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Research Note

January 11, 2008

Gil B. Luria
(213) 688-4501
gil.luria@wedbush.com

Nick Setyan
(213) 688-4519
nick.setyan@wedbush.com

Downside Scenario Analysis Isolates the Resilient

Our downside scenario analysis attempts to gauge the impact of a potential downturn in our companies’
earnings and suggests NCR (NCR, BUY, $31 price target) and Fundtech (FNDT, Buy, $19 price target) as most
resilient among our covered companies. Although we had considered a downturn led by bank spending as only a
risk, not a trend, as recently as November, the evidence is now accumulating that 2008 corporate earnings will likely be
significantly lower than anticipated as recently as October, especially at banks and retailers, which represent most of
the end markets for our companies. We believe that while the reactions of share prices to a potential slowdown for our
covered companies reflect some of these prospects, the reaction may have been overdone, particularly in the case of
FNDT.
For our methodology we use:
o Reasonable worst-case budget reductions of 20-35% to U.S. discretionary spend, using historical
S&P 500 earnings trends in previous downturns as a proxy. Given the differing trends among these
end markets, we used 30-35% declines for banks and retailers and 20% for restaurants.
o Reasonable worst-case incremental operating margins at 30-70%, based on the fixed cost nature
of each of our companies. While in a growth environment high fixed costs translate to positive operating
leverage and fast earnings growth, this is a double-edged sword. We believe that in a down market the
same companies may experience negative operating leverage.
o Threshold forward multiples on trough earnings of 35x, based on the historical 30x-trailing and
35x-forward multiples on trough earnings experienced during the last downturn. We view multiples
higher than 35x on a reasonable worst-case scenario as a negative sign even on trough earnings.
We believe the analysis suggests NCR and Fundtech as the most resilient to a downturn. We believe NCR
appears the most resilient in the group at 22x a reasonable worst-case 2008 EPS of $1.08 (-30% downside from current
estimate of $1.55). With only 26% of its revenue coming from discretionary U.S. based spending, we believe FNDT
Transaction Processing and Hardware

appears attractive at 21x a reasonable worst-case 2008 EPS of $0.52.

We also see Micros, Jack Henry and CyberSource as emerging relatively resilient from the analysis. We believe
the secular growth drivers for CyberSource, international growth at Micros and high recurring revenue at Jack Henry
make them relatively resilient. Although ACI shows low exposure to non-recurring U.S. revenue and VeriFone is trading
at a low multiple on a reasonable worst-case EPS, we believe both companies may have more company specific
downside to estimates beyond the macro impact.
On the negative side of the analysis, we believe that Diebold and Radiant Systems show more sensitivity to a
negative macro environment and more of a potential downside to earnings. Both companies have a high
exposure to the U.S. and a relatively low recurring revenue rate, which may put more pressure on their 2008 results.
We would point out that much of Radiant’s growth is secular in nature as its integrated solutions gain share of the
restaurant POS market, which may soften the impact of a downturn.
We plan to leverage this analysis to reassess our earnings and price targets as we preview the December
quarter.
Risks to this sector include a prolonged slowdown in the economy, accelerated bank consolidation, heightened
regulation and increased competition.

Wedbush Morgan does and seeks to do business with companies covered in its research reports.
Thus, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision. Please see page 17 of this report for analyst certification and important
disclosure information.
 Analysis
Downside Scenario Analysis Isolates the Resilient
We believe an analysis of the potential impact of an impending slowdown in the economy on our covered
company earnings highlight NCR and Fundtech as the most resilient to a downturn. We believe they are
both trading at a reasonable multiple on a reasonable worst-case EPS due to relatively low exposure to
non-recurring U.S. based revenue (Exhibit 1). We also see Micros, Jack Henry and CyberSource as
emerging relatively resilient from the analysis. Although ACI shows low exposure to non-recurring U.S.
revenue and VeriFone is trading at a low multiple on a reasonable worst-case EPS, we believe both
companies may have more company specific downside to estimates beyond the macro impact. On the flip
side, we believe that Diebold and Radiant Systems show more sensitivity to a negative macro environment
and more of a potential downside to earnings. We believe that while the reactions to a potential slowdown
for our covered companies reflect some of these prospects, the reaction may have been overdone,
particularly in the case of FNDT (Exhibit 2). We emphasize this analysis assumes only a U.S. slowdown
with a potentially magnified effect for weakness outside the U.S.
EXHIBIT 1: Scenario Analysis Summary

