US Technology: Searching for a trigger to lead into a new up-trend, as the earnings season starts.

US Stocks
Pricing in the telecom business has not improved. However, there are some signs that things have stabilised in some areas.

Prices remain at abnormally low levels, which will continue to pressure profitability. Moreover, most areas continue to have too much capacity, despite recent business failures. Given the over-capacity, pricing pressure could quickly return to the industry. The wireless area appears to have made some progress in pricing. Several major companies have begun to discontinue their heavily discounted plans. The companies determined that this segment of the market was not likely to generate any future profits. However, this recent change in policy has
resulted in a reduction of customer growth. Worldcom Inc. officially announced that it will exit the wireless resale
business, as part of its strategy to focus on its core operations. The move comes as no surprise, as wireless
resale adds no EBITDA, only pumping up revenue growth. Exiting the business is a positive, as it makes better use of management and capital resources. The long-distance arena continues to suffer from pricing competition.

Voice pricing pressure is fiercest in the commercial segment. In 1Q02, prices declined 19%. The rate of decline in the consumer segment was somewhat better, as rates declined 8% in 1Q02, compared to the prior year.

There remains a significant amount of over-capacity in the industry. This issue, along with increased regulatory
and investor scrutiny, is likely to continue to pressure the stocks in the near term. Worldcom Inc. decreased its
headcount and the company will cut another 16,000 jobs.

With these actions WCOM's management goes in the right direction to cash conservation. Nevertheless Worldcom Inc. will have to take further steps to clearly declare a turnaround. We expect further news will flow in this respect as the company tries to 'right-size' the business. Hold Merck & Co. Inc. (MRK, $52.51, CSFB recommendation: Hold) announced that it plans to re-file an NDA for its second generation painkiller drug, Arcoxia, in the second half of 2003, representing a 12-months delay from the original CSFB's third quarter 2002 forecast. FDA requests additional clinical data on acute pain indication as
well as cardiovascular safety data.

The will collect additional them by conducting a large 6,000 patients study during one year. This delay would reflect on 2003 and 2004. CSFB reduced MRK's revenue forecast from $440
to $400 million and from $850 to $430 million respectively. This should allow Pharmacia along with its marketing partner Pfizer (PFE, $35.34, CSFB recommendation: Buy) to have a head start in the second-generation painkiller drug. Despite this setback, we think the bulk of the disappointment is behind us and reflected in the current price.

Buy Pfizer Inc. stock price levels remain attractive. Among the products, PFE's Lipitor experienced 26% sales growth in 1Q'02 continuing as the number one statin and number one pharmaceutical product in the world. There is still a huge market opportunity both in the US and abroad as many patients remain to be treated for their high cholesterol. The FDA recently granted the drug a range of starting doses that Pfizer Inc. expects would better allow them to compete with an eventual Crestor launch by AstraZeneca. Buy US Technology Stocks
On a week-on-week basis, the NASDAQ Composite Index fell 1.99% to 1504.74.

The NASDAQ Composite's performance over the last week has been very shaky, dominated by mixed company news. The index is continuing its downtrend and there seems to be nothing to improve the investor's sentiment.

However, we do expect the coming earnings season to be without too many surprises, as several companies already have warned about a shortfall in their earnings. We will have a close look especially to the guidance of Oracle Corp (ORCL US: $8.57; CSFB rating: Buy), as it is has been quite optimistic recently, but analysts have been rather sceptical.

Last Tuesday, Siebel Systems CFO (SEBL US: $14.86; CSFB rating: Buy) during a presentation at a technology conference said that the selling environment in the current quarter was at least as challenging, if not tougher, than the first one. He blamed the still challenging economy and the continuing weakness in information technology spending to be the reason for the sluggish business. The company's CEO Tom Siebel earlier said
that the first quarter 2002 might have been the worst in the history of the computer software and hardware industry.

Investors sold off the stock. A series of earnings estimates revisions and downgrades followed the disappointing news and put further pressure on the share price of Siebel System.
There is still no sign of relief coming from the telecom equipment space. The latest disappointment came from Lucent Technologies (LU US: $2.73; CSFB rating: Hold), as it announced its last Tuesday, that its sales would fall as much as 15% from the previous quarter's $3.5 billion. Lucent intents to take measures to reduce costs, by reducing its workforce. The company expects to become able to break even before certain costs with quarterly sales of $4 billion. This is far from reality and Lucent management will not only have to reshape the balance sheet, but also increase its competitiveness on the operating side, as it has lost its leading position over the past years.

On the positive side we had news coming from the research firm IDC, which revised its previously reported figures of PC shipments in 2001 upwards by 8 million. This is due to a closer count of small manufacturers, which were neglected in the previous reports, and seem to play a more important role than expected. IDC also increased their forecast for the current year to an increase in shipments of 4.7% from the previous +3%. They are even more optimistic for the year 2003, forecasting an 11% growth in shipments. Even if we welcome positive news in the current market, we remain cautious, as both Intel Corp (INTC US: $21.28; CSFB rating: Buy) and Hewlett-Packard (HPQ US: $17.35; CSFB rating: Hold) have issued profit warnings and cautious guidance earlier. An increase in shipment not necessary means an increase in profit for the PC maker, as they
will have to fight a price war in order to gain market share.
We added Intel Corp to our Recommendation List, as we believe at current levels a lot of bad news is priced in and the stock looks oversold. Some people in the past have been trying to predict the end of the Intel monopoly, the fall of the King, but they have been wrong.

