Professional Documents
Culture Documents
2018 08 30 Andrew Bernstein Expert Report Exhibits Signed
2018 08 30 Andrew Bernstein Expert Report Exhibits Signed
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Table Of Contents
Page 2 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
1. I have prepared a report of my opinions on damages to be expressed at trial. This report contains
the bases for my opinions with respect to the damages in connection with the Second Amended
Complaint by Qbex Computadores S.A., a Brazilian corporation (“Qbex”), as plaintiff, vs. Intel
Corporation, a Delaware corporation (“Intel”), as Defendant, for Case No. 5:17-cv-03375-LHK,
in the United States District Court, Northern District of California.
2. My analysis is based on the assumption that Qbex prevails on its allegations and claims as to
wrongful actions by Intel. This assumption is necessary as a basis for my analysis. I have not been
engaged to provide opinions on issues relating to liability; therefore, I offer no opinions on liability.
3. The analysis and opinions expressed in this report are based upon the information and
documentation identified to date, my education, my experience in performing similar financial
analyses, business valuation, and economic damage calculations, documents and testimony in the
record, and accepted damages methodologies and approaches.
4. I am a Managing Director at EisnerAmper LLP, a full-service advisory and accounting firm that,
among other services, provides business, economic, financial, and damages consulting to clients
in a variety of industries. I am a Certified Public Accountant, Certified in Financial Forensics and
a Certified Valuation Analyst. My education includes a Bachelor of Science degree in Accounting
from the University of Florida. My curriculum vitae is included in the Exhibits to this report.
5. I considered various financial documents and data, sales and marketing documents, industry and
country economic information, discussion with Qbex, and other matters. In forming my opinion,
I relied upon the documents specifically identified throughout this report and the accompanying
exhibits. A list of the documents which I considered in forming my opinions is provided in the
Exhibits to this report. The documents and information utilized in my analysis and report are the
types of documents and information upon which experts in my field typically rely when
performing such an analysis.
Page 3 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
6. In addition to the documents produced by the parties, I considered relevant publicly available
information, which is also typical of the type of information upon which experts in this field rely
which is also included in the Exhibits to this report. Further, I held discussions with Joabe Fonseca
the chief executive officer and Tatiana Barreto, finance manager of Qbex.
7. This report was prepared in accordance with the American Institute of Certified Public
Accountants (“AICPA”) Consulting Services Standards. The work performed does not include
the performance of an audit, review, or compilation of financial statements in accordance with
Generally Accepted Auditing Standards (“GAAS”) or with standards established by the AICPA.
9. My firm is being compensated at a rate of $500 per hour for my time in this matter and others at
professional rates from $175 to $550.. My firm’s compensation is not contingent upon the
outcome of this litigation.
10. The scope of my expert testimony on economic damages includes: a) business valuation of Qbex,
as of June 1, 2015 based on the business conditions and actual and expected earnings that should
have occurred but for Intel’s wrongful actions, as it would have continued to market, sell and
otherwise conduct its business activities with respect to its Qbex-brand smartphone which used
MediaTek or other processor (the “Qbex Non-Intel” smartphone); b) business valuation of Qbex,
as of June 1, 2016 based on the business conditions and actual and expected earnings that should
have occurred but for Intel’s breach of the May 2016 agreement, as it would have continued to
market, sell and otherwise conduct its business activities with respect to its QBEX brand
smartphones with Intel’s SoFia microprocessor and Intel’s integrated mobile platform (the “Qbex
Page 4 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Intel” smartphone; c) lost profits in connection with Intel’s breach of the May 2016 agreement
whereby Intel agreed to provide and Qbex agreed to purchase 1,250,000 Intel’s designed
smartphones and SoFia microprocessors through the second quarter of 2017; and d) losses incurred
by Qbex for 2015, 2016 and 2017.
12. Qbex, a Brazilian corporation, commenced operations in Brazil in 2003 as a discount retail brand
for value-priced consumer electronics.1 Qbex became one of the most popular and reputable local
(i.e., Brazilian) consumer electronics brands in Brazil, widely recognized for its reliable products
and affordable prices.2 Qbex was one of the fastest growing local electronics companies in Brazil.
Qbex developed a reputation for selling quality electronic devices at affordable prices. Sales
increased from $1.3 million in 2005 to more than $85 million in 2012: 3
1
Second Amended Complaint, par 11, 18. Fonseca Deposition, p. 24.
2
Second Amended Complaint, par 17, 19. Fonseca Deposition, p. 196.
3
Second Amended Complaint, par 2, 20, 22, 23, 24
Page 5 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
13. In the first half of 2015, Qbex began selling Qbex Non-Intel smartphones, which it sold to retailers
(e.g., Carrefour).4 In January of 2015, Intel first approached Qbex, with its interest in launching
its first foray into the smartphones in Brazil with the SoFia microprocessor under the QBEX brand.
Intel represented that the Intel Smartphones and the SoFia microprocessors were of high quality,
designed to function at a high capacity without increasing the phone’s temperature. In April 2015,
Qbex agreed to expand its relationship with Intel to launch the Intel Smartphones under the QBEX
brand based on, among other matters, Intel’s representations that the SoFia microprocessor and
Intel’s mobile platform performed better – based on several technical functionality benchmarks –
than microprocessors produced by its competitors MediaTek and Qualcomm. At the time,
Qualcomm was trying to persuade Qbex to sell its smartphones under the QBEX brand.5 In
connection with Qbex’s agreement to expand its relationship with Intel, Intel instructed Qbex to
discontinue marketing its non-Intel Qbex brand smartphone. Qbex complied with Intel’s
instruction and ceased marketing its Qbex Non-Intel smartphone (except to complete the existing
order from Carrefour and deplete inventory).6
14. In October of 2015, Qbex began selling QBEX brand smartphones with Intel’s SoFia
microprocessor and Intel’s integrated mobile platform. Such products were featured as “Intel
Inside” devices. Qbex was led to believe that the Intel Smartphones would cement Qbex’s position
in the Brazilian market and raise its profile in the industry.7
4
Fonseca Deposition, p. 116.
5
Second Amended Complaint, par 25, 27, 37, 39.
6
Joabe Fonseca
7
Second Amended Complaint, par 4
Page 6 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
15. The plan was to have the QBEX logo prominently displayed on the smartphones and the boxes
together with the “Intel Inside” logo to make clear to the public that the smartphones featured
Intel’s SoFia microprocessors and mobile systems, and that there was a close, strategic
collaboration between Intel and Qbex.8
16. The Qbex Intel smartphones were mainly distributed in Brazil by Rcell Telecom, a distributor
selected by Intel. Rcell was the second largest distributor in Brazil, behind Allaid which was the
distributor for Samsung.9
17. Intel directed Qbex with the suppliers which would furnish Qbex with the components Qbex would
receive in Brazil and assemble into the final product Qbex Intel smartphone. Intel instructed Qbex
that Water World Technology Co. Ltd. (“Waterworld”) in China would be the original design
manufacturer (“ODM”) for the motherboard and internal systems of the smartphones. Fortune Ship
Technology (HK) Limited (“FortuneShip”), I-Swim Technology Company Limited (“ISwim”),
and HK Tianruixiang Communication Equipment Limited (f/k/a JZH) (“HK Tianruixiang”) – all
based in China (or Hong Kong) – were the System Integrators that Intel identified for the
smartphone parts. 10
18. In May of 2016, Intel and Qbex entered into an agreement whereby Intel agreed to provide and
Qbex agreed to purchase 1,250,000 Intel designed smartphones and SoFia microprocessors
through the second quarter of 2017 and to provide Qbex with technical support for these products
during the term of this agreement, as follows:11
8
Second Amended Complaint, par 28.
9
Second Amended Complaint, par 59. Fonseca Deposition, p. 116, 173, 175.
10
Second Amended Complaint, par 29‐31. Fonseca Deposition, p. 52, 118, 162, 189, 219.
11
Second Amended Complaint, par 81‐83, 135; QBX159637.
Page 7 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
19. As of December 2015, Qbex had inquired with Intel regarding over-heating issues with the Qbex
Intel smartphone.12 Qbex began receiving customer complaints or returned smartphones due to
malfunctioning (over-heating) during the first quarter of 2016.13 In the second quarter of 2016 the
number of complaints or malfunctioning phones continued to increase.14 In the third quarter of
2016, the number of returns or complaints for malfunctioning smartphones skyrocketed.15
Eventually, Qbex confirmed through an independent study that a design defect in Intel’s
smartphone design and the SoFia microprocessor caused the smartphones to overheat, catch fire,
and sometimes explode. In December of 2016, Qbex terminated its relationship with Intel and
stopped selling the defective smartphones.16
20. Qbex alleges, among other matters, that Intel wrongfully entered into a business relationship
whereby Qbex would obtain, market, and sell Intel Smartphones with Intel’s SoFia
microprocessors under the Qbex brand in Brazil. As a result of Intel’s wrongful actions, Qbex’s
business was destroyed. But for Intel’s wrongful actions, Qbex would have continued to market,
sell and otherwise conduct its business activities with respect to its Qbex Non-Intel smartphones.