Average ex
ACIW CYBS DBD FNDT HYC JKHY* MCRS* NCR PAY RADS Outliers
Overall Revenue (2008) 392 223 2,967 116 295 788 918 5,101 1,007 286
% from U.S. 52% 94% 60% 52% 52% 100% 45% 38% 38% 88% 62%
% Recurring 50% 50% 35% 50% 12% 66% 27% 35% 12% 21% 36%
% at Risk 26% 47% 39% 26% 46% 34% 33% 25% 34% 69% 38%
At Risk Revenue 102 105 1,144 30 137 264 300 1,251 342 198
Incremental Operating Mgn (2007) -256% 14% 53% 12% -38% 22% 23% 18% 2% 24% 21%
Gross Margin (2007) 60% 48% 25% 54% 26% 43% 52% 21% 43% 44% 42%
Current 2007 EPS Estimate $0.40 $0.38 $1.76 $0.69 -$0.15 $1.19 $2.48 $1.38 $1.16 $0.72
Current 2008 EPS Estimate $0.84 $0.75 $2.07 $0.83 $0.11 $1.45 $2.95 $1.55 $1.51 $0.77
Reasonable Worse Case $0.50 $0.44 $0.97 $0.52 -$0.20 $1.06 $2.29 $1.08 $0.90 $0.29
Assumptions
% Decline in at Risk Revenue -30% -5% -30% -30% -30% -30% -10% -30% -30% -10% -24%
Incremental Operating Margin 70% 70% 30% 70% 50% 50% 70% 30% 50% 50% 54%
Downside from Current -41% -41% -53% -38% -278% -27% -22% -30% -40% -63% -39%
Increase (Decline) from 2007 25% 17% -45% -25% 34% -11% -8% -21% -22% -60% -17%
Moderate Downside Scenario $0.72 $0.64 $1.70 $0.70 $0.01 $1.33 $2.72 $1.39 $1.32 $0.60
Assumptions
% Decline (Growth) in at Risk Revenue -15% +10% -15% -15% -15% -10% 0% -15% -10% 0% -9%
Incremental Operating Margin 50% 50% 20% 50% 30% 30% 50% 20% 30% 30% 36%
Downside from Current -14% -15% -18% -15% -95% -8% -8% -10% -12% -22% -14%
Increase (Decline) from 2007 81% 68% -3% 2% -104% 12% 10% 1% 15% -16% 19%
Current P/FE 18x 22x 12x 13x 38x 17x 21x 15x 11x 19x 17x
P/FE @ Moderate Downside Scen. 21x 26x 15x 15x nm 18x 23x 17x 13x 24x 19x
P/FE @ Reasonable Worse Case 30x 38x 27x 21x nm 23x 27x 22x 19x 52x 29x

* Calendar Year

Source: Wedbush estimates and analysis

EXHIBIT 2: Share Price Changes Since Last Material Company Event

1/10/08 Since
DBD -43% 10/1/2007 Beginning of Q4
FNDT -36% 10/30/2007 Day after earnings report
PAY -31% 12/4/2007 Day after disclosure of accounting review
HYC -23% 11/2/2007 Day after earnings report
ACIW -16% 12/18/2007 Day after earnings report
NCR -15% 11/1/2007 Day after earnings report
JKHY -14% 10/30/2007 Day after earnings report
MCRS -12% 10/26/2007 Day after earnings report
NASDAQ -8% 10/1/2007 Beginning of Q4
RADS -2% 10/26/2007 Day after earnings report
CYBS 12% 10/19/2007 Day after earnings report

Source: Baseline, Wedbush estimates and analysis

2 | Transaction Processing and Hardware Gil B. Luria (213) 688-4501

Nick Setyan (213) 688-4519
 Analysis Prompted by Worsening Prospects at End Markets
Although we had considered a downturn led by bank spending as only a risk as recently as November, the
evidence is now accumulating that corporate earnings will be significantly lower than originally anticipated,
especially at banks and retailers, which represent most of the end markets for our companies. The
downward revisions of earnings expectations for banks and retailers have been significant since November
(Exhibit 3) indicating a tough year for our companies’ end markets and a likely reduction in budgets. The
trends appear to be worst for large banks, then large retailers and regional banks, and not significant yet for
the entire S&P 500 and large restaurants (Exhibits 4-7).
EXHIBIT 3: Change to 2008 Earnings Estimates Since July 2007

Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 1 Week Prior 1/8/2008

10%

5%

0%

-5%

-10%

-15%

-20%
Large Banks Regional Banks
Retailers Restaurants
-25%
S&P 500

-30%

Source: Thompson, Wedbush estimates and analysis

EXHIBIT 4: Large Banks Earnings EXHIBIT 5: Regional Banks Earnings

($ billion; top 7 banks) ($ billion; sample 5 banks)

100 3.0
As of
90 As of
7/8/07 2.5 7/8/07
80
As of
70 2.0
1/8/08
60
50 1.5
As of
40 1/8/08
1.0
30
20 0.5
10
0.0
0
2005 2006 2007E 2008E 2005 2006 2007E 2008E

Source: Thompson, Wedbush estimates and analysis

Gil B. Luria (213) 688-4501 Transaction Processing and Hardware | 3

Nick Setyan (213) 688-4519
 EXHIBIT 7: Restaurant Earnings
EXHIBIT 6: Retailers Earnings
($ billion; top 7 quick service and top 7 casual
($ billion; top 7 retailers)
dining restaurants)

30 8 As of
As of 1/8/08
7
25 7/8/07
6 As of
As of
20 7/8/07
1/8/08 5

15 4
3
10
2
5
1

0 0
2005 2006 2007E 2008E 2005 2006 2007E 2008E

Source: Thompson, Wedbush estimates and analysis

4 | Transaction Processing and Hardware Gil B. Luria (213) 688-4501

Nick Setyan (213) 688-4519
 Reasonable Worst-case Budget Reductions at 20-35%
For our sensitivity analysis we use 20-35% downside to discretionary U.S. spending, using historical S&P
500 earnings trends in previous downturns (Exhibit 8) as a proxy. Given the differing trends among these
end markets, we used 30-35% declines for banks and retailers and 20% for restaurants. We point out that
it appears bottom-up estimates (sum of 500 individual companies) appear to be far more optimistic than
top-down estimates for 2008. This leads us to believe that while downwards earnings revisions for banks
and retailers have come early, more downward revisions are possible.
EXHIBIT 8: Change in EPS for S&P 500

