CSFB-Ratings / Europe

industry situation has not yet stabilised reflecting uncertain demand in
the context of growing supply b) company visibility on q2 and q3 remains
low and c) current margin assumptions are vulnerable
· STM remains our preferred vector to play the re-acceleration of the
industry dynamics but we continue to highlight caution in the near term.
It is too early in our view to anticipate the inflection point.

Scandinavia Online (SCOL.ST - SEK40.00 - Hold)
Stuart Amor/ Shane Leonard (+44 20 7888 9216/1911)
Initiating coverage with a Hold recommendation

· Scandinavia Online (SOL) operates a leading network of Internet portals
in the Nordic region and claimed more than 6m unique users in
December 2000.
· SOL faces fierce competition, not least from its parent companies.
· SOL trades on 3.5x 2001E portal revenues, which is the second lowest
multiple in the European Internet sector.
· We initiate coverage with a Hold recommendation as we believe SOL
will continue to trade below its fair value while the potential conflict of
interest with its parent companies remains in place.

ILOG (ILOG.LN/ILOG.O-€ 27.0/$24.75-Buy)
B Völkel/D Clayton/M Hammond/M Laverty (44 20 7888
3316/0273/4058/36886)
Q2 Results - Business model transition continues, March quarter should be
the acid test
· ILOG reported second quarter 2000/1 results in line with expectations
and previously lowered guidance. Revenues were up 14% to $20.5m and
ILOG achieved break-even. The results reflect the continued transition in
the business model from direct sales to indirect sales through OEM style
partnerships.
· We continue to view the move towards an indirect business model as the
right one for the company. However, visibility in this transition period will
remain limited. ILOG is confident that recurring royalties will begin to
arrive in the March quarter.
· Key metrics: (1) The ISV related revenues now account for 50% of
license revenues, up from 40% last quarter; (2) 30 new ISVs were added
bringing the total to 230.
· In the quarter, ILOG successfully extended existing agreements with
SAP, Siebel and AspenTech and most critically i2 Technologies.
· Although ILOG reiterated its revenue guidance for the third and fourth
quarter, it lowered EPS guidance for fiscal year 2000/1 from $0.35-0.40
to $0.25-0.35.

Misys (MSY.L-659p-Hold)
D Clayton/M Hammond/B Volkel/M Laverty (44 20 7888
0273/4058/3316/36886)
Valuation looks full at current levels
· Misys reported H1 2001 results yesterday morning with the overall
results still showing few signs of regaining revenue or earnings
momentum post Y2K. However there are signs there has been some
acceleration through the period and Q2 showed improvement especially
in the banking business.
· H2 has a significantly easier comparable period than H1, however, even
with the lower hurdle and the accelerating revenues the company clearly
have left themselves a considerable H2 target after the flat to declining
organic revenue and operating profit growth of H1.
· We have undertaken a significant review of our estimates and in our new
model we are now treating the internet development costs as operational.
In our view they are an ongoing cash expense that without visibility on a
sale or floatation of the portal business cannot anymore be classified as
exceptional.
· In our view therefore the best EPS measure to use is pre-exceptional
gain, pre-amortisation and post internet costs as this is the closest
measure to operational cash flow per share.
· We are therefore reducing our PBT and EPS estimates for 2001 and
2002. For 2001 we are moving adj PBT from £137.4m to £119.8m and
adj EPS from 18.3p to 16.7p, and 2002 adj PBT from £174.7m to
£143m and adj EPS from 22.9p to 19.6p.
· We are also reducing our share price target from 750p to 675p. As a
result of this we see only very limited upside to the shares at current
levels and consequently are moving our recommendation to Hold.