21. Qbex alleges, among other matters, that in May of 2016, Intel and Qbex entered into a valid and
enforceable agreement whereby Intel agreed to provide and Qbex agreed to purchase Intel’s
designed smartphones and SoFia microprocessors through the second quarter of 2017; and that in
late 2016, Intel breached this agreement by supplying defective Intel Smartphones and SoFia
microprocessors, by failing to provide technical support to address or otherwise fix these defects,
12
Second Amended Complaint, par 65‐71.
13
Second Amended Complaint, par 72.
14
Second Amended Complaint, par 77.
15
Second Amended Complaint, par 88.
16
Second Amended Complaint, par 90‐91.
Page 8 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
and thus forcing Qbex to withdraw the Qbex Intel Smartphones from the market. But for Intel’s
breach of contract, Qbex would have sold 1,250,000 smartphones with the Intel SoFia processor
through 2017.
23. Economic damages pertaining to destruction of business is the business value of Qbex based
on the business conditions, actual and expected earnings that should have occurred but for
Intel’s wrongful actions, as it would have continued to market, sell and otherwise conduct its
business activities with respect to its Qbex Non-Intel smartphone.
24. Qbex forecasts17 that, commencing June 2015, unit sales of Qbex-brand Non-Intel
Smartphones would have been 10,000 June and increasing by 10,000 units each month until it
reached 70,000 units in December 2015. To be conservative, Qbex forecast of unit sales for
2016 remains constant at 70,000 units per month. The unit price is forecast at R$370.00. The
cost per unit, derived from accounting and business records, is R$240.77, as follows:
Price R$370.00 100.0%
17
As provided by Joabe Fonseca
Page 9 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
25. The forecast earnings for 2015 was based on the foregoing along with the actual sales and cost
of sales for other products which were sold by Qbex in 2015, excluding Qbex Intel
smartphones. Expenses for tariffs duty and taxes, sales, administrative and other expenses,
and the recapture of tariffs duty and taxes were forecast at the actual percentage of net sales as
occurred in 2015. An expense for marketing /price allowance of 5% was included. The forecast
for 2016 was done using the same methodology. An expense of marketing /price allowance
of 12.5%. The forecast is summarized below.
Marketing /Price
Allowance & Other - 0.0% (5,180,000) -3.5% (38,850,000) -12.5%
26. The following summarizes the earnings of Qbex from 2012 through forecast 2016
Page 10 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
27. Unit sales and unit prices were developed by Qbex with consideration of the Brazilian
economy, the smartphone market, unit sales and selling prices by Brazilian brands including
Positivo and MultiLaser. Based on my analysis of these factors, including the information in
the documents considered and matters summarized in the Exhibits to this report, the forecast
unit sales and unit prices are reasonable, as applied, for determining the valuation of Qbex.
28. For purposes of valuation the average EBITDA from 2014 to 2016 of R$ 23,810,673 (US$
$7,407,760) was determined to best represent the expected future earnings of Qbex as a brand
of internet-connected mobile devices.
29. The selection of a method, or methods, of valuation analysis depends on the facts and
circumstances of the appraisal, including the industry and economic circumstances of the
particular company. I applied the capitalization of earnings method under the income approach
to value Qbex as of June 1, 2015 (the “valuation date”). The capitalization of earnings method
seeks to determine an estimate of value by capitalizing a single-period expected economic
stream and converting that amount to a value by dividing it by a capitalization rate. The
capitalization rate is a derivative of the discount (i.e., the discount rate minus the long-term
sustainable growth rate). The process to determine the value of Qbex using the capitalization
of earnings method is explained below.
30. I relied on the average annual EBITDA from 2014 through 2016 of R$ 23,810,673 as the best
representation of Qbex’s expected future earnings. I subtracted depreciation and assumed a
one-year growth rate of 3%, which was based on Statista’s estimate of Brazil’s inflation rate
to arrive at the projected pre-tax income of R$ 23,324,914. Subsequently, the projected pre-
tax income was reduced by Brazil’s corporate tax rate of 34%, which is a combination of a
15% basic rate, a 10% surtax on income that exceeds R$ 240,000 per year and a 9% social
contribution on pre-tax profits, to determine the projected after-tax income.
31. In addition, cash flow adjustments were applied to reflect the expected capital expenditures,
depreciation, and increase in working capital commensurate with the growth in revenue. In this
Page 11 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
case expected depreciation was based on the average annual depreciation from 2014 through
2016 of R$ 250,183; R$ 667,148; and R$ 539,773; respectively. As part of the cash flow
adjustments, capital expenditures are expected to offset expected depreciation. Lastly, the
expected increase in debt-free cash-free (net) working capital of R$ 4,807,799 was based on
2014’s net working capital as a percentage of net sales where net working capital was R$
42,266,881 and net sales were R$ 81,970,232. The increase in working capital resulted in a
reduction of cash flow. The aforementioned adjustments resulted in a projected after-tax cash
flow of R$ 11,048,516.
32. The capitalization rate is estimated using the weighted average cost of capital (“WACC”)
method. The WACC is determined by the weighted average, at market value, of the cost of all
financing sources in the business enterprise’s capital structure. In other words, the WACC is
the all-in rate of return that investors expect to achieve on a company’s assets. The WACC has
two components; the cost of equity and the cost of debt.
33. The cost of equity of 22.53% was estimated using the Build-up method. The build-up method
consists of the following:
Risk-free rate – This rate reflects what an investor would expect to receive at the minimum,
as this rate relates to a safe investment in U.S. Treasury bonds. We relied on the 20-year
U.S. Treasury bond rate of 2.69% as of June 1, 2015.
Equity risk premium – This represents the premium that investors require in the public
market beyond that required by investors in long-term government bonds. We considered
the equity risk premium (supply-side) of 6.21% based on Duff & Phelps’ 2015 Valuation
Handbook; Guide to Cost of Capital (the “Valuation Handbook”).
Size risk premium – This is an additional premium for the level of risk assumed by
investing in smaller companies relative to the risk of investing in larger publicly-traded
companies. The size risk premium of 5.78% was based on companies in 10-smallest decile
as reported in the Valuation Handbook.
Country risk premium – This represents a company’s exposure to country risk due to the
location of its business activities. In this case a country risk premium was assigned because
of Qbex’s business activities in Brazil where observed returns in the market were positively
Page 12 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
correlated and not diversifiable. The estimated country premium of 2.85% was based on
Professor of Finance (Stern School of Business at New York University) Aswath
Damodaran’s country risk premium research released in January 2015.
Company risk premium – This reflects the risks unique to a company and compensates a
potential investor for the risk in investing in the company. We considered various factors
relating to Qbex’s operation to estimate the company-specific risk premium of 5%.
Considered factors included, but not limited to product concentration.
34. The after-tax cost of debt of 8.84% was based on Qbex’s estimated cost of debt of 13.4%, as well
as a 34% tax shield due to the tax-deductible nature of interest expenses, as of the valuation date.
Overall, the weighted average of cost of capital of 19.11% was estimated based on Qbex’s average
capital structure from 2013 through 2015 and consideration of the capital structure of Positivo
Technologica. The average debt to equity ratio was 25% debt to 75% equity. The after-tax
capitalization rate was determined by subtracting the long-term growth rate from the discount rate
(WACC). The long-term growth rate of 3% was based on Statista’s estimate of Brazil’s inflation
rate. Under the capitalization of earnings method, the projected after-tax cash flow was divided
by the after-tax capitalization rate of 16.1% to estimate Qbex’s enterprise value of R$ 98,486,430.
Then I deducted Qbex’s interest-bearing debt of R$ 9,557,511 to arrive at its equity value of R$
88,928,919. Finally, we converted the Brazilian Real to US Dollar based on the Brazilian Real to
USD exchange rate of 0.315707 as of June 1, 2015 to determine Qbex’s equity value of
$28,075,482.
Page 13 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
would have continued to market, sell and otherwise conduct its business activities with respect to
its Qbex Intel smartphone.
36. Qbex forecasts18 that, commencing June 2016, unit sales of Qbex Intel smartphones would have
been 30,000 June and increasing by 10,000 units each month until it reached 70,000 units in
September 2016. To be conservative, Qbex forecast of unit sales after September 2016 to remain
constant at 70,000 units per month. The unit price is forecast at R$395.00. The cost per unit,
derived from accounting and business records, is R$264.91, as follows:
Intel Phones
37. Expenes for tariffs duty and taxes, sales, administrative and other expenses, and the recapture of
tariffs duty and taxes were forecast at the actual percentage of net sales as occurred in 2015. An
expense for marketing /price allowance of 7.5% was included. The forecast is summarized below.
