall Stanicky, CFA (New York): randall.stanicky@gs.com, (212) 357-3292
Market cap                  $5,761 mn
                                           Goldman Sachs & Co.
                                           Stephan Stewart (New York): stephan.stewart@gs.com, (212) 934-4218
Target price                     $26.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E     Gregory Waterman, CFA (New York): gregory.waterman@gs.com, (212) 855-7725
EPS ($)                   1.63     1.99    Goldman Sachs & Co.
                                           Baneesh Banwait (Bangalore): baneesh.banwait@gs.com, (212) 934-6193
P/E                    11.6X       9.5X
                                           Goldman Sachs India SPL
EPS Quarter/Interim*      0.43     0.32

Investment Lists
                                           What's changed
                    Americas Buy List      The District Court of NJ intra-day Monday denied in a short hearing Mylan’s motion for a preliminary
          Americas Conviction Buy List
                                           injunction (PI) against GlaxoSmithKline (GSK) and Apotex relating to Paxil CR (paroxetine HCL ER tabs). As
Coverage view                    Neutral   we had highlighted in our earlier note, Paxil CR preliminary injunction hearing today, we remain CL-Buy, we
*Current and a year ago                    thought expectations for a MYL win were low but we did see potential for a positive outcome. Nevertheless,
                                           we view the loss as a small but manageable set-back that is now behind us though MYL will pursue an
                                           expedited appeal with the Third Circuit Appeals Court while continuing to sell all three strengths. We expect a
                                           near-term Apotex launch per our checks. Overall, no change to EPS or our CL Buy with MYL set to report
                                           Tues Oct 26 post market. We continue to believe a solid 3Q and reaffirmed 2010 outlook will keep recent
                                           momentum in shares.
                                           Implications
                                           Our estimated contribution for generic Paxil CR is $0.06 to $0.12 (3%-6% of 2011 EPS) which we believe is
                                           below most Street forecasts given “significant” royalties back to GSK and AG margin on the 37.5mg (19% of
                                           TRx). As we stated in our earlier note, we believe a negative result puts up to $0.05 (2%-3%) to 2011 at risk
                                           assuming MYL is unsuccessful on appeal (and other potential interim strategies). We are not aware of any
                                           other filers and thus do not expect any other generic competitors for the foreseeable future. Overall, we
                                           believe MYL can absorb the impact in 2011 on a combination of improved F/X, recent product approvals and
                                           potential for ongoing cost savings and thus make no change to EPS.
                                           Valuation
                                           Our $26, 12-month price target is based equally on P/E and EV/EBITDA. Shares trade at sector low 9.5x
                                           2011E EPS against sector-high 3-year 17% EPS CAGR.
                                           Key risks
                                           EU pricing, gross margin expansion and further product approvals.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                 October 19, 2010



Industrials

Crown Holding, Inc. (CCK): First Take: Beats consensus estimates on better operating results                                                         21

CCK, $29.92                                 Richard Skidmore, CFA (New York): richard.skidmore@gs.com, (212) 357-5509
Market cap                   $4,853 mn
                                            Goldman Sachs & Co.
                                            Alex Ovshey (New York): alex.ovshey@gs.com, (212) 902-6751
Target price                       $33.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E    2011E    Usha Chundru (Bangalore): usha.chundru@gs.com, (212) 934-5057
EPS ($)                    2.28      2.80   Goldman Sachs India SPL
P/E                       13.1X    10.7X