Cap Gemini (CAPP.PA-€ 192-Buy)
Will Hovey/ James C. Clark/ Pascal Daloz/ Paul Smith (+44 20 7888
1350/0299/36916/36220)
The T-Rex is back...sooner then expected
· Cap Gemini reported preliminary figures for '00 last night. Including E&Y
for the whole year, revenues were €8,457m, vs €7,674m a year ago
(10.2% growth), and our estimate of €8,406m (9.2% growth). EBITA
margins were 10.5% vs. 10.2% in '99 and our estimate of 10.4%. On a
real basis (i.e. without currency help) revenue grew 12.8% in Q4, just
above our estimate of 12.5%.
· Given that we thought it would be difficult for the company to meet our
forecast, we think even the small outperformance relative to our numbers
is a significant achievement and supports our thesis that '01 will see a
return of demand, talent and fundamental performance to the large blue
chip IT services companies that can perform the large scale back end
integration projects that customers will focus on post .com bubble. In
our view, Cap Gemini E&Y fits this bill better than any other European
company.
· Highlights of Q4 included strong performance in Scandinavia and the
UK, where demand returned with force and the company is gaining
market share, strong demand for CRM and SCM, and a significant drop
in staff turnover from 26% in the first half to 21% in Q4. We expect
turnover to continue to fall from this still relatively high level to around
15% in the not too distant future as the exodus of talent from Cap Gem
to the internet services companies has clearly stopped, and likely
reversed.
· We are lowering our estimates slightly for '01; revenues go from €9.79b
to €9.73b, which implies 15% growth. Our 11.1% margin forecast
remains. Company guidance is for 14% growth, but given 12.8% Q4
growth, building momentum, and easy comps for at least the first 3
quarters of '01, we think our forecast is reasonable. E&Y performance in
the US remains the biggest risk to this and if the US economy worsens
significantly, our numbers will likely have to come down.
· We reiterate our Buy rating and our €250 price target. We expect the
stock to jump from its €170-200 trading range of the last several months
to a €205-230 range for the near term.

Ericsson (LMEb.ST -SKr106.50-Strong Buy)
Ian Burgess/Marc Cabi +44 20 7888 0271/+1 415 836 7701
Fourth quarter results disappoint
· Ericsson reported profits below both CSFB forecast and expectations,
despite revenue growth in line and a healthy order book. In particular, the
operating margin in the Network Operator business unit was below
expectations.
· The cautious outlook for revenue growth (15-20%) and profitability (6-8%
EBIT margin) in 2001 is driven by the uncertain economic environment
and difficult capital markets. This guidance suggests an EPS number for
2001 of approximately SKr2.00-2.20 per share.
· The positives-mobile phone losses in line with expectations, restructuring
on track and very strong order book-are likely to receive little attention.
· The company also announced its intention to outsource the entire
handset production. We view this as a positive step in the turn around of
the business, although it stops somewhat short of the exit that some
commentators had hoped for.
· From the outlook statement and the lower profit margins in
infrastructure, we believe that the catalysts for a re-rating are more likely
from the middle of the year. The group's dominant position in mobile
infrastructure and its ability to leverage that as the roll-out of 3G
progresses suggests that Ericsson is likely to deliver strong growth in the
medium term notwithstanding the near-term uncertainties.

FROM THE US
Atmel Corporation (ATML-US$14.81-Buy)
Tim Mahon, (+1 650 614 5040)
Bucking the Trend; Grows in Q4 and Guides UP
· Atmel reported rev of $574M and EPS of $0.18, above our estimates of
$568M and $0.17, respectively. EPS upside to our est was a
combination of lower than expected share count and higher than
expected interest income. Gross margins of 44.9% increased 50 bps seq
and exceeded our estimate by 30 bps.
· Given the environment in the fourth qtr and expectations (including ours)
that growth for Q1 would be nearly impossible, the co’ s results and
growth forecast (if achieved) is outstanding. Flash memory, which seems
to get all the press nowadays, was up approx 4% seq and, for once,
wasn’ t the highlight. The company’ s MCU and logic business was up
approx 19% seq, mainly driven by smart card ICs (up 50%). We think
Atmel is benefiting from its alliance with Gemplus, one of the leading
smart card suppliers in the world.
· We are maintaining our 20% 2001 rev growth for Atmel. Consistent with
our industry downgrade in Dec, we believe the co's current business and
customers will grow 11%, but we believe the real kicker is two contracts,
that may contribute $250M in rev in 2001.
· The co is trading at premium of 15% and 7% to its historical average
P/S and P/B, respectively, and an 84% and 77% premium to its
historical low P/S and P/B, respectively. Atmel is one of the first semi
stocks we would aggressively buy once industry fundamentals show any
signs of improving.