2016 2017
Net Sales R$ 181,700,000 R$ 312,050,000
18
As provided by Joabe Fonseca
Page 14 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
38. For purposes of valuation the average EBITDA of 2016 and 2017 of R$ 38,221,671 (US$
10,523,588) was determined to best represent the expected future earnings of Qbex as a brand
of internet-connected mobile devices.
39. The selection of a method, or methods, of valuation analysis depends on the facts and
circumstances of the appraisal, including the industry and economic circumstances of the
particular company. I applied the capitalization of earnings method under the income approach
to value Qbex as of June 1, 2016. The capitalization of earnings method seeks to determine an
estimate of value by capitalizing a single-period expected economic stream and converting that
amount to a value by dividing it by a capitalization rate. The capitalization rate is a derivative
of the discount (i.e., the discount rate minus the long-term sustainable growth rate). The
process to determine the value of Qbex using the capitalization of earnings method is explained
below.
40. I relied on the average EBITDA forecast for 2016 and 2017 of R$ 38,221,671 as the best
representation of Qbex’s expected future earnings. I subtracted depreciation and assumed a
one-year growth rate of 3%, which was based on Statista’s estimate of Brazil’s inflation rate
to arrive at the projected pre-tax income of R$ 38,746,757. Subsequently, the projected pre-
tax income was reduced by Brazil’s corporate tax rate of 34%, which is a combination of a
15% basic rate, a 10% surtax on income that exceeds R$ 240,000 per year and a 9% social
contribution on pre-tax profits, to determine the projected after-tax income.
41. In addition, cash flow adjustments were applied to reflect the expected capital expenditures,
depreciation, and increase in working capital commensurate with the growth in revenue. In this
case expected depreciation was based on the average annual depreciation from 2014 through
2016 of R$ 250,183; R$ 667,148; and R$ 539,773; respectively. As part of the cash flow
adjustments, capital expenditures are expected to offset expected depreciation. Lastly, the
expected increase in debt-free cash-free (net) working capital of R$ 4,827,135 was based on
2014’s net working capital as a percentage of net sales where net working capital was R$
42,266,881 and net sales were R$ 81,970,232. The increase in working capital resulted in a
Page 15 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
reduction of cash flow. The aforementioned adjustments resulted in a projected after-tax cash
flow of R$ 20,745,724.
42. The capitalization rate is estimated using the weighted average cost of capital method. The
WACC is determined by the weighted average, at market value, of the cost of all financing
sources in the business enterprise’s capital structure. In other words, the WACC is the all-in
rate of return that investors expect to achieve on a company’s assets. The WACC has two
components; the cost of equity and the cost of debt.
43. The cost of equity of 23.57% was estimated using the Build-up method. The build-up method
consists of the following:
Risk-free rate – This rate reflects what an investor would expect to receive at the minimum,
as this rate relates to a safe investment in U.S. Treasury bonds. We relied on the 20-year
U.S. Treasury bond rate of 2.22% as of June 1, 2016.
Equity risk premium – This represents the premium that investors require in the public
market beyond that required by investors in long-term government bonds. We considered
the equity risk premium (supply-side) of 6.03% based on Duff & Phelps’ 2016 Valuation
Handbook; Guide to Cost of Capital (the “Valuation Handbook”).
Size risk premium – This is an additional premium for the level of risk assumed by
investing in smaller companies relative to the risk of investing in larger publicly-traded
companies. The size risk premium of 5.60% was based on companies in 10-smallest decile
as reported in the Valuation Handbook.
Country risk premium – This represents a company’s exposure to country risk due to the
location of its business activities. In this case a country risk premium was assigned because
of Qbex’s business activities in Brazil where observed returns in the market were positively
correlated and not diversifiable. The estimated country premium of 4.72% was based on
Professor of Finance (Stern School of Business at New York University) Aswath
Damodaran’s country risk premium research released in January 2016.
Company risk premium – This reflects the risks unique to a company and compensates a
potential investor for the risk in investing in the company. We considered various factors
Page 16 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
44. The after-tax cost of debt of 8.84% was based on Qbex’s estimated cost of debt of 13.4%, as well
as a 34% tax shield due to the tax-deductible nature of interest expenses, as of the valuation date.
Overall, the weighted average of cost of capital of 19.89% was estimated based on Qbex’s average
capital structure from 2013 through 2015 and consideration of the capital structure of Positivo
Technologica. The average debt to equity ratio was 25% debt to 75% equity. The after-tax
capitalization rate was determined by subtracting the long-term growth rate from the discount rate
(WACC). The long-term growth rate of 3% was based on Statista’s estimate of Brazil’s inflation
rate. Under the capitalization of earnings method, the projected after-tax cash flow was divided
by the after-tax capitalization rate of 16.9% to estimate Qbex’s enterprise value of R$ 151,318,696.
Then I deducted Qbex’s interest-bearing debt of R$ 9,557,511 to arrive at its equity value of R$
141,761,185. Finally, we converted the Brazilian Real to US Dollar based on the Brazilian Real
to USD exchange rate of 0.277523 as of June 1, 2016 to determine Qbex’s equity value of
$39,341,989.
45. In May of 2016, Intel and Qbex entered into an agreement whereby Intel agreed to provide and
Qbex agreed to purchase Intel’s designed smartphones and SoFia microprocessors through the
second quarter of 2017 and to provide Qbex with technical support for these products during
the term of this agreement, as follows:19
Page 17 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
46. But for Intel’s breach of contract, Qbex would have sold 1,250,000 Qbex Intel smartphones.
The sales price per unit was determined to be at R$395 based on Qbex contract terms with
Rcell and other factors. Expenses for tariffs duty and taxes, sales, administrative and other
expenses, and the recapture of tariffs duty and taxes were forecast at the actual percentage of
net sales as occurred in 2015. An expense for marketing /price allowance of 7.5% was included.
The forecast is summarized below.
Marketing /Price
Allowance & Other (13,627,500) (23,403,750) (37,031,250) -7.5%
Page 18 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
47. The following summarizes the losses incurred by Qbex for 2015 through 2017:
EBITDA
2015 (R$ 2,385,119) ($687,751)
2016 (R$ 27,004,202) ($7,435,078)
2017 (R$ 8,115,718) ($2,443,022)
Total (R$ 37,505,039) ($10,565,850)
48. This report was prepared by Andrew C. Bernstein, Managing Director of EisnerAmper LLP
solely in connection with his providing sworn expert testimony in the matter of Qbex
Computadores S.A., a Brazilian corporation (“Qbex”), as plaintiff, vs. Intel Corporation, a
Delaware corporation (“Intel”), as Defendant, for Case No. 5:17-cv-03375-LHK, in the United
States District Court, Northern District of California. This report may not be used or referred
for any other purpose without the expressed written permission of Mr. Bernstein.
Respectfully Submitted:
_______________________________
Andrew C. Bernstein CPA CFF CVA
Page 19 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
EXHIBIT 1
BACKGROUND:
Andrew C. Bernstein is a Managing Director in EisnerAmper’s Financial Advisory Services
which includes Forensic, Litigation & Valuation Services, Bankruptcy & Restructuring, and other
consulting services. The focus of his practice includes expert testimony on economic damages
issues complex business disputes, expert analyses in Bankruptcy Court, and forensic accounting
investigations.
Mr. Bernstein has provided expert testimony in US District Court and US Bankruptcy court; state
court matters in Florida, New York and Delaware Chancery Court; International Arbitrations;
and other venues. He has been appointed as Receiver in federal court, appointed as an arbitrator
in state court, and has served on ICC arbitral panel. His experience includes a wide range of
claims, industries, and measures of economic damages.
Expert consulting for the seller in connection in connection with the sale of an industrial
equipment manufacturer in a $700 million transaction. The buyer alleged that there were post-
closing accounting adjustments necessary to statement the assets and liabilities in accordance with
Page 20 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
generally accepted accounting principles. This matter included expert analysis of whether
financial reporting was in compliance with accounting standards.
Jury trial testimony in state court in connection with a post-M&A dispute in the Health Care
industry to rebut allegations and testimony by the seller alleging that the buyer failed to comply
with the financial terms of the purchase and sale agreement; and testimony on economic damages
incurred by the buyer as a result of seller’s actions.
Appointed as Arbitrator by a state court judge in the Complex Business Litigation Section in
connection with determining the disputed Accounting Claims pertaining to the post-closing
working capital true-up for a medical product company. This matter included expert analysis of
whether financial reporting was in compliance with accounting standards.
