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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Boplicity who wrote (51355)	5/13/2002 11:33:16 AM
From: Boplicity	Respond to of 65232

S&P to announce new standards for calculating earnings -- WSJ According to a story in this morning's Wall Street Journal, Standard & Poors is expected tomorrow to announce new standards for calculating operating results. The most controversial of S&Ps new standards would treat employee stock options as a quarterly expense against earnings. Using the definition of core earnings that S&P has just developed, the P/E of the S&P 500 would rise from 30x estimated 2002 earnings vs 22x under the old method.

To: Boplicity who wrote (51355)	5/13/2002 12:06:13 PM
From: stockman_scott	Respond to of 65232

The RTW Weekly for May 5 - May 11, 2002 -------------------------------------------------------- In This Issue: 1. MARKET COMMENTARY 2. I2 AND PEREGRINE: GETTING THE BOOT -------------------------------------------------------- 1. MARKET COMMENTARY It is important to note that over the last couple of years the Nasdaq followed large one day gains such as the one this past Wednesday with declines anywhere from 10% to 45%. Wednesday's rally also did not create a move above the 2002 lows in the low 1700's either, and the Semiconductor Index ended the week roughly where it started the week. After some profit taking pressured by the Cisco news, the yield on the ten-year note fell back towards the levels at which it began the week. We still anticipate a degree of capitulation that perhaps breaks down the chip sector while presenting interesting opportunities among RTW firms. While we are not in the business of trying to call an exact bottom we feel that moves such as the one on Wednesday suggest that a significant portion of the investment community is still holding out for a meaningful rebound in IT spending during the second half of 2002. If and when the majority of investors give up on technology for 2002 we feel that from a valuation standpoint some very compelling prices among the group of RTW firms will present themselves. Cisco's numbers highlight the importance of differentiating between the internal progress made by well-managed firms and the overall conditions of a marketplace or group of markets. It should be noted that Cisco CEO John Chambers was enthusiastic about Cisco and not necessarily the overall spending environment among service provider and enterprise customers. The coming reports from Dell, Network Appliance, and Applied Materials could create similar positive buzz. Dell for example is simply killing its competition and quite likely is continuing to execute near flawlessly. As of right now, what we still do not see is meaningful revenue growth from technology firms suggesting that overall demand for IT equipment and services is bouncing substantially. IBM, for example, appears poised to announced additional layoffs, sources are citing weak expected conditions for 2002 and 2003. It would be a welcome sign from a contrarian and psychological standpoint to see investors react negatively or in a muted manner to positive reports such as the one from Cisco. We still contend that the overall cash flow positions of corporations requires continued improvement prior to the emergence of a clear, consistent wave of the inevitable and necessary upgrade of technology products and services. I2 AND PEREGRINE: GETTING THE BOOT We have decided to remove both i2 and Peregrine as potential World Rulers. Peregrine recently announced it was investigating possible accounting issues uncovered when the switched audit firms form Anderson to KPMG. The issues revolve around $100M in revenue from indirect channels. The new auditors have objected to some of the recognized revenues and a thorough review and investigation is under way. The Board of Directors removed Peregrine's CEO and CFO last weekend. In light of the uncertainty about their historical financial results and the lack of trust in management the Rule the World Report has removed Peregrine from all world ruler categories. On a slightly positive note, the Board of Directories acted swiftly, openly and decisively when the accounting issues surface. The Boards handling of the situation was impressive. As well, Peregrine was well positioned in a good market. For these reasons, we will still follow Peregrine and will reconsider their status if the situation at the firm stabilizes. I2 is being removed from all RTW lists because of the continuing erosion of it's competitive position. The i2 products are too complex and expensive to implement. Typical implementations can cast multiple of $10 million. In the current environment for enterprise technology this is simply too large a commitment for a customer, regardless of how convinced the customer is about the benefits and the return-on-investment. This product complexity will also hinder i2 when rapid growth returns. I2 must focus on simplifying their product line so that it can be bought, installed and deployed in much less time so that I2 and it's value chain can serve more customers. This is the approach being taken by competitors Manugistics and Agile. SAP is still a complex SCM application but SAP has a track record of success with many of their accounts and this gives SAP a real advantage over i2. Lastly, i2 has undergone a large change to their management team recently, including losing the CEO and the EVP of Global Sales. Large-scale management changes can be very disabling. We will continue to watch the Supply Chain Management market as it develops and when a leader emerges, RTW subscribers will be the first to know. Have a Nice Week. - The RTW Group ------------------------------------------- The RTW Weekly is a weekly publication that provides commentary on markets and issues relating to technology investing.