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To: Johnny Canuck who wrote (36637)	4/2/2002 8:03:44 PM
From: Bill Cotter	Read Replies (3) \| Respond to of 67759

Hi Harry; VTSS taking a 47 million writeoff of GaAs. Going with CMOS. I wonder if KOPN is facing a similar situation? TEXT-Moody's cuts Vitesse Semiconductor ratings (Press release provided by Moody's Investors Service) Approximately $441 Million of Debt Securities Affected. NEW YORK, April 2 - Moody's Investors Service lowered the ratings on Vitesse Semiconductor Corporation <VTSS.O> (Vitesse), concluding a review commenced on February 22, 2002. The ratings outlook is negative. The following ratings are affected: (i) Rating lowered to B3 from B2 on Vitesse Semiconductor Corporation's $441 million 4% convertible subordinated debentures, due 2005; (ii) Senior implied rating lowered to B1 from Ba3; and (iii) Senior unsecured issuer rating lowered to B1 from Ba3. The ratings downgrades take into account Vitesse Semiconductor's focus on supplying high-performance integrated circuits (ICs) for use in telecommunications and storage technology, and the severe retrenchment in capital investment currently affecting those end use markets. Though Vitesse has reduced its quarterly breakeven revenue rate to $70 million through the implementation of two restructurings during FY2001Q3 and F2002Q1, revenues are expected to remain well below the revised breakeven level for the near-term. Revenues of $39.2 million for FY2002Q1 ended December 31, 2001 were down 76.3% from peak revenues in FY2001Q1, and are expected to range from $39 million to $43 million for FY2002Q2. Moody's is concerned over the company's continued draw down of cash in the absence of end-market visibility, and the prevailing belief that a recovery in information technology capital spending will be deferred until sometime after an overall economic recovery is in evidence. A recovery in wireline telecommunications capital investment by the incumbent service providers is expected to be even more gradual. While Vitesse will no longer be under review, Moody's plans to monitor the company's performance against guidance, most notably the company's expectation of achieving breakeven on a net basis during its FY2003Q1 ending December 31, 2002. To the extent that performance deviates significantly from the company's forecast, and high technology and telecommunications investment remains mired in uncertainty as of that time, a further downgrade could be warranted. For the moment, Moody's concerns are mitigated by the company's substantial liquidity, with $555 million cash and investments available as of December 31, 2001; the substantial interest income being earned by these investments; and Vitesse's moderately leveraged 41% debt to capitalization, after adjusting for the company's consolidated tangible net worth. Vitesse's net cash position, after accounting for $441 million of outstanding convertible subordinated notes as of December 31 2001, was $114 million. The negative outlook anticipates continued cuts in communications carrier spending, and uncertainty over whether a significant proportion of the company's 150 reference designs awarded in FY2001 will gain traction with OEM customers. The ratings also reflect the intense competition within the high-performance communications IC market, and the inexorable pressure on sustaining research and development expenditures in the wake of contracting revenues. For the LTM ended December 31, 2001, Vitesse's engineering, research and development expenses represented nearly 65% of revenues. Vitesse competes with specialized communications IC vendors, including PMC Sierra, Applied Micro Circuit, Broadcom, and Conexant, as well as more diversified and substantially capitalized semiconductor concerns such as IBM Microelectronics and Intel. Nevertheless, as original equipment manufacturers (OEMs) have pared their internal ASIC (application specific integrated circuit) design teams to reduce costs and concentrate their resources on systems architecture, the market opportunity for application specific standard products (ASSPs) incorporating more complete solutions over the optical carrier hierarchy has expanded. The key for Vitesse is to be able to successfully transition from high speed physical layer products which are becoming more commoditized, to offering both upper layer products and chipset modules in which areal proximity and a common interface translate into better performance and significant cost reductions for customers. The ratings also recognize the substantial investment in capital expenditures made in FY2001 - $153 million, $111 million of which was spent during FY2001H1 - and the subsequent $47 million write-down of gallium arsenide (GaAs) wafer fabrication and testing equipment in FY2002Q1. The change in strategy from providing physical layer components to offering more complete solutions featuring upper layer network processing and switching functions has led Vitesse to transition towards complementary metal-oxide silicon (CMOS) process technology to meet the functional and time to market requirements of its customers. The company expects a continued diminution in revenues from products based on GaAs process technology, particularly as the yields and speeds associated with CMOS process technology continue to improve. The outsourcing of products based on CMOS processes to outside foundries, primarily TSMC (Taiwan Semiconductor Manufacturing Corp.) and IBM, will facilitate the draconian reductions in capital expenditures planned for FY2002 and FY2003. CMOS based products contributed approximately 77% of FY2002Q1 revenues. The company provides its own foundry services for indium phosphide (InP) process technology, currently in the early stages of development, and is poised to benefit once the deployment of next generation, high speed communications equipment operating at OC-768 or 40GB/s speeds gains momentum. The ratings, however, are buttressed by Vitesse's ability to transcend the GaAs process technology which figured prominently in its OC-192 products, and successfully integrate upper layer intelligence into its devices, as its recent record of design wins would attest. Morgan Stanley and Morgan Stanley Online are service marks of Morgan Stanley Dean Witter & Co. Services are offered through Morgan Stanley DW Inc., member SIPC. Any redistribution of information found at this site strictly prohibited. © 2002 Morgan Stanley DW Inc.