International Arbitration
ICC Arbitral Panel member in connection a Post M&A dispute following a +$1 billion transaction
between a global beverage company and a South American-based company. Matters included
determining GAAP application for a working capital adjustments and claims that the non-GAAP
financial statements were a breach of reps and warranties affecting the value and purchase price
of the target company.
ICC Arbitration testimony in a post M&A dispute in which the buyer of an aviation services
company alleged that the seller’s financial statements and other representations failed to disclose
a material adverse condition pertaining to a major customer, which resulted on an overstatement
of the purchase price.
Arbitration testimony before an ICC arbitral panel rebutting damages claimed by a distributor
alleging that it had exclusive rights in South America against a Korean consumer electronics
manufacturer. Testimony identified fundamental flaws in the claimant’s damages model and
rebutted claims pertaining to economic causation, including product longevity.
Arbitration testimony before an ICC arbitral panel as to the financial facts supporting the
claimant’s allegations that it was fraudulently induced into an investment as a minority
shareholder in a media company.
ICDR Final Hearing testimony for respondent rebutting $40 million in damages asserted by
claimant in the active-wear garment manufacturing industry involving NAFTA-DR operations in
Nicaragua, Dominican Republic and the US.
ICDR Final Hearing testimony for claimant asserting damages pertaining to wrongful use of
internet-based IT application for enabling multi-website distribution and update of photo and
video files.
Page 21 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Business Valuation
Expert testimony in Delaware Chancery Court before Chancellor Strine in connection with a
shareholder action alleging that officers and directors breached their fiduciary duties in pricing
the sale of the companies operating subsidiary.
Business valuation for a closely-held, family-owned business in a dispute among the shareholder
/family members. Participated in mediation to assist resolving differences between the parties.
Business valuation for a closely held business in connection with litigation concerning sale of
shares to an ESOP in which the Department of Labor asserted that the transaction price was
unfairly overstated.
Testified before the Chief Justice in a British Overseas Territory in connection with the wind-
down of a spirits import and retail enterprise concerning the financial results of operations and
whether the capital put in by the partners was properly classified as debt versus equity.
Accounting investigation on behalf of a minority shareholder in connection with claims that the
majority shareholder was engaging in self-dealing, mischaracterizing and/or concealing cash
distributions, and other financial wrong-doing pertaining to a beachfront hotel property.
Bench trial testimony in state court rebutting over $100 million of lost profits and costs claimed
by a real estate developer alleging delays prevented project completion.
Insurance coverage on builder’s risk loss claim in a multi-phase luxury condominium develop.
Issues included project delay damages to the developer when fire in the 11th structure of a 12
structure project required the damaged building to be razed and restarted.
Developer’s claim against its general contractor’s surety. The surety, which self-performed in
place of the defaulted general contractor, ceased work after expending the penal sum of the bond,
causing the developer to complete the project. My trial testimony was the costs and delay damages
to the developer. Damages were awarded to the developer and affirmed by appellate court.
Page 22 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Intellectual Property
Expert testimony in a bench trial as a rebuttal witness for the plaintiff, a cosmetics company, in
connection with a trademark infringement claim. The issues addressed included the defendant’s
basis for apportionment.
Expert testimony rebutting a claim for infringer’s profits in a copyright matter brought by an
engineer concerning designs for an indoor boat storage facility in Texas. Issues included
apportionment of profits to the subject intellectual property and basis for determining costs
associated with revenues.
Expert testimony on lost profits in connection with theft of trade secret alleged by a durable
medical equipment manufacturer pertaining to a component that allowed the defendant company
to enter and compete in the U.S. market.
Expert testimony rebutting over $30 million in lost profits claimed by a start-up franchisor alleging
theft of trade secrets in connection with the hull design of a vessel.
Expert testimony on wrongful net earnings by the defendant in a theft of trade secrets matter in
the after-market distribution of window and door components, including part number
identification system, pricing, customer data and other information.
Jury trial testimony in a state court matter concerning a medical services joint venture between
venture partners, a medical-device manufacturer and the investors. Testimony included rebuttal
of economic causation and lost profits, including the plaintiff’s expert’s failure to correlate the
failure of the clinical services company with the alleged actions of the medical device
manufacturer.
Expert testimony on lost profits in a matter between a hospital system and a comprehensive cancer
centers, in matters including wrongful termination, breach of exclusive services agreement and
other matters.
Page 23 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Jury trial testimony in state court rebutting a lost profits claim of +$20 million by a
communications consultant alleging breach of contract against a large corporation. My testimony
demonstrated that the methodology used by the plaintiff was unreliable, failed to derive a proper
measurement of damages, and was not determined based on the requirements of the contract.
Arbitration testimony rebutting damages claimed by a luxury travel company against a global
hotel company for lost profits. Testimony included underlying facts in the opposing expert’s data
that contradicted his conclusion and invalidated his analysis and plaintiff’s failure to identify
external negative business events that were not considered by the plaintiff’s analysis of its
damages.
Jury trial testimony in federal court in connection with lost profits claimed by a maritime services
provider alleging that the defendant wrongfully prevented the plaintiff from operating entering a
certain market. Areas of testimony included application of the benchmark method for analysis of
economic causation.
Expert report rebutting over $200 million in damages in a dispute between two of the major
companies providing worldwide cellular device logistics including reverse-distribution.
Accountant to the Special Master appointed by Judge Gold, initially Judge Ed Davis (retired) and
subsequently Judge Chavies (retired), in the matter of Wachovia Bank NA v Tien et al, to
investigate and report to the court on the acquisition and disposition of certain assets.
Forensic Accountant to State Court appointed receiver for Home Equity Mortgage Corporation
which involved over $200 million from 800 investors in connection with hard-asset mortgage
loans.
Forensic Accountant for a federal bank in connection with the investigation of accounts and
transactions pursuant to an agreed order with the OCC.
Page 24 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Forensic Accountant for the audit committee of a public company in connection with
embezzlement schemes involving certain officers.
Forensic Accountant for the SEC in the Worldwide Entertainment receivership, which involved
$300 million and 3,750 investors, and involved testimony in federal court on disgorgement.
PROFESSIONAL AFFILIATIONS
National Association Of Federal Equity Receivers – Member (2016 to the present)
American Institute of Certified Public Accountants – Member (1981 to the present)
Florida Institute of Certified Public Accountants – Member (1981 to the present)
National Association of Certified Valuation Analysts – Member (2004 to present)
PROFESSIONAL EMPLOYMENT
Kaufman Rossin & Co 1980 to 1990 Manager
Arthur Andersen 1990 to 1992 Manager
Peterson Consulting 1992 to 1995 Principal
PricewaterhouseCoopers 1995 to 2001 Director
KPMG 2001 to 2003 Director
Berkowitz Pollack Brant 2003 to 2016 Director
EisnerAmper 2016 to Present Managing Director
Page 25 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Page 26 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Page 27 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Page 28 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Page 29 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Case Documents
1. Second Amended Complaint
2. Joabe Santos Da Fonseca Deposition
Documents Produced
3. 001_QBX159620_1040234_QbexProductionVol.007_xCoversheet Only
4. 002_QBX159621_1040234_QbexProductionVol.007_Email
5. 003_QBX159633_1040234_QbexProductionVol.007_Volume Price Cost Spreadsheet
6. 004_QBX159645_1040234_QbexProductionVol.007_Email re Intel contract
7. 005_QBX159661_1040234_QbexProductionVol.007_Siri Contract
8. 006_QBX159667_1040234_QbexProductionVol.007_Email with forecast
9. 6. - marcas cases [production bates number to be provided by counsel]
10. 007_QBX159678_1040234_QbexProductionVol.007_xCoversheet Only
11. 008_QBX159679_1040234_QbexProductionVol.007_xCoversheet Only
12. 009_QBX159680_1040234_QbexProductionVol.007_Fortune Ship Technology HK Proforma Invoice
13. 010_QBX159681_1040234_QbexProductionVol.007_xCoversheet Only
14. 011_QBX159682_1040234_QbexProductionVol.007_xCoversheet Only
15. 012_QBX159683_1040234_QbexProductionVol.007_Email with forecast
16. 013_QBX159686_1040234_QbexProductionVol.007_70k forecast
17. 014_QBX159687_1040234_QbexProductionVol.007_MARKET RESEARCH DATA
18. 015_QBX159726_1040234_QbexProductionVol.007_Internal Policies & Procedures
19. 016_QBX159732_1040234_QbexProductionVol.007_xCoversheet Only
20. 017_QBX159733_1040234_QbexProductionVol.007_xCoversheet Only
21. 018_QBX159734_1040234_QbexProductionVol.007_Shipping Document re Fortune SHI Technology
22. 019_QBX159737_1040234_QbexProductionVol.007_Shipping Document re Fortune SHI Technology
23. 020_QBX159738_1040234_QbexProductionVol.007_Shipping Document re Fortune SHI Technology
24. 021_QBX159740_1040234_QbexProductionVol.007_Shipping Document re Fortune SHI Technology
25. 022_QBX159743_1040234_QbexProductionVol.007_Shipping Document re Fortune SHI Technology
26. 023_QBX159744_1040234_QbexProductionVol.007_Shipping Document re Fortune SHI Technology
27. 024_QBX159746_1040234_QbexProductionVol.007_Shipping Document re HK Tianruixiang
28. 025_QBX159747_1040234_QbexProductionVol.007_Shipping Document re HK Tianruixiang
29. 026_QBX159748_1040234_QbexProductionVol.007_Shipping Document re HK Tianruixiang
30. 027_QBX159749_1040234_QbexProductionVol.007_Shipping Document re HK Tianruixiang
31. 028_QBX159750_1040234_QbexProductionVol.007_Shipping Document re HK Tianruixiang
32. 029_QBX159752_1040234_QbexProductionVol.007_Shipping Document re HK Tianruixiang
Page 30 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Page 31 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Page 32 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Page 33 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Articles Research
158. 1_2016 09 20 Mobile Economy Latin America And The Caribbean
159. 2012 09 17 Lenovo to buy Brazilian electronics giant CCE _ ZDNet
160. 2013 01 03 Cisco Research_ Smartphones rival laptops Brazil..