40%

30% 29%

24%

20% 19% 19% 19%

18%
17%
16% Bottom Up Estimate
15%
13%

10% 8% 8% 9%
8%

3% Top Down Estimate

1% 1%
0%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E

0%

-7%
-10%

-15%

-20%

-30%
-31%

-40%

Source: S&P, Wedbush estimates and analysis

Reasonable Worst-case for Incremental Operating Margins at 30-70%

For the incremental operating margins in our sensitivity analysis we use 30-70% incremental operating
margins, based on the fixed cost nature of each of our companies. While in a growth environment high
fixed costs translate into positive operating leverage and fast earnings growth, this is a double-edged
sword. We believe that in a down market the same companies may experience negative operating
leverage. We use gross margins and historical incremental operating margins to determine the appropriate
incremental margins for each sensitivity analysis (Exhibit 1 and company appendices).

Gil B. Luria (213) 688-4501 Transaction Processing and Hardware | 5

Nick Setyan (213) 688-4519
 03
/3
1
09 /19

0x
5x
10x
15x
20x
25x
30x
35x
40x
/3 8 8
0
03 /19
/3 8 8
1
09 /19
/3 8 9
0
03 /19
/3 8 9
1
09 /19
/3 9 0
0
03 /19
/3 9 0
1
09 /19
/3 9 1
0
03 /19
/3 9 1
1
09 /19
/3 9 2
0
03 /19
/3 9 2
1
09 /19
/3 93
0
03 /19
/3 9 3
1
09 /19
/3 94
0
03 /19
/3 94
1
09 /19
/3 95
0
03 /19
/3 95
1
09 /19
/3 96
0
03 /19
/3 96
1
09 /19
/3 9 7
0
03 /19
/3 97
1

6 | Transaction Processing and Hardware

09 /19
/3 98
0
03 /19
/3 9 8
1
09 /19
/3 9 9
0/
03 19
/3 9 9
1
09 /20
/3 0 0
0
03 /20
/3 0 0
1
09 /20
/3 0 1
0
03 /20
/3 0 1
1
09 /20

Source: S&P, Wedbush estimates and analysis

/3 0 2
0
03 /20
/3 0 2
1
09 /20
/3 03
0
03 /20
/3 0 3
1
09 /20
/3 04
0
03 /20
/3 04
1
09 /20
EXHIBIT 9: S&P 500 Price / Forward Earnings

/3 05
0
03 /20
/3 05
1
09 /20
/3 06
0
03 /20
/3 06
1
09 /20
/3 0 7
0/
20
07
Historical Multiples on Trough Earnings Add Context

12
/
31
0x
5x
10x
15x
20x
25x
30x
35x

06 /19
/3 88
0
12 /19
/3 89
1
06 /19
/3 8 9
0/
12 19
/3 90
1
06 /19
/3 90
0
12 /19
/3 9 1
1
06 /19
/3 91
0
12 /19
/3 9 2
1
06 /19
/3 92
0
12 /19
/3 93
1
06 /19
/3 9 3
0/
12 19
/3 94
1
06 /19
/3 94
0
12 /19
/3 9 5
1/
06 19
/3 95
0
12 /19
/3 96
1
06 /19
/3 9 6
0
12 /19
/3 97
1
06 /19
/3 9 7
0
12 /19
/3 9 8
1
06 /19
/3 98
0
12 /19
/3 9 9
1
06 /19
/3 9 9
0
12 /20
/3 00
1
06 /20
/3 0 0
0
trough earnings that we would view the last line of Exhibit 1 and the company appendices.

12 /20
/3 0 1
1
06 /20
/3 01
0
12 /20
/3 0 2
1
06 /20
/3 02
0
12 /20
/3 0 3
1
06 /20
/3 0 3
0
12 /20
/3 04
1
06 /20
/3 0 4
0
12 /20
/3 0 5
EXHIBIT 10: S&P 500 Price / Trailing Earnings

1
06 /20
/3 05
0
12 /20
/3 0 6
1
To add context to the sensitivity analysis, we point out that trough earnings are usually accompanied by

06 /20
/3 0 6
0
12 /20
/3 07
1/2
00
7
higher multiples (Exhibit 9,10). It is in the context of the historical 30x-trailing and 35x-forward multiples on

Nick Setyan (213) 688-4519

Gil B. Luria (213) 688-4501
 Appendix 1: ACIW Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 299 318 356 367
Pro Forma Operating Income 61 54 51 24

Change in Revenue 18 38 11
Change in Operating Income (7) (3) (27)
Incremental Operating Margin -40% -7% -256%
Gross Margin 73% 71% 67% 60%

Downside Scenarios for 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-25% -20% -15% -10% -5% 0% 5%
30.0% $0.70 $0.72 $0.75 $0.77 $0.79 $0.82
Incremental

40.0% $0.65 $0.68 $0.71 $0.75 $0.78 $0.81

Margin

50.0% $0.60 $0.64 $0.68 $0.72 $0.76 $0.80 $0.84

60.0% $0.55 $0.60 $0.65 $0.70 $0.75 $0.79
70.0% $0.50 $0.55 $0.61 $0.67 $0.73 $0.79

Percent Downside from 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-25% -20% -15% -10% -5% 0% 5%
30.0% -18% -15% -12% -9% -6% -3%
Incremental