Microchip Technology (MCHP- US$26.31-Buy)
Tim Mahon, (+1 650 614 5040)
MCHP: Reports In-Line With Pre-Announced Guidance
· MCHP reported Dec-qtr (FQ3) rev of $176.4M; roughly in-line with our
estimate, though EPS of $0.34 beat our estimate by $0.01, owing mostly
to slightly higher than expected “other” income and a slightly lower share
count. Gross margins of 55.2% were another record for the co, though
they narrowly missed our est by 30 bps.
· The distribution inventory correction that forced the co to preannounce
weak earnings in mid-Dec, persisted through the end of the qtr. This
decrease in bookings has forced the co into a situation where 40% turns
business is needed to hit its Mar-qtr guidance.
· Management believes that the inventory correction issues that plagued
the company in the Dec-qtr will be largely corrected by mid-Feb. As a
result though, the co is guiding rev down slightly for the Mar-qtr; it
believes growth should resume in the Jun-qtr and beyond. We are
slightly more concerned about the macro environment and the impact
this could have on the growth in the markets Microchip serves over the
next several quarters.
· As a result, we are modeling a 2% seq rev decline in the Mar-qtr to
$186M (including TLCM’ s numbers in Dec for comp reasons). FY01
revenue and decreases to $697M $1.27, from $688.4M. Our new FY02
rev est is $815M, down from $805M. However, we are maintaining our
BUY rating, as we continue to believe that MCHP’ s business model
offers investors unparalleled stability over the longer-term.

CONFERENCE CALL DETAILS
Ericsson will hold a conference call today at 15.00 CET. The dial in numbers
are:
Europe +44 (0) 8700 559 369 / +44 141 273 2005
US: +1 888 849 9225 webcast: www.ericsson.com/press
Replay until 28 th January on:
Europe: +44 141 566 8866, CIN no. 503, Passcode: 130#
North America: +1 800 633 8284, Reservation no. 17638584
RESULTS DIARY
Company Results Date
Ericsson FY/Q4 2000 26-Jan
London Bridge Software FY 2000 26-Jan
Devoteam sales 30-Jan
Nokia Group FY/Q4 2000 30-Jan
Intershop Communications FY/Q4 2000 31-Jan
ARM FY/Q4 2000 31-Jan
Alcatel FY/Q4 2000 31-Jan
Siemens Q1 31-Jan
Infineon Q1 31-Jan
Business Objects FY/Q4 2000 1-Feb
EPCOS Q1 1-Feb
Adcore FY/Q4 2000 6-Feb
Alphameric FY 2000 6-Feb
Dassault Systems FY/Q4 2000 6-Feb
Philips FY/Q4 2000 8-Feb
Cap Gemini FY/Q4 2000 14-Feb
Valtech FY 2000 mid Feb
Autonomy FY/Q4 2000 15-Feb
WM data FY/Q4 2000 16-Feb
Sema FY/Q4 2000 20-Feb
Wavecom Q4 20-Feb
Baltimore Technologies FY/Q4 2000 21-Feb
ELMOS FY/Q4 2000 21-Feb
Brokat FY/Q4 2000 21-Feb
Logica H1 21-Feb
Ubizen Q1 26-Feb
CMG FY/Q4 2000 26-Feb
Devoteam FY/Q4 2000 27-Feb
Contact maria-sofia.dibelmonte@csfb.com or +44 20 7888 8264.
Specify your CSFB salesperson contact, current fax number if you would like
to receive the European Tech Daily by fax, and preferred format for e-mail
attachment: MS Word, Adobe Acrobat or Text Only.

gruß
proxi