161. 2013 02 06 Brazil Surpasses 25 Million Broadband Connections _ The Network
162. 2013 06 24 Huawei kicks off smartphone production in Brazil _ ZDNet
163. 2013 07 15 Charting Broadband and Economic Growth in Brazil
164. 2013 07 30 The world’s most expensive smartphone_ ..
165. 2014 04 23 Acquisition of Motorola to fuel sales o...tphones - Business - Chinadaily.com
166. 2014 05 08 Qualcomm Will Use Brazil as a Platform To Launch New Technology
167. 2014 05 09 Qualcomm Will Use Brazil as a Platform To Launch New Technology – WSJ
168. 2014 06 10 Cisco_VNI_Forecast_and_Methodology
169. 2014 06 18 Mobile data traffic in Brazil set to skyrocket _ ZDNet
170. 2014 07 14 Smartphones represent 76 percent of all phones in Brazil _ ZDNet
171. 2014 07 29 Meet Intel's SoFIA, the super-cheap smartphone chip created in Singapore – CNET
Page 34 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
172. 2015 04 06 Brazilians paid $289 on average for smartphones in 2014 _ ZDNet
173. 2015 04 28. 10 things you need to know about the mobile market in Brazil - Blog – MEF
174. 2015 05 18 Brazilian computer giant Positivo sees Q1 profits soar _ ZDNet
175. 2015 06 30 Xiaomi takes first big step outside Asia with Brazil smartphone _ Reuters
176. 2015 07 02 Mobile device manufacturers in Brazil _ Innovation House Rio
177. 2015 07 08 Recession hits Brazilian smartphone sales _ ZDNet
178. 2015 07 10 Xiaomi disappoints customers in Brazil launch _ ZDNet
179. 2015 09 30 Brazil Focus_ the Smartphone Market - Blog – MEF
180. 2015 12 23 Qbex launches new X-Go smartphone in Brazil
181. 2015 12 23 Qbex launches new X-Go smartphone in Brazil_Factiva
182. 2016 03 11 Will New Iphones Let INtel Inside_Dow Jones
183. 2016 04 16 Analysts Debate Intel's Chances for Grabbing iPhone Chip Business _ Fortune
184. 2016 04 28 Intel's New Strategy Is The Right One For The Company
185. 2016 04 29 Intel cuts Atom chips, basically giving..
186. 2016 05 02 Intel Kills Future Low-End Mobile Chips But Not Getting Out of Mobile _ Fortune
187. 2016 05 31 Xiaomi downsizes Brazil operations _ ZDNet
188. 2016 09 14 Samsung, Lenovo-Motorola Dominate Brazil's Smartphone Market in Q2 2016
189. 2016 10 07 Brazilian mobile market returns to growth _ ZDNet
190. 2016 10 10 Samsung halts sales, exchanges of Note 7
191. 2016 10 11 Note 7 fiasco could burn a $17 billion hole in Samsung accounts _ Reuters
192. 2017 02 15 Why did Intel Abandon a Promising Project like Atom_
193. 2017 03 03 Despite Recession, Brazil LTE Smartphon..
194. 2017 03 20 New Qualcomm Smartphone Chips Aimed At India, Brazil Markets _ Fortune
195. 2017 03 20 Qualcomm announces 205 mobile platform ..
196. 2017 04 24 Smartphone adoption to match population growth in Brazil _ ZDNet
197. 2017 06 06 Cisco_VNI_Forecast_and_Methodology
198. 2017 06 06 vni-hyperconnectivity-wp
199. 2017 09 06 Lenovo bounces back in Brazil _ ZDNet
200. 2017 12 22 Behind the Fall and Rise of China's Xiaomi _ WIRED
201. 2018 01 19 Lenovo Brazil operations back in black _ ZDNet
202. 2018 02 05 Qualcomm and USI Enter Agreement to Form Joint Venture for Semiconductor Module
Factory in Brazil
203. 2018 04 03 How China's Tech Giant Lenovo Is Losing Its Grip On Smartphones
204. 2018 04 06 Brazil - Mobile Phones - Competitive Landscape
205. 2018 04 19 Moto G6, Moto G6 Plus and Moto G6 Play launched in Brazil
206. 2018 06 11 Huawei partners with Positivo to return to Brazilian smartphone market _ ZDNet
207. 2018 06 12 Huawei back in Brazil - Global Times
Page 35 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
Statista Reports
213. _Binder of Statistics from Statista
214. 1 Number of smartphone users in Brazil from 2015 to 2022
215. 1 Number of smartphones sold in Brazil from 2014 to 2017
216. 1 Share of population in Brazil that use a smartphone from 2015 to 2022
217. 1 Year-over-year growth in the number of smartphone users in Brazil from 2014 to 2020
218. 2 Brazil If you use a smart phone for personal purposes, what brand is it
219. 2 Brazil What brand of smartphone do you use for business purposes
220. 2 Distribution of smartphone shipments share in Brazil by vendor from 2015 to 2016
221. 2 Market share held by selected Chinese smartphone brands in Brazil from June 2017 to June 2018
222. 3 Distribution of smartphone sales in Brazil in 2017, by price range
223. Average daily mobile data usage per user in selected countries in 2015 (in megabytes)
224. Average time spent on voice calls per mobile phone subscriber in Brazil from 2005 to 2016
225. Brazil If you use a smart phone for business, what operating system do you use
226. Brazil If you use a smart phone for personal purposes, what operating system do you use
227. Brazil What type of mobile phone plan do you have
228. Brazil Which mobile operator carrier do you use for personal purposes
229. Connected device usage in Brazil in 2014
230. Distribution of mobile phone sales in Brazil in 2017, by model
231. Distribution of smartphone sales in Brazil in 2017, by operating system
232. Gross revenue generated by mobile telephony services in Brazil from 2000 to 2016
233. How large is your monthly data volume according to your smartphone contract
234. Market share of mobile operating systems in Brazil from January 2012 to December 2017
235. Market share of smartphone sales by operating system in Brazil from 2013 to 2017, by month
236. Mobile phone production in Brazil from 2000 to 2017 (in 1,000 units)
237. Mobile phone shipments in Brazil from 2000 to 2017 (in 1,000 units)
238. Mobile phone user penetration in Brazil from 2012 to 2018
239. Mobile telephony market share in Brazil from 2000 to 2016, by telecommunications provider
240. Monthly average household expenditure on mobile telephony in Brazil in 2013 and 2016
241. Number of cellular telephone sites (cell sites) in Brazil from 2002 to 2016
Page 36 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
242. Number of mobile cellular subscriptions per 100 inhabitants in Brazil from 2000 to 2016
243. Number of mobile phone lines in Brazil from 1996 to 2016
244. Number of mobile phone subscriptions in Brazil from 1998 to 2016, by type of technology
245. Number of mobile telephony lines in Brazil from April to October 2017, by type of technology
246. Share of mobile phone users in Brazil as of November 2015, by brand
247. Share of mobile phone users that use a smartphone in Brazil from 2014 to 2019
248. Share of people who spend three hours or more of their daily free time using a personal computer, tablet or
cell phone in Brazil in 2016, by age group
249. Thinking generally about shopping online using a smartphone, which of the following have you done in the
past year
250. Thinking generally about shopping online using a smartphone, which of the following have you done in the
past year
251. Brazil Which of the following electronic products do you own
252. Consumer electronics revenue in Brazil from 2nd quarter 2016 to 1st quarter 2017 (in million U.S. dollars)
253. Leading companies in the consumer electronics market in Brazil in 2016, based on net revenue (in million
Brazilian reals)
254. Number of desktop PCs, notebooks and tablets sold in Brazil from 2005 to 2017 (in million units)
255. Number of tablet users in Brazil from 2013 to 2018 (in millions)
256. Sales value of computer equipment manufacturer (CNAE v2.0 2621) in Brazil from 2009 to 2020 (in
million U.S. dollars)
257. Sales value of electronic component manufacture (CNAE v2.0 2610) in Brazil from 2009 to 2020 (in
million U.S. dollars)
258. Tablet shipments in Brazil from 2011 to 2017 (in million units)
Positivo
259. Standardized FS 2017 2016 2015_POSI3_DFP_2017_PORT (1)
260. Standardized FS 2016 2015 2014_POSI3_DFP_2017_PORT (1)
261. Standardized FS 2015 2014 2013_POSI3_DFP_2017_PORT (1)
262. Standardized FS 2014 2013 2012_POSI3_DFP_2014_pt
263. Positivo_Tecnologia_SA-Annual_Report(Aug-21-2018)
264. Positivo_Tecnologia_SA-12.31.2017 Interim_Report(Mar-21-2018)
265. Positivo_Tecnologia_SA-12.31.2016 Interim_Report(Mar-23-2017)
266. Positivo Tecnologia S A BOVESPA POSI3 Financials
267. demosntracaoPadronizada (1)
268. Audited FS 2017_POSI3_DFs_2017_PORT
269. Audited FS 2016_POSI3_DF_2016_PT
270. Audited FS 2015_demosntracaoAnuaisPadronizada