They should not forget the competitive advantage Intel has through its solid $26.5 billion annual revenues and solid profit margin. Its research and development budget of around $4 billion is more than the market capitalisation of its closest competitor Advanced Micro Devices' (AMD US: $9.60; CSFB rating: Buy) $3.38 billion. And there is Intel's ability to continuously reinvent and reposition itself in challenging market environments.

Actually the company is continuing to diversify its operations into the telecommunication equipment and networking gear and handheld computer areas, which all are currently facing tough times, but this strategy should be paying off for Intel in the long run. Selected technology company quarterly earnings release for the week of June 17 to June 21:

Europe
Last Friday's panic-like selling and the late recovery from the intra-day lows made investors recall the events of
September 21, 2001, which, by the way, was also a Friday.

History has shown that most lows are either hit on a
Monday or a Friday. Analysts often refer to this phenomenon as the 'weekend-effect'. However, we doubt that Friday June 14 has marked such a low. We believe that today's situation is different from the optimism about an economic recovery that built up after the terrorist attacks. Investors' confidence in published earnings and corporate governance as well as the structural weaknesses of big economies such as the USA and parts of Europe that have become apparent in the past quarters make it difficult for investors to get the necessary visibility to justify new investments. The sentiment issue 'post-Enron' has become a big drag for a sustainable recovery of the major equity markets.

Despite our cautious stance we believe that the deeply oversold pattern of the markets could be the trigger for a technical rally in the weeks ahead. However, also in this respect we feel that we are not there yet as sentiment indicators still reflect too much optimism among investors to justify such a rally. Corporate announcements during the week have shown that companies continue to struggle, as demand is not picking up. Sales warnings of Nokia and Lucent as well as profit warnings of Abbey National, Abbot Labs and rumours of Corus missing forecasts are just a few examples of the past week, which underline that the road to recovery remains very bumpy.

Nokia's (NOK1V FH; EUR 13.27) mid-quarter update was broadly in line with expectations. Nokia lowered its revenue forecast from a range of +2% to +7% to a decline of 2% - 6% and kept its earnings guidance of EUR 0.18-0.20 unchanged. As expected the network sector took the hardest hit with revenues now expected to decline between 20% and 25% (from a decline between 5% and 10%). Despite the bad news there was also some positive surprise. The handset business continues to perform reasonably well compared to its competitors. The company expects to gain 1% market share to 38%, whereas the consensus was looking for a decline. Despite the strong competition Nokia was able to maintain its handset margins of 20%.

In terms of valuation Nokia has reached an attractive level. The stock is now trading at a P/E 03E level of 15.5x (basis CSFB), which is below the market's approx. 18x. However, industry fundamentals do not produce any compelling reason to rush back to the stock, as we simply see no trigger other than a technical rally to bring the stock higher in the short term.
Despite faring better than the overall market the Stoxx European Healthcare index declined another 3.35% falling to the lowest levels in two years and bringing its year-to-date decline to 18.10%. Concerns about earnings and patent issues weighed on the market after Abott Laboratories issued a profit warning and a court ordered Genentech to pay USD 300 million in royalties to a cancer centre. Aventis (AVE FP; EUR 68.80) will hold an R&D day on June 18 (London) and June 19 (N.Y.).

We expect the company to reassure the market that the operative business is on track to reach an EPS growth of as much as 30%, which was communicated during the 1Q02 earnings release at the end of April. We believe that Aventis has reached a very attractive buying level. The stock is well supported at current levels and remains our favourite stock in the sector. Aventis closed the week unchanged.

After holding on strongly to the EUR 15 Arcelor (LOR FP; EUR 14.05) came under pressure on Friday as rumours regarding a pending profit warning of Europe's no. 2 steelmaker Corus hit the market. This comes after a period of good news for the steel sector. Earlier in the week a US consultancy firm called World Steel Dynamics issued a report that world steel prices may rise as much as 54% by early next year due to pending
steel shortage later this year. The report cites the closure of many mills while demand remained strong. We believe that the fundamentals remain in favour of steel stocks and continue to view Arcelor the best play in the sector.

Last week, the FTSE Group announced the new composition of the FTSE 100 Index. The stocks to leave the index are Logica (LOG LN; GBP 2.01), ARM (ARM LN; GBP 1.56) and Electrocomponents (ECM LN; GBP 3.87) while Xstrata (XTA LN; GBP 9.10), Bunzl (BNZL LN; GBP 5.135) and Johnson Matthey (JMAT LN; GBP 11) will join the index. With the exit of ARM and Logica Sage (SGE LN; GBP 1.615) remains the only technology stock in the FTSE 100.