EPS Quarter/Interim
                      *
                           0.86      0.81
                                            News
                                            Crown Holdings (CCK) reported 3Q10 EPS (excluding one-time items of minus $0.01) of $0.85 matching the
Investment Lists                            high end of its guidance and beating consensus of $0.83; we had forecast 3Q10 EPS of $0.86. CCK reported
                      Americas Buy List     its global beverage can volumes grew 11% yoy in 3Q10, reflecting strength in emerging markets’ demand
Coverage view                     Neutral   plus the benefits of CCK’s new beverage can lines in Slovakia, Brazil, and Vietnam. CCK generated $150 mn
                                            of free cash flow in the quarter and used $105 mn to buy back stock, reducing its share count by 3.0 mn from
*Current and a year ago
                                            the end of 2Q10 to the end of 3Q10.
                                            Analysis
                                            CCK’s 3Q2010 operating results exceeded our forecasts despite slightly lower revenue than expected. CCK
                                            reported total revenue of $2.2 bn in 3Q2010, down 3.4% yoy and 2.3% less than our forecast of $2.25 bn.
                                            The decline in revenue was driven by weaker sales in N.A. and European food cans. CCK generated EBIT of
                                            $295 mn in 3Q10, up from $270 mn in 3Q09 as CCK’s margins increased to 13.4% vs 11.8% a year ago; we
                                            had forecasted 3Q10 EBIT at $287 mn and margins of 12.7%. The better than expected EBIT was driven by
                                            lower corporate expense, which fell $12 mn sequentially. On an EPS basis, CCK’s 3Q2010 results fell a
                                            penny shy of our forecast due to a higher than expected tax rate (29.8% vs our estimate of 28%), which we
                                            estimate negatively impacted CCK’s EPS by $0.02 versus our forecast.
                                            Implications
                                            We expect CCK will tighten its 2010 EPS guidance range to $2.15-$2.20 from $2.10-$2.20 during its 3Q10
                                            conference call. We expect CCK’s 3Q10 results will be neutral to modest positive for CCK stock as results
                                            were better than consensus and free cash flow was solid. We remain buyers of CCK given its leverage to
                                            emerging market growth in beverage cans, new capacity expansion, strong free cash flow generation, and
                                            valuation. Our price target and estimates are unchanged. CCK will host a conference call at 9AM (EST)
                                            Tuesday to discuss results.



Technology

VMware, Inc. (VMW): First Take: Strong revenues & EPS; deferred less than we expected                                                                22

VMW, $77.63                                 Derek R. Bingham (San Francisco): derek.bingham@gs.com, (415) 249-7435
Market cap                  $32,786 mn
                                            Goldman Sachs & Co.
                                            Sarah Friar (San Francisco): sarah.friar@gs.com, (415) 249-7436
Target price                      $105.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E    2011E    Gonzalo Cavenaghi (San Francisco): gonzalo.cavenaghi@gs.com, (415) 249-7438
EPS ($)                    0.85      1.35   Goldman Sachs & Co.
P/E                       91.5X    57.7X

EPS Quarter/Interim
                      *
                           0.24      0.12
                                            News
                                            VMware reported 3Q2010 revenues of $714 mn (up 46% year over year), above our and Street estimates of
Investment Lists                            $713 mn and $698 mn. Upside was on the license line, coming in at $343 mn (up 43% yoy), above our
                      Americas Buy List     estimate ($335 mn) and well above the Street at about $325 mn. Non-GAAP EPS was $0.39, above our and
Coverage view                 Attractive    Street estimates of $0.37 and $0.35, with non-GAAP operating margin of 28.6% vs. our 28.3% estimate.
                                            Total deferred revenue was $1.51 bn, below our and Street forecasts of $1.65 bn and $1.54 bn (up 2%
*Current and a year ago                     sequentially). DSO was 48 days compared to 57 last quarter and 47 a year earlier. Cash flow from operations
                                            was $197 mn, shy of our and Street estimates of $345 mn and $276 mn. The company guided 4Q revenue
                                            above the Street to $790-$810 mn. Our and Street estimates are currently $809 mn and $774 mn. The




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                       October 19, 2010



                                 company will host a call at 5:00 p.m. EST. Dial-in: 1.517.308.9134. Passcode: Q3.
                                 Analysis
                                 License and revenue numbers continue to impress, posting significant upside, and flowing through on
                                 margins. Cash flow was negatively impacted by a change in “other assets” of about $60 mn. Deferred
                                 revenue was up sequentially, though we expected a stronger number given we are getting into the teeth of
                                 the first ELA renewal cycle.
                                 Implications
                                 Our price target is unchanged.



Global: Technology: Internet: Global Internet Notables - Week of October 18, 2010                                                           23

                                 James Mitchell, CFA (New York): james.mitchell@gs.com, (212) 357-1849
                                 Goldman Sachs & Co.
                                 Ingrid Chung (New York): ingrid.chung@gs.com, (212) 902-2360
                                 Goldman Sachs & Co.
                                 Jordan Monahan (New York): jordan.monahan@gs.com, (212) 902-1879
                                 Goldman Sachs & Co.
                                 Fred Krom (New York): fred.krom@gs.com, (212) 902-8618
                                 Goldman Sachs & Co.