Page 37 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
MultiLaser
271. corporate timeline
272. Multilaser Industrial S A Financials in USD
273. Multilaser Industrial S A Financials
274. https://www.celltick.com/celltick-and-multilaser-partner-to-bring-start-experience-to-android-users-in-
brazil/
275. https://www.multilaser.com.br/institucional#quem-somos
276. Multilaser_Industrial_12.31.2013 SA-Annual_Report(Mar-27-2014)
277. Multilaser_Industrial_12.31.2014 SA-Annual_Report(Apr-01-2015)
278. Multilaser_Industrial_12.31.2015 SA-Annual_Report(Mar-31-2016)
279. Multilaser_Industrial_12.31.2016 SA-Annual_Report(Apr-05-2017)
280. Multilaser_Industrial_12.31.2017 SA-Annual_Report(May-18-2018) (1)
281. Multilaser_Industrial_12.31.2017 SA-Annual_Report(May-18-2018) (1).pt.en (1)
282. MultilaserIndustrialSA_PrivateCompany
CapitalIQ
283. Qbex - Capital IQ Transaction Screening v2
Brazil Economy
284. Statista dossier about Brazil
285. economic-forecast-summary-brazil-oecd-economic-outlook
286. Brazil GDP - World Bank
Page 38 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
50. Brazil entered into a deep recession commencing in 2014/2015 which ended during 2017. The
Economy is experiencing growth above 2% which is forecasted to through 2022. Private
consumption (also referred to as personal consumption, consumer expenditure, or personal
consumption expenditures, measures consumer spending on goods and services) declined 3.2% in
2015 and 4.4% in 2016 experienced a turnaround and grew at an estimated 0.9% in 2017 and 2.3%
in 2018 and 3.1% in 2019. 20
51. As illustrated in the two graphs below, Brazil’s Gross Domestic Product in current prices is
expected to grow over 2% annually from 2017 to 2022 after experiencing significant decline in
2015.21
20
Economic Forecast Summary‐Brazil, OECD Economic Outlook, Volume 2018, Issue 1.
21
Statista Dossier about Brazil, Source: IMF, April 2018.
Page 39 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
52. Low inflation is supporting household real incomes which is likely to support private consumption
going forward. As private consumption recovers, growth is expected to accelerate. Unemployment
is projected to decline further, including through the creation of more formal sector jobs.22 The
graph below illustrates the inflation rate from 2012 to 2022 based on year-to-year comparison.23
22
Economic Forecast Summary‐Brazil, OECD Economic Outlook, Volume 2018, Issue 1.
23
Statista Dossier about Brazil, Source: IMF, April 2018.
Page 40 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
53. The Brazilian market for smartphones is the fourth largest market in the world. In 2015, the market
outlook was that sales would continue to rise and the installation of local manufacturing plants
would continue to be a trend for Brazil. One of the main reasons for the installation of local
manufacturing plants of mobile devices are the substantial incentives provided by the country’s
government to incentivize the consumption of technology products manufactured in Brazilian
territory. A national policy known as “Lei do Bem”, originally intended to promote research and
development in the country and later updated to lower the cost of mainstream technology products,
was one of the major causes for the explosive growth in sales of mobile devices since 2013. In
addition to the benefit of installing proprietary manufacturing facilities, the OEM and ODM
business models have been widely adopted by mobile device brands to benefit from the taxation
benefits and consumer base of Brazil. The country has also turned into one of the main poles for
exports of these products to other markets in Latin America, as local manufacturing allows for
these devices to be shipped at reduced prices to countries like Argentina, Chile and Uruguay.24
54. Brazilian brands have made significant efforts to expand their share in the national market for
mobile devices, offering mostly entry-level to intermediate products. This is a strategy that
functioned well for the segment of tablets, as this market in the country is mostly dominated by
local brands who offer entry-level products priced below USD 150. One of the most prominent
national mobile device manufacturers, Positivo, launched its Octa line of smartphones to compete
in the profitable segment of intermediate devices and has its production centered in the city of
Curitiba. A similar strategy was adopted by local brand Multilaser, which produces budget-focused
devices in the city of Extrema.25
55. Analysis of Brazil mobile phones market as to mobile phone manufacturers includes 1) key buyers
– retailers and network operators, and 2) technology manufacturers for mobile telephony as key
suppliers. The Brazilian mobile phones market is dominated by a small number of large-sized
24
2015 07 02 Mobile device manufacturers in Brazil (Innovation House Rio)
25
2015 07 02 Mobile device manufacturers in Brazil (Innovation House Rio)
Page 41 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
companies, such as Apple, Samsung, Lenovo Group Limited and LG Electronics. Rivalry is
increased due to the limited number of competitors and the high penetration of mobile phone
devices which intensifies price competition. The rise of the smartphone allows new entrants to
exploit the rapid increase in the market. The market is made up of two categories of buyers: 1) big
store retailers such as GPA (Companhia Brasileira de Distribuicao) and Magazine Luiza SA.,
which purchase handsets to sell to end-users. 2) mobile network operators such as Telefonica,
America Movil and Oi. (Apple has only three stores in Brazil as of 2017.) Manufacturers are
divided into 2 categories: 1) Software manufacturers such as Google (which produced Android);
their category does not include Apple and Microsoft mobile phones as they produce their own
operating systems. 2) Electronics manufacturers who produce most of the components on a
contract basis. Some of the largest semiconductor company in the mobile phone industry arte
Qualcomm, Foxconn, Jabil Circuit, Taiwanese Semiconductor Manufacturing Company (TSMC)
and Skyworks solutions. The increasing popularity of smartphones means several newcomers have
successfully entered the market in recent years such as Huawei and Xiaomi. Smartphones offer the
basic functions of a regular mobile phone along with touch screen, cameras, GPS navigation, Wi-
Fi and mobile broadband access. The structure of the Brazilian market is not appealing to new
entrants in re the size of the smartphone buyers’ market, and economic and political instability.
New entrants would need to be low price mobile phones that would target price sensitive groups.
However, there is competition in this niche from Lenovo and other price competitive
manufacturers, such as Positivo and Gradient. In the Brazil mobile phone market there is a second
tier of smaller manufacturers with phones that are targeted towards niche markets or produced for
specific regions. Xiaomi and Huawei focus on offering budget alternatives. Smartphone operation
with Android operating systems include: Samsung, Sony, HTC, and LG. The market for
smartphones operating on the Android platform is fragmented and competitive. The android
phones vary in form, screen size, build quality, processing power and price. Differentiations that
premium phones have over budget competitors is diminishing as consumers are moving toward
cheaper devices.26
26
2018 04 06. Brazil – Mobile Phones – Competitive Landscape. MarketLine Industry Profiles.
Page 42 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
56. In Brazil, the world’s fourth largest market for smartphones, local tax laws have shaped the market.
Companies such as Samsung, Motorola and LG and more recently Xiaomi, had no choice but to
‘go local’ if it wants to sell phones in Brazil because of a tax policy called ‘Lei do Bem’ or Good
Law. In 2013, the authorities introduced the policy to boost demand for mobile/digital
technologies while stimulating the local economy. They did it by reducing two key taxes. The first
was COFINS (Contribuição para o Financiamento da Seguridade Social), a social security
contribution which is usually 7.6 per cent. The second was PIS (Programa de Integração Social).
