Janalent Microsoft Economic Forum - March 2009

Dr. Bernard Malamud, Department of Economics, UNLV Anne Chahal, President & CEO, Janalent Rocky Griggs, Marketing Manager-Southwest, Microsoft Joe Honan, Vice President-Solutions, Janalent

Where we are & how we got here

Southern Nevada & SW US Outlook

Dr. Bernard Malamud, UNLV

Anne Chahal, Janalent

What our customers are doing

Rocky Griggs, Microsoft

What every company needs to consider

Joe Honan, Janalent

Dr. Bernard Malamud Professor of Economics

A “Global Saving Glut” The best of times Capital Inflows

Easy Money Policy

Escalating House Prices

Ambitious Mortgage Brokers

Eager Home Buyers Developer Clout

Innovative Banks

Bank Regulators

Gov’t Sponsored Enterprises

Securitization MBSs

Rating Agencies

The Boom Years: High Real GDP Growth  Declining Unemployment 1997 – 2000 2003/4 - 2006

Growth > ~ 2.5 %  Unemployment

The best of times Capital Inflows

Easy Money Policy

Escalating House Prices

Ambitious Mortgage Brokers

Eager Home Buyers Developer Clout

Innovative Banks

Bank Regulators

Gov’t Sponsored Enterprises

Securitization MBSs

Rating Agencies

The Downturn: Slowing GDP Growth  Rising Unemployment

Growth < ~ 2.5%  Unemployment

Employment in Las Vegas Metro Area January 2009 vs. January 2008 January 2009

January 2008

% Change

880.9

919.5

-4.2%

Accommodation

164.7

176.7

-6.8%

Casino Hotels and Gaming Construction Manufacturing

158.9 82.6 24.3

171.2 95.0 25.9

-7.2% -13.1% -6.2%

Financial Activities (FIRE) Retail & Wholesale Trade

45.9 120.8

48.0 125.6

-4.4% -3.8%

Trans, Warehousing & Utilities Professional & Business Services Employment Services

37.2 106.9 10.7

37.6 115.9 15.7

-1.1% -7.8% -31.8%

Education and Health Services

67.1

64.6

+3.9%

100.9 11.5 15.4 74.0

98.6 11.3 14.9 72.4

+2.3% +1.2% +3.4% +2.2%

10.0%

5.6%

Total All Industries Basic Industries

Other Industries

Government Federal State Local

Unemployment Rate

Financial System Meltdown At home

Gov’t Supported Takeovers •Countrywide  BofA •Bear Stearns  JPMorgan Chase •Silver State Bank Nevada State •Merrill Lynch  BofA •Washington Mutual  JPM Chase •Wachovia  Wells Fargo •Security Saving  Bank of Nevada

Interventions/ Nationalizations/ Pre-privatizations •IndyMac •Fannie Mae/ Freddie Mac

•AIG

Abroad •HBOS  Lloyds Bank •Fortis  PNB Paribus

•Northern Rock •Royal Bank of Scotland •Dexia •Glitnir/Kaupthing/ Landsbanki

Bankruptcies •New Century Financial

•Lehman Brothers

•Washington Mutual Inc.

Baa-AAA Interest Differential The Good News: 1932 was worse The Bad News: This downturn isn’t over until 2010 6.00

May 32 5.64%

5.00 4.00

3.00 2.00 1.00 0.00

Dec 08 3.38

Apr 38 3.17%

Sep 82 2.69%

Responses Lender of Last Resort / Spender of Last Resort • • • • •

Tax Rebate $124 bil. Fed Fund Rate Cuts Fannie/Freddie $200 bil. Bear-Stearns $29 bil. AIG $174 bil.