40.0% -24% -20% -16% -12% -8% -4%

Margin

50.0% -29% -25% -20% -15% -10% -5% 0%

60.0% -35% -29% -24% -18% -12% -6%
70.0% -41% -34% -28% -21% -14% -7%

Implied Earnings Multiple

Decline in Non-Recurring U.S. Revenue Baseline

-25% -20% -15% -10% -5% 0% 5%
30.0% 21x 21x 20x 19x 19x 18x
Incremental

40.0% 23x 22x 21x 20x 19x 18x

Margin

50.0% 25x 23x 22x 21x 19x 18x 18x

60.0% 27x 25x 23x 21x 20x 19x
70.0% 30x 27x 24x 22x 20x 19x

Parameters
2008E
Revenue 392
U.S. % of Sales 52%
U.S. Sales 203
Recurring 50%
At Risk Revenue 102
Tax Rate 37%
Shares 39
Share price $14.82 1/10/2008

Source: Wedbush estimates and analysis

Gil B. Luria (213) 688-4501 Transaction Processing and Hardware | 7

Nick Setyan (213) 688-4519
 Appendix 2: CYBS Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 37 51 70 116
Pro Forma Operating Income 2 5 6 13

Change in Revenue 14 20 46
Change in Operating Income 3 1 6
Incremental Operating Margin 20% 6% 14%
Gross Margin 67% 59% 51% 48%

Downside Scenarios for 2008 EPS

Growth in Non-Recurring U.S. Revenue Baseline

-5% 0% 5% 10% 15% 20% 25%
30.0% $0.62 $0.64 $0.66 $0.68 $0.70 $0.72
Incremental

40.0% $0.57 $0.60 $0.63 $0.66 $0.69 $0.72

Margin

50.0% $0.53 $0.57 $0.60 $0.64 $0.67 $0.71 $0.75

60.0% $0.49 $0.53 $0.57 $0.62 $0.66 $0.70
70.0% $0.44 $0.49 $0.54 $0.60 $0.65 $0.70

Percent Downside from 2008 EPS

Growth in Non-Recurring U.S. Revenue Baseline

-5% 0% 5% 10% 15% 20% 25%
30.0% -17% -14% -12% -9% -6% -3%
Incremental

40.0% -23% -19% -15% -12% -8% -4%

Margin

50.0% -29% -24% -19% -14% -10% -5% 0%

60.0% -35% -29% -23% -17% -12% -6%
70.0% -40% -34% -27% -20% -13% -7%

Implied Earnings Multiple

Growth in Non-Recurring U.S. Revenue Baseline

-5% 0% 5% 10% 15% 20% 25%
30.0% 27x 26x 25x 24x 24x 23x
Incremental

40.0% 29x 28x 26x 25x 24x 23x

Margin

50.0% 31x 29x 28x 26x 25x 23x 22x

60.0% 34x 31x 29x 27x 25x 24x
70.0% 38x 34x 31x 28x 26x 24x

Parameters
2008E
Revenue 223
U.S. % of Sales 94%
U.S. Sales 210
Recurring 50%
At Risk Revenue 105
Tax Rate 4%
Shares 70
Share price $16.69 1/10/2008

Source: Wedbush estimates and analysis

8 | Transaction Processing and Hardware Gil B. Luria (213) 688-4501

Nick Setyan (213) 688-4519
 Appendix 3: DBD Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 2,357 2,587 2,906 2,866
Pro Forma Operating Income 273 221 211 190

Change in Revenue 230 319 (40)

Change in Operating Income (52) (10) (21)
Incremental Operating Margin -23% -3% 53%
Gross Margin 28% 25% 25% 25%

Downside Scenarios for 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -25% -20% -15% -10% -5% 0%
10.0% $1.70 $1.77 $1.83 $1.89 $1.95 $2.01
Incremental

15.0% $1.52 $1.61 $1.70 $1.80 $1.89 $1.98

Margin

20.0% $1.34 $1.46 $1.58 $1.70 $1.83 $1.95 $2.07

25.0% $1.15 $1.30 $1.46 $1.61 $1.77 $1.92
30.0% $0.97 $1.15 $1.34 $1.52 $1.70 $1.89

Percent Downside from 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -25% -20% -15% -10% -5% 0%
10.0% -18% -15% -12% -9% -6% -3%
Incremental

15.0% -27% -22% -18% -13% -9% -4%

Margin

20.0% -36% -30% -24% -18% -12% -6% 0%

25.0% -44% -37% -30% -22% -15% -7%
30.0% -53% -44% -36% -27% -18% -9%

Implied Earnings Multiple

Decline in Non-Recurring U.S. Revenue Baseline

-30% -25% -20% -15% -10% -5% 0%
10.0% 15x 15x 14x 14x 13x 13x
Incremental

15.0% 17x 16x 15x 14x 14x 13x

Margin

20.0% 19x 18x 16x 15x 14x 13x 12x

25.0% 22x 20x 18x 16x 15x 13x
30.0% 27x 22x 19x 17x 15x 14x

Parameters
2008E
Revenue 2,967
U.S. % of Sales 60%
U.S. Sales 1,772
Recurring 35%
At Risk Revenue 1,144
Tax Rate 29%
Shares 66
Share price $25.88 1/10/2008

Source: Wedbush estimates and analysis

Gil B. Luria (213) 688-4501 Transaction Processing and Hardware | 9

Nick Setyan (213) 688-4519
 Appendix 4: FNDT Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 59 74 86 105
Pro Forma Operating Income 5 7 8 10

