Global Technology| July 22, 2015 IInnpphhii ((IIPPHHII,, EEqquuaall--wweeiigghhtt,, PPTT $$1188..55)) iMB and 100G Product Cycles Drive Upside IInnvveessttmmeenntt TThheessiiss The acquisition of Cortina, which closed in 4q14, should add substantially to 2015 earnings, by nearly a factor of 2, since Cortina is highly profitable and doesn’t have the high investment of the core business. With most of its revenues exposed to secular growth markets in Data Center/Cloud (~60% of revenues) and Data/Video transport (~40% of revenues), we model Inphi’s ex-Cortina top-line grows 27% in 2015 and 15% in 2016. The company’s core strength in high-speed analog design is driving its products for data centers and telecom, with strong growth potential over the next three years. Communications has just outgrown the Server Source: Thomson Reuters, Morgan Stanley Research segment – driven by 100G products and continues to be the main growth driver. Equal to Base Case scenario. We value Inphi on 15x 2016e EPS , in Price Target $18.5 line with the peer group of infrastructure exposed names (BRCM, KKeeyy VVaalluuee DDrriivveerrss CAVM, ALTR, XLNX, MRVL) Growth in worldwide Datacenter and Cloud Cortina acts as an accelerant to communication segment growth, Bull $27 infrastructure builds and IPHI’s iMB product ramps faster than expected, maintaining a 16.5x Bull Case CY16 non- Ramp of iMB on INTC Haswell server platform with higher share of the market than we are modeling. IPHI quickly GAAP EPS of $1.63 increasing DDR4 LRDIMM attach rates recovers market share in DDR4 buffers despite it's late start. Continued worldwide build out of 100G Strong market growth and market share gains at 100G. infrastructure Capex/Opex savings through the use of coherent Cortina doesn’t grow much but substantially contributes to higher Base $18.5 optics drive upgrade of optical modules EPS. IPHI’s iMB product attach rate improves in 2015-16, 100G 15x Base Case CY16 non- starts gaining traction. Attach rates continue to move up in 2015. GAAP EPS of $1.27, in line Growth in 100G continues in 2015 and into 2016. Top line growth PPootteennttiiaall CCaattaallyyssttss with infrastructure related of 15%+ post-Cortina but continued aggressive investment for peer group Further launches of server series using LRDIMMs longer-term growth caps near-term EPS upside (e.g. HP Proliant) and industry studies highlighting the benefits of LRDIMMs Traction with Intel’s Haswell platform more drawn out with muted Bear $11 Price declines of LRDIMM modules to <$1000 per adoption of iMB pushing out IPHI’s revenue ramp. Competitive 8.5x Base Case CY16 adj. EPS module landscape toughens, adding price pressure for LRDIMMs in DDR3 of $0.92+~$3 in cash Capex announcements from carriers for 40G/100G and loss of market share in DDR4. 100G ramp is slower than ports and switches expected. Corresponding lack of visibility drives multiple compression RRiisskkss ttoo AAcchhiieevviinngg PPrriiccee TTaarrggeett Lower attach rates of DDR4 LRDIMM modules and loss of market share A stall in the worldwide build out of 40G/100G comms infrastructure Unfavorable outcome of litigation with Netlist 34