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To: ptanner who wrote (20940)	11/29/2000 9:00:21 AM
From: dhellman	Respond to of 275872

Merrill Lynch - Morning Notes Summary – 29 November 2000 Semiconductors • Five wireline companies (Broadcom (BRCM; C-2-1-9; $85.06), Vitesse Semiconductor (VTSS; C-2-1-9; $53.25), Applied Micro Circuits (AMCC; D-2-1-9; $49.19), Transwitch (TXCC; C-2-1-9; $28.75) and PMC Sierra (PMCS; C-2-1-9; $96.88)) have been very weak recently as the potential impact of the problem on growth prospects for the first part of 2001 has become clear. We continue to believe that order growth rates for the March 2001 quarter will be the most likely first sign of trouble. • We think it’s important, however, not to interpret our comments to mean that December quarter earnings for our wireline comm IC companies are at risk. Our checks during the past few weeks indicated no weakness in either revenue or order activity for the five companies that we downgraded. • It is also important not to extrapolate our comments on the wireline comm IC sector to other parts of the semiconductor business. We have pointed out that companies supplying the wireless handset industry are further along in the process of working off inventory and resuming order growth, and we believe that investors have more fully factored the potential problems into stock prices. • Finally, we’d point out that the argument for a sustained downturn in the semiconductor business remains questionable. We think shorter-term catalysts are absent, but longer term investors should continue to be comfortable owning high-quality communications names in our sector. (J. Osha) Gateway (GTW, $31, C-1-2-9) 00E $1.86; 01E $2.25 • We expect that Gateway will issue a press release either Wednesday after the market close or on Thursday providing a quarterly update. The company speaks on Thursday afternoon at a competitor’s technology conference. Given management’s emphasis on being straightforward with the Street, we believe the company will issue a very clear statement about the quarterly outlook, either positive or cautionary. At this juncture, we think that Gateway could choose to err on the side of caution by saying that it was mildly disappointed in the past weekend’s results. • For the all-important kick-off to the retail selling season this past weekend, we believe that Gateway’s volumes showed significant improvement over pre-holiday weeks but were not quite as strong as originally hoped for. • We still believe Gateway will meet the 24% consensus growth rate. However, we now essentially rule out any reasonable chance of upside to the numbers. Therefore, we are reducing our 4Q00 sales estimate to $3.040 (up 24%) billion from $3.135 billion. Note that we are keeping our $0.63 EPS estimate intact, which is a penny above the Street, and we are maintaining our intermediate-term Buy rating on Gateway shares. However, we would exercise caution going into Thursday’s presentation. (S. Fortuna) ChipPAC (CHPC, $7.63, D-1-1-9 to D-3-2-9) Lowering 00E from $0.50 to $0.35; Lowering 01E from $1.04 to $0.47 • ChipPAC preannounced fiscal fourth quarter (December) operating EPS results of approximately $0.03 on revenue of $128 million. This is well below estimates of $0.18. • ChipPAC is seeing reduced forecasts from its customers and believes there has been inventory buildup in the channel, especially at computing and wireless customers. We estimate the $0.15 shortfall breaks down as follows: $0.06 was due to computing; $0.05 from communications (wireless); and the rest from multi-applications end markets. • The company also announced the purchase of VIKO Test Labs, a provider of testing, package qualification, and failure analysis services. The purchase transaction is expected to close by year-end. It should be accretive to 2001 earnings with revenue of $20-25 million. We plan to update our financial model following the closure of the transaction. • We are cutting our EPS estimate for FY 2001 from $1.04 to $0.47 on revenue of $585 million. FY2000 EPS goes from $0.50 to $0.35. • We are reducing our intermediate term rating from Buy to Neutral on the reduced visibility and concerns about resolution of the channel inventory levels. Our long term recommendation is lowered from Buy to Accumulate as ChipPAC stands to benefit from the growing trend toward outsourcing of chip assembly and test. • ChipPAC is a leading company in outsourced packaging and test of integrated circuits for integrated device manufacturers (IDMs) and fabless semiconductor companies. By the company’s estimate, it had a 7% share of the outsourced packaging market in 1999. (B. Hodess)

To: ptanner who wrote (20940)	11/29/2000 10:42:07 AM
From: Petz	Read Replies (2) \| Respond to of 275872

Pete & Goutama, no criticism intended (VOXW), on the contrary, the Porfolio you have constructed is an awesome achievement. I was curious about VOXW because I rode it up from 1 to 2 a year ago (on the way to 12+ and then back to 1). Does the portfolio only reflect positions that 1)Intel has sold a portion of (but do they have to report sales for companies they never held more than X% of the stock?) 2)were revealed in the last 10Q (or is it some other report?) 3)other criteria?? In other words, how is Goutama doing this and how much of Intel's portfolio is missing from your shadow portfolio? Petz