Change in Revenue 16 11 19
Change in Operating Income 2 1 2
Incremental Operating Margin 15% 8% 12%
Gross Margin 55% 55% 55% 54%

Downside Scenarios for 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -22.5% -15% -7.5% 0% 5%
30.0% $0.70 $0.72 $0.75 $0.78 $0.81
Incremental

40.0% $0.65 $0.69 $0.73 $0.77 $0.80

Margin

50.0% $0.61 $0.65 $0.70 $0.75 $0.80 $0.83

60.0% $0.56 $0.62 $0.68 $0.73 $0.79
70.0% $0.52 $0.58 $0.65 $0.72 $0.78

Percent Downside from 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -22.5% -15% -7.5% 0% 5%
30.0% -16% -13% -9% -6% -2%
Incremental

40.0% -21% -17% -12% -8% -3%

Margin

50.0% -27% -21% -15% -10% -4% 0%

60.0% -32% -25% -18% -11% -5%
70.0% -37% -29% -21% -13% -5%

Implied Earnings Multiple

Decline in Non-Recurring U.S. Revenue Baseline

-30% -22.5% -15% -7.5% 0% 5%
30.0% 15x 15x 14x 14x 13x
Incremental

40.0% 16x 15x 15x 14x 13x

Margin

50.0% 18x 16x 15x 14x 13x 13x

60.0% 19x 17x 16x 15x 14x
70.0% 21x 18x 16x 15x 14x

Parameters
2008E
Revenue 116
U.S. % of Sales 52%
U.S. Sales 60
Recurring 50%
At Risk Revenue 30
Tax Rate 28%
Shares 17
Share price $10.68 1/10/2008

Source: Wedbush estimates and analysis

10 | Transaction Processing and Hardware Gil B. Luria (213) 688-4501

Nick Setyan (213) 688-4519
 Appendix 5: HYC Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 241 245 249 272
Pro Forma Operating Income (7) (27) 6 (2)

Change in Revenue 4 3 23
Change in Operating Income (20) 34 (9)
Incremental Operating Margin -520% 1004% -38%
Gross Margin 36% 30% 36% 26%

Downside Scenarios for 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -22.5% -15% -7.5% 0% 5%
10.0% $0.05 $0.06 $0.08 $0.09 $0.10
Incremental

20.0% -$0.01 $0.01 $0.04 $0.07 $0.09

Margin

30.0% -$0.07 -$0.03 $0.01 $0.05 $0.08 $0.11

40.0% -$0.13 -$0.08 -$0.03 $0.02 $0.08
50.0% -$0.20 -$0.13 -$0.06 $0.00 $0.07

Percent Downside from 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -22.5% -15% -7.5% 0% 5%
10.0% -55% -43% -32% -20% -8%
Incremental

20.0% -111% -87% -63% -39% -16%

Margin

30.0% -166% -130% -95% -59% -24% 0%

40.0% -221% -174% -126% -79% -32%
50.0% -276% -217% -158% -99% -39%

Implied Earnings Multiple

Decline in Non-Recurring U.S. Revenue Baseline

-30% -22.5% -15% -7.5% 0% 5%
10.0% 86x 68x 56x 48x 42x
Incremental

20.0% nm 292x 104x 63x 46x

Margin

30.0% nm nm 729x 94x 50x 38x

40.0% nm nm nm 182x 56x
50.0% nm nm nm 2894x 63x

Parameters
2008E
Revenue 295
U.S. % of Sales 52%
U.S. Sales 155
Recurring 12%
At Risk Revenue 137
Tax Rate 32%
Shares 53
Share price $4.27 1/10/2008

Source: Wedbush estimates and analysis

Gil B. Luria (213) 688-4501 Transaction Processing and Hardware | 11

Nick Setyan (213) 688-4519
 Appendix 6: JKHY Sensitivity to Slowdown in U.S. Discretionary Spending

2003A 2004A 2005A 2006A 2007A

Revenue 405 467 536 592 668
Pro Forma Operating Income 99 119 140 157

Change in Revenue 68 56 76
Change in Operating Income 20 21 17
Incremental Operating Margin 30% 37% 22%
Gross Margin 42% 43% 43%

Downside Scenarios for Calendar 2008 EPS

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-30% -20% -10% 0% 5% 12%
10.0% $1.37 $1.39 $1.41 $1.43 $1.44
Incremental

20.0% $1.30 $1.33 $1.37 $1.41 $1.43

Margin

30.0% $1.22 $1.27 $1.33 $1.38 $1.41 $1.45

40.0% $1.14 $1.21 $1.29 $1.36 $1.40
50.0% $1.06 $1.15 $1.25 $1.34 $1.39

Percent Downside from 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -20% -10% 0% 5% 12%
10.0% -5% -4% -3% -2% -1%
Incremental

20.0% -11% -8% -6% -3% -2%

Margin

30.0% -16% -12% -8% -5% -3% 0%

40.0% -21% -16% -11% -6% -4%
50.0% -27% -21% -14% -8% -5%

Implied Earnings Multiple

Decline in Non-Recurring U.S. Revenue Baseline

-30% -20% -10% 0% 5% 12%
10.0% 17x 17x 17x 17x 17x
Incremental

20.0% 18x 18x 17x 17x 17x

Margin

30.0% 20x 19x 18x 17x 17x 17x

40.0% 21x 20x 19x 18x 17x
50.0% 23x 21x 19x 18x 17x

Parameters
CY2008E
Revenue 788
U.S. % of Sales 100%
U.S. Sales 788
Recurring 66%
Tax Rate 36%
Shares 91
Share price $23.97 1/10/2008