Fed “Facilities”

• • • • • • • • • • •

Primary Dealer Credit Facility (PDCF) $58 bil. Treasury Security Loan Facility (TSLF) $133 bil. Term Auction Facility (TAF) $416 bil. Asset- Backed Commercial Paper Funding Facility (CPFF) $1,777 bil. Money Market Investor Funding Facility (MMIFF) $540 bil. More Fed Fund Rate Cuts … Hold At ~0% Fed Purchases of Long-Term Securities: GSEs & MBSs $600 bil. Term Asset-Backed Securities Loan Facility (TALF) $200 bil. Emergency Economic Stabilization Act/TARP $700 bil. Government Loans Government Equity Stimulus Package $787 bil. aka The American Recovery and Reinvestment Act TARP II • Stress Tests

•

Total funds to State of Nevada

• • • • • • • • •

~$ 1,710 mil.

Education Stabilization & Construction Medicaid Assistance General Budget & Other Highways & Bridges State energy & Weatherization Clean Water Programs Transit capital Unemployment & Worker Training Child Care/ Foster Care/adoption

610 mil. 419 mil. 249 mil. 218 mil. 80 mil. 48 mil. 45 mil. 22 mil. 19 mil.

Anne Chahal CEO & President

•

“Las Vegas 1st Place” in Bizjournal’s analysis of the nation’s current growth centers. Metros with most momentum entering the recession – Nov 2008

•

“Nevada Ranked Number Two” in the Small Business & Entrepreneurship Council's "Small Business Survival Index 2008" – Dec 2008

•

US LEI (leading economic indicators) have trended positive in the last two months. – Feb 2009

•

US New Housing Starts up 22% in February 2009 according to the Commerce Department – March 17, 2009

• • • • •

Fastest growing region over the next 25 years 5 of the top 10 fastest growing states (Nevada, Arizona, Utah in top 5) Predicted to be the hub for renewable energy and “green collar” research, jobs, & industry ~Possibly $7.35 B in energy investments or borrowing authority for Nevada -Feb 2009 estimates 70% of all goods from pacific rim will go through SouthWest

• • • • • • • • • •

Well positioned as leader for solar, geo-thermal, wind, and other green collar industries Hoover Dam bypass bridge evolving “western-slope” Hwy 93 NAFTA trade route High-speed rail between SoCal & Las Vegas becoming a reality and partially funded Affordable and available commercial & residential property Business friendly regulatory and tax climate Unmatched ability to transform Well established base community & industries Fantastic retirement community Technology and infrastructure (i.e. supernap datacenter) World’s center for hospitality and entertainment

• •

Film production industries Gaming/resort industry administration

• • • • • • • •

Increased funding for education, healthcare & energy Possibly $3.25 B in borrowing authority for upgrading NV regional power grid $15 B in Small Business assistance $250 M in local NV transportation projects Ability to write down 5 years of losses Reduction of estimated tax payments by 10% Accelerated asset depreciation Increased SBA loan guarantees (from 50 to 95%)

+ Climate & Weather + Positioning as renewable resource hub + Leadership in national “clean energy” + Business friendly + Supply & demand + Population migration trends + Increased industry expansion / diversification + Stability & ease of access + World class hospitality and tourism

•

• • •

Don’t just sit and watch it happen or watch other companies make money off of it. Change happens. Technology happens. Embrace it! No one plans to fail, but too many companies fail to plan or make necessary adjustments If small businesses do some effective planning, manage their cash flow, keep on selling and accept change, they will be well-positioned in the SW marketplace as we move into the future.

Rocky Griggs Partner Marketing Manager

• • •

It’s not that bad, you got a free meal Words of wisdom

Industry Insights from Microsoft customers large and small

•

50 million = 38/13/5

•

Who was Federal Expresses largest customer?

