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To: Jenna who wrote (18736)	11/18/1998 1:55:00 PM
From: lebo	Respond to of 120523

Thanks for your reply Here is an MSDW research report 26 MORGAN STANLEY DEAN WITTER Wireless Services Industry Analysis CellNet Data Systems (CNDS) Strong Buy Price $7/Target $30 Proposition 9 Defeated By Wide Margin Colette Fleming /Kit Konolige/John Bonaccolta 11/10/98 Proposition 9 was defeated by a wide margin. On No-vember 3, a proposition known as Proposition 9 was brought in front of California voters for approval of revi-sions to three main tenets of the state's already enacted util-ity deregulation legislation. The vote was defeated by a margin of approximately 70%. We believe that the failure of Proposition 9 is positive for CellNet, as the Proposition would have led to further uncertainty around the timing and extent of utility de-regulation. The existing deregulation legislation in Cali-fornia had already brought about a slower-than-expected pace of change in the utility industry. If Proposition 9 had passed, we believe that further uncertainty would have re-sulted, slowing the take rate for CellNet's NMR (Network Meter Reading) applications. Under the terms of Proposition 9, three originally en-acted tenets of utility deregulation would have been made more stringent to utilities. The California utility legislation would have been made more stringent from the perspective of the utilities had Proposition 9 gone through. Specifically, the following three changes would have had the greatest impact: (1) Private electric utilities would not have been allowed to charge customers for the transition costs for nuclear power plants (other than reasonable de-commissioning costs); (2) the measure would have required at least a 20% rate reduction, compared to the 10% reduc-tion enacted by the original deregulation legislation; and (3) the measure would not have allowed utilities to charge cus-tomers for the costs of repaying the rate reduction bonds. We continue to rate shares of CellNet Strong Buy, with a price target of $30 per share. Our valuation for the stock is derived from a detailed discounted cash flow analysis for each of the company's primary business strategies of satu-ration deployment, broad deployment, and commercial data services. CellNet Data Systems (CNDS): Strong Buy Price $7/Target $30 Summary Judgment On Lawsuit Misinterpreted By the Market Colette Fleming/Kit Konolige/John Bonaccolta 11/10/98 CellNet Data Systems lost a summary judgment in its patent infringement lawsuit against Itron Inc. On No-vember 5, 1998, CellNet Data Systems announced that it had lost a summary judgment in a patent infringement law-suit that it had filed against Itron Inc. In April 1997, Cell-Net sued Itron for allegedly infringing its U.S. patent on a device for use with an electric meter for recording time of energy use. In its decision, the U.S. District Court for the Northern District of California ruled that none of the ac-cused Itron products infringed any of the asserted claims regarding CellNet's patent. We believe that the announcement has caused some con-fusion in the market, and we stress that the lawsuit was brought by CellNet, not against CellNet. We believe that some investors may have wrongfully interpreted the an-nouncement, thinking perhaps that the summary judgment was issued in a suit filed against CellNet. We stress that this is not the case. The lawsuit in question was brought by CellNet against Itron, not vice versa. In October 1996 (sev-eral months prior to the lawsuit filed by CellNet against Itron), Itron did file a similar patent infringement lawsuit against CellNet, and this case is still pending. CellNet has asserted that it believes that the suit filed by Itron is “with-out merit.” In fact, CellNet had the opportunity to purchase the technology and rights in question, but had declined be-cause it believed that the technology and rights do not cover CellNet's systems and are not useful or necessary for the operation of CellNet's own NMR services. It's not over until it's over. Further, the judgment issued by the court was only a summary judgment. CellNet now must decide whether it will appeal the decision or drop the case. It is our understanding that the company is currently evaluating this decision, and we would put the odds of its pursuing an appeal or dropping the case at 50/50. We believe that the stock overreacted to the announce-ment of the summary judgment. As mentioned previ-ously, we believe that there was some confusion surround-ing the announcement which caused the stock to trade off significantly. Once the nature of the lawsuit was clarified, the stock regained most of its decline. We had not included any monetary benefits to CellNet regarding its lawsuit against Itron in our valuation models for CellNet. There-fore, the summary judgment has no impact on our valuation for the stock. We continue to rate the shares Strong Buy.