Source: Wedbush estimates and analysis

12 | Transaction Processing and Hardware Gil B. Luria (213) 688-4501

Nick Setyan (213) 688-4519
 Appendix 7: MCRS Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 487 597 679 786
Pro Forma Operating Income 57 79 100 125

Change in Revenue 110 82 107

Change in Operating Income 22 22 24
Incremental Operating Margin 20% 26% 23%
Gross Margin 51% 51% 51% 52%

Downside Scenarios for 2008 EPS

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-10% -5% 0% 5% 10%
30.0% $2.67 $2.74 $2.81 $2.88
Incremental

40.0% $2.57 $2.67 $2.76 $2.86

Margin

50.0% $2.48 $2.60 $2.72 $2.83 $2.95

60.0% $2.38 $2.53 $2.67 $2.81
70.0% $2.29 $2.45 $2.62 $2.79

Percent Downside from 2008 EPS

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-10% -5% 0% 5% 10%
30.0% -10% -7% -5% -2%
Incremental

40.0% -13% -10% -6% -3%

Margin

50.0% -16% -12% -8% -4% 0%

60.0% -19% -14% -10% -5%
70.0% -23% -17% -11% -6%

Implied Earnings Multiple

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-10% -5% 0% 5% 10%
30.0% 24x 23x 22x 22x
Incremental

40.0% 24x 24x 23x 22x

Margin

50.0% 25x 24x 23x 22x 21x

60.0% 26x 25x 24x 22x
70.0% 27x 26x 24x 23x

Parameters
2008E
Revenue 918
U.S. % of Sales 45%
U.S. Sales 414
Recurring 27%
At Risk Revenue 300
Tax Rate 33%
Shares 42
Share price $62.75 1/10/2008

Source: Wedbush estimates and analysis

Gil B. Luria (213) 688-4501 Transaction Processing and Hardware | 13

Nick Setyan (213) 688-4519
 Appendix 8: NCR Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 4,635 4,561 4,582 4,926
Pro Forma Operating Income 28 120 154 216

Change in Revenue (74) 21 344

Change in Operating Income 92 34 62
Incremental Operating Margin -125% 162% 18%
Gross Margin 21% 20% 21%

Downside Scenarios for 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -25% -20% -15% -10% -5% 0%
10.0% $1.39 $1.42 $1.44 $1.47 $1.49 $1.52
Incremental

15.0% $1.31 $1.35 $1.39 $1.43 $1.47 $1.51

Margin

20.0% $1.24 $1.29 $1.34 $1.39 $1.44 $1.49 $1.55

25.0% $1.16 $1.22 $1.29 $1.35 $1.42 $1.48
30.0% $1.08 $1.16 $1.24 $1.31 $1.39 $1.47

Percent Downside from 2008 EPS

Decline in Non-Recurring U.S. Revenue Baseline

-30% -25% -20% -15% -10% -5% 0%
10.0% -10% -8% -7% -5% -3% -2%
Incremental

15.0% -15% -12% -10% -7% -5% -2%

Margin

20.0% -20% -17% -13% -10% -7% -3% 0%

25.0% -25% -21% -17% -12% -8% -4%
30.0% -30% -25% -20% -15% -10% -5%

Implied Earnings Multiple

Decline in Non-Recurring U.S. Revenue Baseline

-30% -25% -20% -15% -10% -5% 0%
10.0% 17x 17x 16x 16x 16x 16x
Incremental

15.0% 18x 18x 17x 17x 16x 16x

Margin

20.0% 19x 18x 18x 17x 16x 16x 15x

25.0% 20x 19x 18x 18x 17x 16x
30.0% 22x 20x 19x 18x 17x 16x

Parameters
2008E
Revenue 5,101
U.S. % of Sales 38%
U.S. Sales 1,921
Recurring 35%
At Risk Revenue 1,251
Tax Rate 25%
Shares 182
Share price $23.77 1/10/2008

Source: Wedbush estimates and analysis

14 | Transaction Processing and Hardware Gil B. Luria (213) 688-4501

Nick Setyan (213) 688-4519
 Appendix 9: PAY Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 390 485 581 904
Pro Forma Operating Income 35 76 122 129

Change in Revenue 95 96 323

Change in Operating Income 41 45 7
Incremental Operating Margin 43% 47% 2%
Gross Margin 38% 42% 46% 43%

Downside Scenarios for 2008 EPS

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-30% -20% -10% 0% 5% 10%
10.0% $1.39 $1.42 $1.45 $1.48 $1.49
Incremental

20.0% $1.26 $1.32 $1.39 $1.45 $1.48

Margin

30.0% $1.14 $1.23 $1.32 $1.42 $1.46 $1.51

40.0% $1.02 $1.14 $1.26 $1.39 $1.45
50.0% $0.90 $1.05 $1.20 $1.36 $1.43

Percent Downside from 2008 EPS

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-30% -20% -10% 0% 5% 10%
10.0% -8% -6% -4% -2% -1%
Incremental

20.0% -16% -12% -8% -4% -2%

Margin

30.0% -24% -18% -12% -6% -3% 0%

40.0% -32% -24% -16% -8% -4%
50.0% -40% -30% -20% -10% -5%

Implied Earnings Multiple

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-30% -20% -10% 0% 5% 10%
10.0% 12x 12x 12x 11x 11x
Incremental