This funds employee savings and is usually 1.65 per cent. Under the new regime the two taxes
were reduced to zero on locally-produced smartphones priced under R$1500. It seems to have
worked. In 2014 alone, according to market watcher Pyramid Research, 54.5 million smartphones
were sold in Brazil, making it the fourth largest market in the world. Law-makers recently decided
to extend Lei do Bem to the end of 2018. The tax regime has succeeded in compelling overseas
OEMs to set up shop in the country. Alongside Samsung, LG opened a factory in Taubaté,
Motorola outsourced manufacturing to Flextronics in Jaguariúna, while Microsoft makes Lumias
in Manaus. Apple sells iPhones made by its partner Foxconn in the city of Jundiaí. Earlier this
year, China’s Xiaomi opened a local facility (its first outside Asia) to make its Redmi 2 handset.
There are also a small number of local handset makers active in the market – Positivo, Multilaser
– though they have made more impact in the tablet space.27
57. High import tariffs and the tax system in Brazil contribute significantly toward high prices for
consumer electronics. Brazil’s import duties were implemented to protect domestic industries
from foreign competition. Foreign technology companies can avoid tariffs and taxes by setting up
manufacturing facilities in Brazil. Huawei, Nokia and ZTE have facilities in Brazil; and Foxconn
– which makes Apple products – entered the market in 2011. In addition, Brazil lifted federal taxes
for smartphones manufactured in Brazil, after implementing similar policies for domestically
produced tablets and computers. The smartphone exemption only applies to devices priced below
R$1,500. There is an emerging middle class in Brazil and across South America, created sudden
demand.28
27
2015 09 30. Brazil Focus: the Smartphone Market. (mobileecosystemforum.com)
28
2013 06 30. The world’s most expensive smartphone. (theverge.com)
Page 43 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
58. In 2013, it was estimated that by 2017 almost all internet users in Brazil and close 60% of the
country are expected to go online through mobile devices. A Brazilian web analytics company
reported that middle-class consumers accounted for 63% of feature phone and smartphone internet
users in Brazil, almost twice the share from upper economic classes. In 2011, the number of people
accessing the mobile internet in Brazil exceeded fixed household access.29
59. Mobile data (which includes handset-based data traffic, such as texting, multimedia messaging
and handset video services) and internet traffic in Latin America is forecast to grow at a compound
annual growth rate of 66% from 2013 to 2018.30
60. Smartphones represented 76 percent of all mobile phones in Brazilian May 2014, up from 53% in
May 2013. Data compiled by market intelligence firm IDC and the Brazilian Electrical and
Electronics Industry Association predicted a 30% increase in smartphone sales in 2014. Factors
supporting growth includes presence of significant up-and-coming players that are investing in the
local market aided by tax breaks such as Lenovo, Huawei, and Xiaomi.31
61. The following table shows the market share of Chinese smartphones sold in Brazil in June 2017
and June 2018.32
Jun '17 Jun '18
Asus 1.87% 2.53%
Lenovo 2.33% 1.86%
Alcatel 1.38% 1.38%
Xiaomi 0.15% 0.58%
Huawei 0.23% 0.21%
ZTE 0.09% 0.13%
HTC* 0.09% 0.04%
LeEco 0.01% 0.03%
Neffos 0.00% 0.02%
Oppo 0.01% 0.01%
OnePlus 0.02% 0.01%
6.18% 6.80%
29
2013 07 15. Charting Broadband and Economic Growth in Brazil. (blogs.cisco.com)
30
2014 06 10. Cisco Visual Networking Index: Forecast and Methodology, 2013‐2018, p. 14
31
2014 07 14. Smartphones represent 76 percent of all phones in Brazil. (zdnet.com)
32
Statista, published by StatCounter, June 2018.
Page 44 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
62. Brazil experienced a deep economic crisis that started in mid-205. The third-quarter 2016 was the
peak of the downturn. In 2014, the smartphone market was strong; there was a 56% increase in
sales in the second quarter of 2104 as compared to the same quarter 2013. In 2015, Smartphone
sales in Brazil started to decline due to the recession. April 2015 smartphone sales were 1% less
than April 2014. However, May 2015 sales were 16% less than May 2014. Other factors affecting
sales on smartphones in Brazil include the dollar hike in relations to the local currency, which has
resulted in price increases to consumers. However, in 2016, the mobile phone market in Brazil
returned to growth. Sales of smartphones during the second quarter of 2016 increased 16.6% over
the prior quarter. The majority of devices sold in the 2Q ranged between BRL499 and BRL999.
During 2016, LTE Smartphones grew 53% annually and comprise 86% of total smartphone
shipments. Sub-US$100 LTE smartphone price segment has been the key driver growing 58%
annually.33
63. Brazil’s smartphone market is very concentrated market in terms of few brands controlling most
of the market share. The top five brands captured a combined 75% of the smartphone market. This
is mainly driven by the high barriers to entry. To succeed, the brands need to have a local
manufacturing setup or partner. Without one, brands must pay up to 60% of assorted taxes to
import a completely built unit (CBU). Furthermore, unlike other LATAM countries, open
distribution presence is the key to succeed in Brazil which is resource and capital intensive. Thus,
we have already seen players such as Xiaomi and Sony exiting or relegated to niche players. Many
33
2015 07 08. Recession hits Brazilian smartphone sales. (zdnet.com); 2016 10 07. Brazilian mobile market returns
to growth. (zdnet.com); 2017 03 03. Despite Recession Brazil LTE Smartphones Grew 53% Annually in 2016.
(counterpointresearch.com)
34
Number of smartphones sold in Brazil 2014 to2017. Statista.
Page 45 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
successful international brands are not growing as fast in Brazil as in the other corners of the
world.35
64. The graph below illustrates the distribution of smartphone sales in Brazil in 2017 by price range:36
65. In a 2015 post, Mobile Ecosystem Forum, reported that with a population of 200 Million, Brazil
has 278 Million mobile phones in use, making it the 4th largest market in the world, after China,
India and the US. Its smartphone user base is estimated at 89.5 Million, the 5th largest in the world,
and is growing at an annual rate of around 22% every year. The most recent MEF Global Consumer
Survey indicated that the number of Brazilians making any kind of purchase using a mobile phone
surged from 49 per cent in 2013 to 61 percent in 2014. This was the highest growth amongst all
the surveyed countries.37
66. The graph below illustrates the number of smartphone users in Brazil from 2015 to 2022 (in
millions)38
35
2017 03 03. Despite Recession Brazil LTE Smartphones Grew 53% Annually in 2016. (counterpointresearch.com)
36
Distribution of smartphone sales in Brazil in 2017 by price range. Statista
37
2015 04 28. 10 things you need to know about the mobile market in Brazil. (mobileecosystemforum.com)
38
Number of smartphones sold in Brazil from 2014 to 2017. Statista
Page 46 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
67. As of June 2017, IP Traffic in Latin America was forecast to grow at a compound annual growth
rate of 21% from 2016 to 2021. Consumer IP Traffic incudes: internet, email, IM, file sharing,
gaming, and video. However, Mobile Data Traffic (handset-based data traffic such as text
messaging, multimedia messaging, and video) was forecast to grow at a compound annual growth
rate of 47% for the same period.39
68. In June 2013, Huawei announced it will start producing smartphones in Brazil next month in order
to curb heavy import taxes and offer more competitive pricing. Apart from Huawei, other Chinese
tech giants operating in Brazil are Foxconn and ZTE, also based in the São Paulo countryside.40
Huawei exited the Brazilian smartphone manufacturing market in 2015 and returned in 2018 in
partnership with Brazilian electronics manufacturer Positivo.41
69. In May 2014, Qualcomm Inc. announced that it will use Brazil as a platform to launch a new
technology for smartphones. Qualcomm will partner with electronics makers in Brazil to jointly
verify of a manufacturing technology its developed is viable for industrial production of cellphone
components. In 2014, cellphone makes such as China’s Huawei Technologies Co. Ltd and U.S.’s
Motorola Mobility have smart phone plants in Brazil.42
39
2017 06 06. The Zettabyte Era: Trends and Analysis. Cisco.