                                 Price performance
                                 For the week ending Monday, October 18, 2010, the market-weighted Internet average increased 9.4% week
                                 over week, outperforming the NASDAQ, up 3.3%, and the S&P 500, up 1.7%. This report contains news from
                                 the latest week and a valuation summary.
                                 E-commerce highlights
                                 – U.S. e-commerce holiday spending may grow 7%-9% yoy in 2010, up from 4% yoy in 2009, according to
                                 comScore, a Web analytics provider.
                                 Online advertising highlights
                                 – Google reported 3Q net revenue (+25% yoy/+8% qoq) and EBITDA (+18% yoy/+8% qoq) that were 3%-4%
                                 above our estimates, helped by monetization initiatives within search and new activities such as display.
                                 Google also disclosed that 3Q annualized display revenue was over $2.5 bn, similar to our 2010 estimate of
                                 $2.6 bn, and mobile revenue was over $1.0 bn, similar to our 2010 estimate of $0.9 bn.
                                 – Sony announced four Google TV-based LCD televisions, ranging from a 24-inch model at $600 to a 46-inch
                                 model at $1,400, which it began shipping on October 16. Sony also launched a Blu-Ray player running
                                 Google’s software, selling at $400.
                                 – Google plans to launch Google Instant within the Omnibox of its Chrome browser, according to
                                 TechCrunch. Currently, Google Instant runs via Google’s Web site, but not within browser search boxes or
                                 toolbars.
                                 – Yahoo! plans to introduce Y Connect, a social feature similar to Facebook Connect, allowing users to log
                                 into non-Yahoo! media sites with a single Yahoo! login, according to the Wall Street Journal. Users will also
                                 be able to share content across Web properties utilizing Yahoo! Pulse, a social plug-in to Yahoo! mail.
                                 – Alibaba and Microsoft partnered to create Etao, a new China-based search engine property, according to
                                 the Wall Street Journal. We believe Alibaba aims to use Etao to drive traffic to Taobao.com. Etao search
                                 results are displayed in several groups, including product images and prices, links to related online forums,
                                 informational websites, and Web search results provided by Bing.




Americas: Technology: Key takeaways from IBM earnings and implications across TMT                                                           24

                                 Sarah Friar (San Francisco): sarah.friar@gs.com, (415) 249-7436
                                 Goldman Sachs & Co.
                                 Julio C. Quinteros Jr. (San Francisco): julio.quinteros@gs.com, (415) 249-7464
                                 Goldman Sachs & Co.
                                 Derek R. Bingham (San Francisco): derek.bingham@gs.com, (415) 249-7435




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                  October 19, 2010



                                           Goldman Sachs & Co.
                                           Stephanie Withers, CFA (San Francisco): stephanie.withers@gs.com, (415) 249-7470
                                           Goldman Sachs & Co.

                                           What’s Changed
                                           IBM’s 3Q2010 report points to a relatively healthy backdrop for IT spend. Results came in modestly ahead of
                                           expectations, with revenue of $24.3 bn (up 4% at constant currency) modestly above Street at $24.1 bn and
                                           EPS of $2.82 vs. expectations of $2.75. The earnings upside was primarily driven by a decreased tax rate,
                                           which drove $0.10 of upside in the quarter, and should contribute $0.15 for the year. That said, the company
                                           did report accelerating revenue growth on a constant currency basis across its major markets and segments.
                                           Growth markets were a highlight, with 26% growth at constant currency in the BRIC markets, 13% in growth
                                           markets overall.
                                           Takeaways from TMT
                                           Software: IBM reported software revenue in line with Street expectations, up 1% reported, 2% constant
                                           currency, 6% constant currency after adjusting for the PLM divestiture. However, we believe organic constant
                                           currency software revenue growth was about 2% once adjusted for acquisitions closed over the past year, in
                                           keeping with the 2%-3% yoy organic growth of the past two quarters. We see two major takeaways from
                                           IBM’s muted software revenue growth: (1) IBM’s lackluster growth supports our thesis that Oracle (CL-Buy)
                                           continues to gain share in database and middleware; Oracle reported 9% yoy cc organic (ex Sun) growth in
                                           overall software revenue in its August quarter. (2) We expect IBM to continue to be acquisitive to grow its
                                           software business; the company has closed 8 deals this year, spending over $2 billion.
                                           Services: Results from IBM reinforce continued strength in consulting services and lagged outsourcing
                                           prospects. IBM’s GBS segment including its consulting segments appears to be tracking inline with recently
                                           reported results from ACN and INFY, suggesting an intact enterprise IT spending backdrop, supporting our
                                           positive view on Buy-rated ACN and CL-Buy SAPE.