20.0% 13x 13x 12x 12x 11x

Margin

30.0% 15x 14x 13x 12x 12x 11x

40.0% 16x 15x 13x 12x 12x
50.0% 19x 16x 14x 12x 12x

Parameters
2008E
Revenue 1,007
U.S. % of Sales 38%
U.S. Sales 387
Recurring 12%
At Risk Revenue 342
Tax Rate 25%
Shares 85
Share price $16.83 1/10/2008

Source: Wedbush estimates and analysis

Gil B. Luria (213) 688-4501 Transaction Processing and Hardware | 15

Nick Setyan (213) 688-4519
 Appendix 10: RADS Sensitivity to Slowdown in U.S. Discretionary Spending

2004A 2005A 2006A 2007E

Revenue 135 172 222 252
Pro Forma Operating Income 8 15 24 31

Change in Revenue 37 50 29
Change in Operating Income 7 9 7
Incremental Operating Margin 20% 18% 24%
Gross Margin 44% 41% 44% 44%

Downside Scenarios for 2008 EPS

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-10% -5% 0% 5% 10% 14%
10.0% $0.68 $0.70 $0.72 $0.74 $0.76
Incremental

20.0% $0.58 $0.62 $0.66 $0.70 $0.74

Margin

30.0% $0.48 $0.54 $0.60 $0.66 $0.73 $0.77

40.0% $0.38 $0.46 $0.55 $0.63 $0.71
50.0% $0.29 $0.39 $0.49 $0.59 $0.69

Percent Downside from 2008 EPS

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-10% -5% 0% 5% 10% 14%
10.0% -13% -10% -7% -5% -2%
Incremental

20.0% -25% -20% -15% -9% -4%

Margin

30.0% -38% -30% -22% -14% -6% 0%

40.0% -51% -40% -29% -19% -8%
50.0% -63% -50% -37% -24% -11%

Implied Earnings Multiple

Growth (Decline) in Non-Recurring U.S. Revenue Baseline

-10% -5% 0% 5% 10% 14%
10.0% 22x 21x 20x 20x 19x
Incremental

20.0% 25x 24x 22x 21x 20x

Margin

30.0% 31x 27x 24x 22x 20x 19x

40.0% 38x 32x 27x 23x 21x
50.0% 52x 38x 30x 25x 21x

Parameters
2008E
Revenue 286
U.S. % of Sales 88%
U.S. Sales 251
Recurring 21%
At Risk Revenue 198
Tax Rate 30%
Shares 34
Share price $14.70 1/10/2008

Source: Wedbush estimates and analysis

16 | Transaction Processing and Hardware Gil B. Luria (213) 688-4501

Nick Setyan (213) 688-4519
 Companies Mentioned in this Report (price as of close January 10, 2008)

Company Ticker Rating Current Price Price Target

ACI Worldwide ACIW HOLD $14.82 $18.00
CyberSource CYBS BUY $16.69 $18.00
Diebold DBD HOLD $25.88 $31.00
Fundtech FNDT BUY $10.68 $19.00
Hypercom HYC HOLD $4.27 $6.50
Jack Henry JKHY BUY $23.97 $32.00
Micros Systems MCRS HOLD $62.75 $74.00
NCR NCR BUY $23.77 $31.00
VeriFone PAY HOLD $16.83 $27.00
Radiant Systems RADS BUY $14.70 $18.00

ANALYST CERTIFICATION
I, Gil Luria, certify that the views expressed in this report accurately reflect my personal opinion and that I have not
and will not, directly or indirectly, receive compensation or other payments in connection with my specific
recommendations or views contained in this report.
IMPORTANT DISCLOSURES

INVESTMENT RATINGS
STRONG BUY – The stock is expected to return at least 20% over the next 6-12 months.
BUY – The stock is expected to return at least 15% over the next 6-12 months.
HOLD – The stock is expected to return between -15% and +15% over the next 6-12 months.
SELL – The stock is expected to decline by at least 15% over the next 6-12 months.

DISTRIBUTION OF RATINGS (as of September 30, 2007)

BUY – 58% (4% of this rating category were investment banking clients within the last 12 months).
HOLD – 40% (0% of this rating category were investment banking clients within the last 12 months).
SELL – 2% (0% of this rating category were investment banking clients within the last 12 months).
The analysts responsible for preparing research reports do not receive compensation based on specific investment
banking activity. The analysts receive compensation that is based upon various factors including WMS’s total
revenues, a portion of which are generated by WMS’s investment banking activities.
WMS makes a market in the securities mentioned herein.
WMS changed its rating system from (BUY/ HOLD/SELL) to (STRONG BUY/BUY/HOLD/SELL) on January 5, 2006.
Additional information is available upon request by contacting Ellen Kang at (213) 688-4529 or
ellen.kang@wedbush.com.

OTHER DISCLOSURES
The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contained herein is not
a representation by this corporation, nor is any recommendation made herein based on any privileged information. This information is not
intended to be nor should it be relied upon as a complete record or analysis; neither is it an offer nor a solicitation of an offer to sell or buy any
security mentioned herein. This firm, Wedbush Morgan Securities, its officers, employees, and members of their families, or any one or more of
them, and its discretionary and advisory accounts, may have a position in any security discussed herein or in related securities and may make,
from time to time, purchases or sales thereof in the open market or otherwise. The information and expressions of opinion contained herein are
subject to change without further notice. The herein mentioned securities may be sold to or bought from customers on a principal basis by this
firm. Additional information with respect to the information contained herein may be obtained upon request.