• • •

We always overestimate the change that will occur in the next 2 years and underestimate the change that will occur in the next 10. Don't let yourself be lulled into inaction. If GM had kept up with technology like the computer industry has, we would all be driving $25 cars that got 1000 MPG. You don’t have to be great to start, but you have to start to be great

10% 100%

19%

21%

80%

11% Increase

46% 60%

75%

Decrease No Change

40%

20%

15%

68%

35%

0% 10-200

200-500

500+

85%

64%

64%

57% 37% 25%

11%

23%

44% 35%

10-200

32% 16%

200-500 500+

• • •

•

Help our customers identify ways to take unnecessary cost out of doing IT Enable customers to focus on their core business Raise the stacks in Research and Development by increasing investment from $8 to $9 billion this year

Continue focus on key strategic partnerships that have a ripple effect in the economy

Joe Honan Vice President-Solutions

Reassess strategic plan often, control spending, drive costs out of IT, strengthen core systems, operations, and processes. Key Ways to Get Fit, Get Strong Analyze current burn Identify & eliminate duplicated expenses Rationalize & renegotiate maintenance contracts Virtualize as a strategy, not a project Consider on-line services where appropriate “Leading regional healthcare provider is on track to save over $500,000 annually in facilities and maintenance cost by virtualizing and moving off of legacy platform to a Microsoft infrastructure. (Novell to Microsoft)”

Smart companies are increasing their bets and investments in strategic areas while their competitors “re-trench” Key Ways to Spend more… Wisely Spend to Save! Analyze & provide business case to support plans Identify & rank spending opportunities / priorities Use the opportunity to spend on value to customer Take advantage of stimulus & incentives “By focusing on business intelligence (CRM) and increased marketing budget, regional services firm has been able to drive over $300,000 in new revenue and 10 net-new customers so far in Q1”

Increased focus rather than “shot-gun” diversification is a key differentiator between leaders & laggards in turbulent times… Key Ways to Increase Focus & Take Advantage “Double down” on strengths, cull non-performers Identify & dump non-profitable relationships Create 5 new ways to increase value-proposition Invest in business analytics & customer mgmt. Find ways to save your customers money “By replacing legacy systems, regional photography organization has been able to spend more time on generating revenue & enhancing online presence, rather than managing ailing systems ”

Expanding customer base by thinking and acting in new ways is the what is separating the up-starts from the start-ups… Key Ways to Expand Base & Embrace Technology It’s not your father’s internet…it’s your kids… Viral marketing has had a HUGE impact Get your “out there message” out there Build a community of customers for customers PROVE technology is strategic to your organization “By implementing our business intelligence system and enabling community site links, we now have 10 times more visibility into the contacts and details of our prospects with 10 times less expense”

Rely upon key vendors, deepen relationships with key partners, strengthen networks of friendly competitors Key Ways to Deepen / Strengthen Relationships Open up to key vendors, they’ll find ways to save Focus partnerships and execute on a plan Build bridges rather than moats w/ competitors Collaborate & Communicate… with everyone Develop an organizational “Elephant Memory” “By focusing on how we can help customers better exercise their existing Enterprise Agreements, we have become THE trusted advisor for several organizations by proactively finding ways to save by working with us”

Steps to Survive & Thrive in this recession Get in Shape Control spending, shed excess expenses, Virtualize, strengthen core systems & processes

Spend more…Wisely Increase investments in strategic areas, take advantage of competitors “retrenching”

Increase focus & Take Advantage Increase focus rather than diversification, leverage business intelligence to better understand customers

Expand Base & Embrace Technology Find new customers through using new methods of reaching them (e.g. Twitter, Social Networks)

Deepen / Strengthen Relationships Rely upon key vendors, invest into key partnerships, find ways to work with competitors

Virtualize as a strategy, not a project Continually assess & Move email & collaboration on-line Increase investments in getting your message out Replace bad with good (e.g. legacy systems, storage)

Track & evaluate your spend (eg CRM) Hyper-focus your message, utilize CRM Only 2 things - Support revenue generation or save $$ Create new value, everyone is listening

Embrace and leverage the power of communities Build communities for your customers Prove the value of technology to your organization

Ask key vendors to find way to save you money Use technology to prevent “slipping through the cracks” Use trusted advisors to exercise existing agreements