Microsoft Corp. (MSFT): Ozzie departure potentially negative for Cloud positioning                                                                    25

MSFT, $25.82                               Sarah Friar (San Francisco): sarah.friar@gs.com, (415) 249-7436
Market cap                $224,918 mn
                                           Goldman Sachs & Co.
                                           Derek R. Bingham (San Francisco): derek.bingham@gs.com, (415) 249-7435
Target price                     $28.00
                                           Goldman Sachs & Co.
Fiscal y/e Jun         2011E     2012E     Stephanie Withers, CFA (San Francisco): stephanie.withers@gs.com, (415) 249-7470
EPS ($)                   2.30     2.65    Goldman Sachs & Co.
                                           Ventsi Stoichev (San Francisco): ventsi.stoichev@gs.com, (415) 249-7440
P/E                    11.2X       9.7X
                                           Goldman Sachs & Co.
EPS Quarter/Interim*      0.53     0.40

Investment Lists
                                           What's changed
                                 Neutral   Microsoft announced that Ray Ozzie, Chief Software Architect (CSA), would step down over the coming few
Coverage view                Attractive    months. Following the transition of his day-to-day Cloud responsibilities he will focus in the entertainment
                                           area before full retirement. Ray joined Microsoft in the CSA role to ease the transition of founder Gates’
*Current and a year ago
                                           departure; in 2005 he laid out his thesis on how software-as-a-service, enabled by Internet technologies
                                           would be disruptive to Microsoft’s core franchises. He has subsequently been the visionary on their Cloud
                                           build-out with the Azure platform.
                                           Implications
                                           We downgraded Microsoft to Neutral on 10/3 on near-term concerns of PC refresh cycle weakness and a
                                           longer-term concern of how new mobile devices such as smartphones and tablets are impinging on the
                                           company’s dominant franchises. In the Cloud, we view Microsoft as having a strong portfolio of enterprise
                                           data center assets with the potential to become a platform leader with Azure. However, Ozzie’s departure
                                           causes us some concern given his vision and leadership here. From a tablet perspective, Apple’s results
                                           after hours also provide some updated datapoints on tablet adoption, with Apple noting that 65% of Fortune
                                           100 companies are investigating iPad usage currently. This is consistent with our survey work, which
                                           highlighted 60% of Fortune 1000 CIOs expecting tablets to be cannibalistic to notebooks. While valuation
                                           remains reasonable, we don’t see the status quo as being able to unlock the value in the shares.
                                           Valuation
                                           Microsoft currently trades at 9.3X CY12, significantly below the software group average of 20.6X. Our 12-




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                 October 19, 2010



                                          month price target is $28, and is derived from P/E, EV/adjusted FCF/growth multiples, and DCF.
                                          Key risks
                                          Upside risks include better traction from WP7, and very low expectations into earnings print; downside, weak
                                          PC momentum and tablets traction.



Infinera Corp. (INFN): Reiterate Sell on continued downside to Street estimates                                                                      26

INFN, $12.33                              Simona Jankowski, CFA (San Francisco): simona.jankowski@gs.com, (415) 249-7467
Market cap                 $1,218 mn
                                          Goldman Sachs & Co.
                                          Thomas D. Lee (New York): thomas.d.lee@gs.com, (212) 902-2066
Target price                     $8.50
                                          Goldman Sachs & Co.
Fiscal y/e Dec         2010E    2011E     Amanda O'Brien (San Francisco): amanda.obrien@gs.com, (415) 249-7467
EPS ($)                (0.35)    (0.42)   Goldman Sachs & Co.
                                          Mukul Garg (Bangalore): mukul.garg@gs.com, (212) 934-9960
P/E                        --        --
                                          Goldman Sachs India SPL
EPS Quarter/Interim*   (0.10)    (0.19)