Gil B. Luria (213) 688-4501 Transaction Processing and Hardware | 17

Nick Setyan (213) 688-4519
 RESEARCH DEPARTMENT
(213) 688-4520 / (866) 855-4529
DIRECTOR OF RESEARCH
Mark D. Benson (213) 688-4435

INDUSTRIAL MATERIALS AND SERVICES ENTERTAINMENT AND MEDIA

Industrial Materials and Services
Al Kaschalk....……..….……………………. (213) 688-4539
Pedja Jovanovic....……..…...…………….. (213) 688-4355
CONSUMER PRODUCTS AND SERVICES
Consumer Products
Rommel T. Dionisio ………………..……… (213) 688-4418
Kurt M. Frederick, CPA …………………… (213) 688-4459
Entertainment Retail
Michael Pachter …………………..……..... (213) 688-4474
Edward Woo, CFA …………………….….. (213) 688-4382
Chris White…………..….…………………. (213) 688-4423
Footwear and Apparel
Jeff Mintz, CFA…………….…………….… (213) 688-4518
David Epstein ……………….,…….……... (213) 688-6624
Restaurants
Brian Moore …………………………….…. (213) 688-4319
Gene Chen, CPA….………………………. (213) 688-4506
Specialty Retail: Hardlines
Joan L. Storms, CFA ……………………… (213) 688-4537
John Garrett…………………………...…… (213) 688-4523
Specialty Retail: Softlines
Betty Chen …………………..…………...... (213) 688-4524
Specialty Retail: Sporting Goods
Jeff Mintz, CFA …..……………….…..….… (213) 688-4518
David Epstein …….……….…………..…… (213) 688-6624
Entertainment: Software
Michael Pachter …………………...…….… (213) 688-4474
Edward Woo, CFA ………….…………….. (213) 688-4382
Chris White…………..….…………………. (213) 688-4423
Entertainment: Toys
Chris White…………..………….…………. (213) 688-4423
Edward Woo, CFA …………………….….. (213) 688-4382
Entertainment: Content
Michael Pachter……..…...………..…….... (213) 688-4474
Chris White ………….………….…………. (213) 688-4423
Internet Advertising/Media
Edward Woo, CFA…….…………….….. … (213) 688-4382
Media
William Kidd…. …………………………..… (213) 688-6698
Jung Hwang, CPA…………………………. (213) 688-4557
TECHNOLOGY
Enterprise Software
Michael B. Nemeroff.……………..………. (212) 668-9876
Ariel Sokol…..……..…..…………………... (212) 668-9874
Next Generation Energy
Al Kaschalk....……..………....……………. (213) 688-4539
Pedja Jovanovic....……..…………………. (213) 688-4355
Semiconductors
Steve Park…………………………...….…. (213) 688-4380
Telecommunications Equipment
Rohit Chopra …………………...…………. (212) 668-9871
Telecommunications Software
Scott P. Sutherland, CFA ……………..…. (213) 688-4522
Kerry Rice, CPA …………………………… (213) 688-4538
Transaction Processing and Hardware
Gil B. Luria....….…..………....……………. (213) 688-4501
Nick Setyan……....……..…………………. (213) 688-4519
Wireless Equipment
Scott P. Sutherland, CFA ………….…….. (213) 688-4522
Kerry Rice, CPA …………………………… (213) 688-4538

INSTITUTIONAL SALES INSTITUTIONAL TRADING

Los Angeles (213) 688-4470 / (800) 444-8076 Los Angeles (213) 688-4470 / (800) 421-0178
New York (212) 668-9868 New York (212) 344-2382 / (800) 421-0178
Boston (617) 832-3700 Boston (617) 832-3700 / (800) 421-0178
CORPORATE HEADQUARTERS
1000 Wilshire Blvd., Los Angeles, CA 90017-2465
Tel: (213) 688-8000
www.wedbush.com
ALASKA
Anchorage …………………………………………………….. (907) 273-2300 COLORADO
Fairbanks ………………………………………………..….… (907) 452-8101 Cherry Creek .………………………………………… (303) 377-7327
ARIZONA Denver …………………………………………………. (303) 571-4949
Phoenix ……………………………………….………………. (480) 778-8540 HAWAII
CALIFORNIA Honolulu ……………………………………………….. (808) 536-4579
Glendale………………………………………………………. (818) 243-2141 NEVADA
Los Angeles …………………………………………………… (213) 688-8031 Las Vegas ……………………………………………… (702) 732-4571
Menlo Park ……………………………………………………. (650) 323-5173 OREGON
Newport Beach ………………………………………………. (949) 719-3200 Eugene …………………………………………………. (541) 485-0202
Palm Desert ……………………………………….………… (800) 847-1533 Lake Oswego ..………………………………………... (503) 675-3100
Roseville ……………………………………….…………….. (916) 784-9900 Portland ….…………………………………………….. (503) 224-0480
San Diego ……………………………………….……………. (619) 233-9600 Salem …………………………………………………... (503) 316-0880
San Francisco ……………………………………………….. (415) 273-7300 WASHINGTON
Santa Rosa ….……………………………………………….. (707) 521-2280 Seattle ………………………………………….………. (206) 623-3040
Solana Beach …………………………………………….….. (858) 523-4930
Woodland Hills ………………………………………………. (818) 226-6740