Volatile weeks to accompany the July reporting period (page 1 of 2)

We recommend to maintain a conservative and selective approach to accumulating technology stocks as we believe sentiment will remain volatile into the July reporting period.

Technology

We have added Openwave Systems (OPWV US, $32.45, CSFB rating: Strong Buy) to our US Technology Buy Recommendations list. OPWV is a leading supplier of communications software infrastructure products and services. Since its (Phone.com) merger with Software.com in 2000, Openwave Systems (renamed) has successfully delivered 2 consecutive quarters (Dec-2Q01 and Mar-3Q01) of healthy earnings. OPWV has a leading global market share in the Internet gateway market and we believe the company is well positioned to benefit from any increase in adoption rates of wireless Internet usage. Looking ahead, we believe the key drivers to the stock's out-performance includes 2.5G network upgrades and Unified Messaging potentially being the killer-application for wireless Internet. OPWV's valuations are relatively undemanding at 17.4x price-to-sales and 3.2x price-to-book. Our initial price target at $37.00 provides a investors with a short-term return of 14% and our 12-month price target of $43.50 provides a long-term capital gain of 34%. OPWV is scheduled to report Jun-4Q01 results on 23 July 2001. We recommend to accumulate OPWV with the following 3-tiered structured buying strategy.

Wireless Communications Software: Price Levels
Openwave Systems * T1 = $32.00 40%

--CSFB rating: Strong Buy T2 = $24.00 40%
T3 = Hold 20%

Average (straight) Purchasing Price $28.00


Valuations: (if at $24.00) (at $32.00) (if at $37.00)
Price-to-Sales: 12.90x 17.42x 19.89x
Price-to-Book: 2.41x 3.26x 3.72x
(source: Bloomberg)

3-tiered structured Buy strategy:
T1 = 1st tier buy level
T2 = 2nd tier accumulation level
T3 = 3rd tier accumulation level

Neutral on Applied Micro Circuits Corps (AMCC US, $16.33, CSFB rating: Buy). AMCC warned earlier in the week that they expect the coming June 1Q01 to experience a sequential revenue decline of 67% (magnitude of decline was unexpected) and guided down revenue and EPS estimates. The company attributed the shortfall to persistent excess inventory, continuing cancellations and push-outs. Though the company warned of weaker than expected numbers, and given the prevailing weak sentiment in the early part of the week when AMCC announced, it was interesting to see the company's stock price holding steady above $14.00 (the day after) and even trekking higher later in the week. The reasonable conclusion from AMCC's price action during the week is that investors were psychologically prepared for the bad news and that at low levels of $14.00, AMCC's valuations (9.6x price-to-sales and 0.8x price-to-book) appeared relatively undemanding given the company's potential when business recovers sometime in 2002/03. However, given the anticipated volatility in sentiment during the coming earning period, we suggest investors who bought the stock for a short-term trading scenario to look to sell a portion of their trading exposure on the stock to lock-in profits as price approaches $20.00. AMCC is expected to report earnings on 18-Jul-02. We do not recommend investors to chase the stock at current levels but to accumulate on weakness (for high risk-taking technology investors with at least a 12-month investment time horizon).


Europe


International equity markets had to cope with a couple of events, such as the FED rate cut, a drop in oil prices, more profit warnings and window dressing at the end of a disappointing first half of 2001.