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Five analysts and top management from eight sector firms examine the Semiconductor sector in this special 57-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info377.htm

TWST: What have you been telling investors about how they should interpret the flow of news surrounding the semiconductor industry, and the semiconductor stocks, over the last few months?

Mr. Veerappan: The flow of news is going to be conflicting, in the sense that you’re going to get some positive data points, you’re going to get some negative data points, and so the stock market consequently will be very volatile. That’s certainly something that I’m telling investors. Consequently, I’m telling them to pick their spots, identify franchise companies that they’re willing to own for the long term, and play those, while bearing in mind that, in the near term, the next three to six months or so, most of these stocks will remain in a trading range.

TWST: What are the encouraging signals that you’re getting from the stock market and the industry about these stocks?

Mr. Veerappan: The encouraging signal, if you can call it one, is the fact that most of the companies in my space, at least most of the good ones, have proactively reduced their revenue levels somewhere between 50% and 60% from their peak levels that were registered in the December quarter of 2000. We’ve seen a significant reduction in revenue levels for most of these companies, and at these reduced levels, it appears that cancellation and push-out activity is slowing considerably. Now, that is the only positive data point of significance that one can focus on.

TWST: To what would you attribute the miscalculations about the amount of capacity that was going to be needed to meet the predicted demand for semiconductors?

Mr. Veerappan: In hindsight, it’s easy to say that there certainly was “irrational exuberance,” to use a popular phrase that Mr. Greenspan coined a few years ago, and we can look back and see that we were certainly building far in excess of projected demand in the hope and belief that the Internet phenomenon, if you will, would continue growing at triple-digit growth rates on a consistent basis. That simply hasn’t been the case, as we can tell from hindsight.

TWST: Are there any company-specific risks, or are the risks related to the overall environment?

Mr. Veerappan: The risks are certainly with the overall environment, and filtering down to these three companies is a clear indication that near-term business fundamentals remain weak, remain anemic. Therefore, I think near term these stocks will trade in a range that is sideways/slightly down. When you see a stock at either end of the range, you either buy or take profits, but with a longer-term perspective, I think these are the names that you want to own coming out of this down cycle.

TWST: Are there any other names that you are watching very closely, that are going to be positioning themselves during the down cycle to take advantage of the upturn?

Mr. Veerappan: Absolutely. Vitesse (Nasdaq:VTSS) and JDS Uniphase (Nasdaq:JDSU). Both of them are focused on the long haul portion of the optical network. Vitesse has dramatically acted, over the past year, I would say, to expand its product portfolio, and has established a leadership position in the switch fabric arena. Vitesse is now migrating toward the fiber side of the interface as well, through acquiring a transponder player.

This special issue includes:

1) Semiconductor - In an in-depth (5,500 words) Analyst Roundtable, Eric Chen, Senior Analyst at JPMorgan H and Q and Joseph A. Osha, top ranked Analyst responsible for covering the semiconductor industry at Merrill Lynch Global Securities, examine the outlook for the sector including, inventory levels, future outlook for smaller companies and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance at twenty-three sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Outlook for Semiconductors - In an in-depth (3,000 words) Analyst Interview, Dan Scovel, Semiconductor Analyst with Needham and Company, examines the outlook for the sector and shares specific stock recommendations.

4) Semiconductor Industry Overview - In an in-depth (2,000 words) Analyst Interview, Arun Veerappan, Managing Director at Robertson Stephens, examines the outlook for the sector and shares specific stock recommendations.

5) Semiconductor Stocks - In an in-depth (1,900 words) Analyst Interview, Jonathan Joseph, Managing Director at Salomon Smith Barney, examines the outlook for the sector and shares specific stock recommendations.

6) CEO interviews (average 2,500 words). Top management of eight sector firms examine the outlook for their firm and the sector.