40
2013 06 24. Huawei Kicks off smartphone production in Brazil. (zdnet.com)
41
2018 06 11. Huawei partners with Positivo to return to Brazilian smartphone market. (zdnet.com)
42
2014 05 09. Qualcomm Will Use Brazil as a Platform To Launch New Technology. (wsj.com)
Page 47 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
70. During 2014, Lenovo acquired Motorola Mobility from Google to look outside of China for a
bigger market share and high profit margins. Motorola will be operated as a separate brand after
the acquisition. In 2013, Lenovo was mostly sold in China where mid- and low-end phones are in
demand.43 By 2017, Latin America was anchoring much of Lenovo’s handset business. Brazil is
the most important market for Lenovo phone sales by volume.44
71. In 2015, Chinese smartphone maker Xiaomi started making devices in Brazil for sale locally,
seeking to dramatically undercut rivals on price in its first big step beyond Asia. At a launch event
earlier in the day, Xiaomi announced that the entry-level Redmi 2 smartphone would go on sale in
Brazil for R$499.45 However, less than 12 months later, in May 2016, the company ceased its
local manufacturing activity and reached an outsourcing deal with Foxconn. Xiaomi devices sold
in Brazil will be imported. Xiaomi attributed this change to changes in manufacturing rules and
taxation on e-commerce sales. The company prioritized the internet as its only sales channel in
Brazil.46
72. Positivo Tecnologia (“Positivo”) is Brazilian company that manufactures and markets: small and
medium-sized computers, laptops, tablets, monitors, electronic boards, computerized educational
desks, servers, cell phones, smartphones and educational software. The company's production of
PCs, tablets and smartphones is carried out in Brazil.47
43
2014 04 23. Acquisition of Motorola to fuel sales of smartphones. (chinadaily.com)
44
2018 04 03. How China’s Tech Giant Lenovo Is Losing Its Grip On Smartphones. (forbes.com)
45
2015 06 30. Xiaomi takes first big step outside Asia with Brazil smartphone. (reuters.com)
46
2016 05 31. Xiaomi downsizes Brazil Operations. (zdnet.com)
47
Positivo Standardized Financial Statements ‐ 2016
Page 48 of 49
Qbex Computadores S.A. vs. Intel Corporation
Plaintiff’s Expert Witness Report of Andrew C. Bernstein,
August 30, 2018
73. Positivo Tecnologia (“Positivo”) was created in May 1989 with the initial objective of
manufacturing and selling computers for to schools throughout Brazil. In 2004, the Company
debuted in the retail market selling computers to the country's main networks, and in nine months
became the largest computer manufacturer in Brazil. At the end of 2005 it began selling to the
corporate hardware market, with a line of desktops, notebooks and servers, and surpassed the mark
of 500 thousand computers produced. In December 2006, Positivo began trading its shares in the
Novo Mercado, R $ 604.1 million were raised in the initial public offering. In 2008, expanded its
sales channel to market computers and technology services to small and medium-sized companies.
In 2010, the company began marketing desktops, notebooks, all-in-ones, e-readers and tablets in
the Argentine and Uruguayan markets. In 2011, the Company launched the first tablet developed
exclusively for Brazilian consumers with digital content in Portuguese.48
74. At the end of 2012, the company debuted in the handset market with the launch of three models of
smartphones with touchscreen, and two devices with physical keyboard - known as messaging
phones. In 2015, the Company launched the Quantum business unit, focused on selling high-
performance, cost-effective smartphones (through partnerships with Oi and TIM)49 and started
sales of the VAIO brand in Brazil with high-end notebooks50. In 2016 the economic crisis
worsened. The market for smartphones, contracted 8.0% in 2016.51 However, in 2017, the
smartphone market increased 9.7%. In 2018, Huawei and Positivo partnered in the smartphone
market. Positivo will be handling the import, sales and technical support for the Huawei products
in Brazil.52
48
http://www.positivotecnologia.com.br/en
49
Positivo, Standardized Financial Statements ‐ 2015
50
http://www.positivotecnologia.com.br/en/about‐us/
51
Positivo, Standardized Financial Statements ‐ 2016
52
2018 06 11 Huawei partners with Positivo to return to Brazilian smartphone market. (zdnet.com).
Page 49 of 49
QBEX
Actual Historical Statements Of Income (Loss)
Tariffs Duty Taxes On Sales (27,320,446) -21.2% (26,001,173) -21.0% (21,470,245) -26.2% (12,724,344) -21.2% (20,079,734) -25.7%
Recapture Of Tariffs Duty Taxes On Sales 14,080,903 10.9% 13,834,991 11.2% 14,793,136 18.0% 12,587,548 20.9% 16,893,635 21.6%
Cost Of Goods Sold (98,144,749) -76.2% (94,395,720) -76.4% (44,889,059) -54.8% (56,530,493) -94.0% (85,416,245) -109.3%
Gross Profit 17,480,712 13.6% 17,012,445 13.8% 30,404,064 37.1% 3,462,579 5.8% (10,459,998) -13.4%
Marketing /Price Allowance & Other - 0.0% - 0.0% - 0.0% - 0.0% - 0.0%
Operating Expenses (10,639,969) -8.3% (12,680,580) -10.3% (12,596,510) -15.4% (5,847,698) -9.7% (13,221,761) -16.9%
EBITDA 6,840,742 5.3% 4,331,865 3.5% 17,807,554 21.7% (2,385,119) -4.0% (23,681,759) -30.3%
Depreciation (1,444,782) 0.0% (173,082) 0.0% (250,183) 0.0% (667,148) 0.0% (539,773) 0.0%
Interest Expense (1,894,263) 0.0% (2,936,021) 0.0% (1,369,489) 0.0% (477,838) 0.0% (311,820) 0.0%
Factoring Expense (1,853,113) 0.0% (1,484,396) 0.0% (2,225,213) 0.0% (2,481,707) 0.0% (1,905,987) 0.0%
Profit Before Taxes 1,648,585 1.3% (261,634) -0.2% 13,962,669 17.0% (6,011,811) -10.0% (29,761,782) -38.1%
Analysis.xlsx
P&L w Reclass & SHB Calc
QBEX
Should-Have-Been 2015 and 2016
Tariffs Duty Taxes On Sales (12,724,344) -21.2% (21,923,249) -21.2% (1,354,498) -21.2% (1,707,899) -21.2% (31,585,195) -21.2% (65,769,746) -21.2%
Recapture Of Tariffs Duty Taxes On Sales 12,587,548 20.9% 21,687,558 20.9% 1,339,937 20.9% 1,689,538 20.9% 31,245,632 20.9% 65,062,675 20.9%
Cost Of Goods Sold (56,530,493) -94.0% (67,415,848) -65.1% (4,165,198) -65.1% (5,412,704) -67.1% (114,368,439) -76.6% (202,247,544) -65.1%
Gross Profit 3,462,579 5.8% 35,948,462 34.7% 2,221,027 34.7% 2,639,745 32.7% 34,550,269 23.1% 107,845,386 34.7%
Marketing /Price Allowance & Other - 0.0% (5,180,000) -5.0% - 0.0% - 0.0% (5,180,000) -3.5% (38,850,000) -12.5%
Operating Expenses (5,847,698) -9.7% (10,075,218) -9.7% (622,484) -9.7% (784,895) -9.7% (14,515,537) -9.7% (30,225,654) -9.7%
EBITDA (2,385,119) -4.0% 20,693,244 20.0% 1,598,544 25.0% 1,854,849 23.0% 14,854,732 10.0% 38,769,732 12.5%
Analysis.xlsx
P&L w Reclass & SHB Calc
QBEX
Price Cost Of SmartPhones
Intel Phones A18 A28 Average of A18 & A28
Price 395.00 100.0% Price 310.00 100.0% 430.00 100.0% 370.00 100.0%
Components 210.00 53.2% Components 173.33 55.9% 205.02 47.7% 189.18 51.1%
Assembly 2.57 0.7% Assembly 2.57 0.8% 2.57 0.6% 2.57 0.7%
Taxes 44.44 11.3% Taxes 34.88 11.3% 48.38 11.3% 41.63 11.3%
Retailer Disc 7.90 2.0% Retailer Disc 6.20 2.0% 8.60 2.0% 7.40 2.0%
Total COGS 264.91 67.1% Total COGS 216.98 70.0% 264.56 61.5% 240.77 65.1%
Margin 130.09 32.9% Margin 93.02 30.0% 165.44 38.5% 129.23 34.9%
Analysis.xlsx
Intel & Non-Intel COGS
QBEX
Breach Of Contract Damages
Breach Of Contract
Units 460,000 790,000 1,250,000
Sales Price Per Unit 395.00 395.00
Cost Per Unit (264.91) (264.91)
2016 2017 Total
Net Sales 181,700,000 312,050,000 493,750,000 100.0%
Analysis.xlsx
P&L w Reclass & SHB Calc
EXHIBIT 9
QBEX Computadores LTDA
Capitalization of Earnings Method
As of June 1, 2015
Brazilian Reals
Years Ended December 31,
2014 2015 2016
Weight 1 1 1
Sum of weights 3
Cost of debt
Company specific debt rate 13.40%
Less: tax shield at 34.00% -4.56%
After-tax cost of debt 8.84%
2016 2017
Weight 1 1
Sum of weights 2
Cost of debt
Company specific debt rate 13.40%
Less: tax shield at 34.00% -4.56%
After-tax cost of debt 8.84%