To: Johnny Canuck who wrote (36637)	4/2/2002 8:31:56 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 67759

Tuesday April 2, 12:19 pm Eastern Time Reuters Stock Funds Post Gain in 1st Quarter By Martha Slud NEW YORK (Reuters) - U.S. stock mutual funds notched up slightly in the first quarter, with value-oriented funds and international portfolios registering the biggest increases, according to new data. The average diversified U.S. stock fund rose 0.36 percent in the first three months of the year, according to research service Lipper Inc. These funds, with a combined $2.4 trillion in assets, invest in a variety of sectors and account for about three-quarters of all U.S. stock fund assets. Including sector funds such as health and technology funds and world stock funds, the average U.S. stock fund gained 0.78 percent, said Lipper, a division of Reuters Group Plc (quote from Yahoo! UK & Ireland: RTR.L). Results were boosted by a 3.79 percent increase for world equity funds in the quarter. In comparison, the broad Standard & Poor's 500 index (^SPX - news) slipped 0.1 percent for the quarter, while the Dow Jones industrial average (^DJI - news) gained 3.8 percent and the tech-laden Nasdaq Composite index (^IXIC - news) lost 5.4 percent. The data was released late Monday. Last week, Lipper released preliminary data for the quarter, excluding the final day of trading on Thursday. Diversified stock funds lost steam after rising 14.8 percent in the last three months of 2001, as fund managers and analysts said investors were awaiting more signs of economic recovery before plowing back into the market. But there were some bright spots -- especially among value-oriented funds that hunt for stocks that are considered undervalued. These funds continued to outpace more aggressive growth funds in a repeat of last year's trend. Small-cap value funds, ignored during the technology-led bull market of the late 1990s, rose 8.74 percent in the first quarter, bringing 12-month gains to 24.7 percent, according to Lipper. Mid-cap value funds rose 6.39 percent in the quarter, while large-cap value funds edged up 1.84 percent. In contrast, small-cap growth funds slipped 2.61 percent in the January-to-March period, mid-cap growth funds fell 2.5 percent and large-cap growth funds were down 2.87 percent. Gold-oriented funds, buoyed by investor enthusiasm over the volatile sector, soared 35.2 percent, bringing 12-month returns to 69.6 percent. The niche sector has about $2.6 billion in combined assets. Every category of world equity funds rose in the period, led by a 12.2 percent increase in emerging markets funds. Among the biggest portfolios, the Fidelity Magellan fund (FMAGX - news) slipped 1.6 percent in the quarter and the Vanguard 500 index (VFINX - news), whose results mirror the S&P 500, gained 0.24 percent. The biggest losers were telecommunications sector funds, down 18.4 percent as the telecom industry faces heavy debt loads and slow revenue growth. These funds, a small sector with only about $3.2 billion in combined assets, are down 33.9 percent for the past 12 months. Type of Fund Net Assets ($mln) Q1 (%) Large-Cap Growth $356,263.2 -2.87 Large-Cap Core $431,565.0 -0.36 Large-Cap Value $281,053.5 1.84 Multi-Cap Growth $167,668.4 -3.86 Multi-Cap Core $214,195.7 0.37 Multi-Cap Value $203,078.5 2.64 Mid-Cap Growth $93,797.6 -2.50 Mid-Cap Core $48,752.1 3.39 Mid-Cap Value $41,957.7 6.39 Small-Cap Growth $46,662.0 -2.61 Small-Cap Core $55,310.2 4.57 Small-Cap Value $66,405.0 8.74 S&P 500 Index Objective $235,817.4 0.09 Equity Income $93,843.7 2.74 Specialty Diversified Equity $3,150.2 2.48 U.S. Diversified Equity Funds $2,339,520.5 0.36 Type of Fund Net Assets ($mln) Q1 (%) Health/Biotechnology $45,324.9 -7.68 Natural Resources $6,628.0 11.27 Science & Technology $57,503.6 -7.61 Telecommunications $3,253.3 -18.37 Utility $18,365.9 -1.72 Financial Services $15,038.2 4.37 Real Estate $13,537.9 7.96 Specialty/Miscellaneous $5,798.0 4.92 Sector Equity Funds $165,449.8 -2.19 Type of Fund Assets ($mln) Q1 (%) Gold $2,571.3 35.20 Global $119,860.8 0.66 Global Small-Cap $15,162.6 2.62 International $180,899.0 1.20 International Small-Cap $7,737.0 4.55 European Region $15,986.7 0.44 Pacific Region $3,388.6 5.72 Japanese $1,823.3 2.19 Pacific Ex Japan $3,035.7 11.98 China Region $607.6 4.88 Emerging Markets $33,684.8 12.24 Latin American Funds $1,187.4 9.43 World Equity Funds $385,944.8 3.79 Total Equity Funds $2,890,915.0 0.78 Source: Lipper.