Investment Lists
                                          What's changed
                   Americas Sell List     Infinera reported strong 3Q revenue/non-GAAP EPS of $130mn/$0.18, well above GS estimates of
Coverage view                   Neutral   $125mn/$0.09 and the Street at $126mn/$0.09. However, 4Q revenue guidance of $115-120mn was
                                          meaningfully below GS/Consensus at $128mn/$133mn, with EPS guidance of $0.02-$0.05 also significantly
*Current and a year ago
                                          below GS/Consensus at $0.10/$0.11.
                                          Implications
                                          We reiterate our Sell rating on the stock despite the ~20% sell-off after hours, as we still see significant
                                          downside to estimates and to our $8.50 price target. We believe the drivers of Infinera’s Q4 weakness are
                                          consistent with those outlined in our 9/26/10 downgrade, namely (1) an inventory reduction at customers after
                                          over-ordering in 1H 2010, (2) a weakened competitive position as the market is moving to 40G, where
                                          Infinera lacks a native product, and (3) 10G pricing pressure. While we are raising our FY10 non-GAAP EPS
                                          to $0.19 from $0.15 to reflect the Q3 beat, we are keeping our FY11/12 estimates unchanged at $0.15/$0.18,
                                          which is about 65% below Consensus estimates heading into the call.
                                          Valuation
                                          Our 12-month price target is $8.50, based on a target EV/Sales multiple of 1.2X applied to our CY11 sales
                                          estimate of $477mn.
                                          Key risks
                                          Risks include better than expected traction in new segments such as internet content providers, stronger
                                          optical demand, and a take-out.
                                          Impact on related securities
                                          While the market is likely to interpret Infinera’s comments on slowing orders in September, in particular in
                                          Europe, as a negative read-across to other telecom equipment vendors such as Juniper and Tellabs, we view
                                          the miss as largely company-specific given Infinera’s product cycle gap, especially in light of Ciena’s recent
                                          reiteration of guidance.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                        October 19, 2010




VMware, Inc. (VMW): Strong quarter despite fewer large deals; strong pipeline for 4Q                                                                          27

VMW, $78.35                                 Derek R. Bingham (San Francisco): derek.bingham@gs.com, (415) 249-7435
Market cap                  $33,423 mn
                                            Goldman Sachs & Co.
                                            Sarah Friar (San Francisco): sarah.friar@gs.com, (415) 249-7436
Target price                      $100.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E    2011E    Gonzalo Cavenaghi (San Francisco): gonzalo.cavenaghi@gs.com, (415) 249-7438
EPS ($)                    0.86      1.33   Goldman Sachs & Co.
P/E                       91.5X    58.8X

EPS Quarter/Interim
                      *
                           0.30      0.17
                                            What's changed
                                            VMware reported a strong top line result, though light cash flow and deferred caused some consternation.
Investment Lists                            Our key takeaways are as follows: 1) We believe that lightness in VMware’s deferred revenue (about $25 mn
                      Americas Buy List     or 3% below the Street) was partly a more difficult than understood sequential bookings comparison vs. a
Coverage view                 Attractive    very strong 2Q, and also partly a function of fewer large deals (i.e., ELAs and renewals) in the quarter. We
                                            believe that some renewals can get delayed as contract terms are negotiated, at times as a result of
*Current and a year ago
                                            VMware’s pricing discipline. 2) The strong license result despite fewer large deals is a testament to the
                                            strength of VMware’s transactional demand. 3) Some of the aforementioned large deal slippage should
                                            contribute to a particularly strong bookings quarter in 4Q, and likely ongoing bookings strength into 2011. 4)
                                            The 3Q call was the most vocal we have heard the company on its desktop business, signaling a positive
                                            inflection driven both by growing customer interest and also VMware’s improved product, which is now over
                                            10% of new license bookings in the US (including both VDI and other desktop products).
                                            Implications
                                            Based on revenue upside in the quarter, we lift our CY10 and CY12 non-GAAP EPS to $1.49 (from $1.44)
                                            and $2.39 (from $2.36); our CY11 non-GAAP EPS is unchanged due to tempered margin expectations. We
                                            revise our 12-month price target downward to $100 from $105 due to the impact of lower cash flow estimates
                                            on our price target framework.
                                            Valuation
                                            At after market levels, VMware trades at 38X our CY2011E non-GAAP EPS and 21X CY2011EV/FCF versus
                                            the software group at 21X and 14X, respectively. Our 12-month price target is based on a triangulation of
                                            historical P/E, current EV/adjusted FCF/growth, DCF, and an M&A overlay.
                                            Key risks
                                            Key risks include the macro environment and large competitors.



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Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                              October 19, 2010




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Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                           October 19, 2010



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Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                                 October 19, 2010



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