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Five analysts and top management from eighteen sector firms examine the Document & Database Management Software sector in this special 93-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info407.htm

TWST: What are the greatest risks facing the storage hardware sector and the storage software sector today?

Mr. Hargil: On the hardware sector, you’re looking at very expensive pieces of hardware in the storage sector. These are not cheap machines by any stretch of the imagination. Whether you buy it from EMC (NYSE:EMC), Sun (Nasdaq:SUNW), Hewlett-Packard (NYSE:HWP), Hitachi (NYSE:HIT), they are all expensive machines without a doubt. In this current environment where people are trying to save as much as possible on their IT expenditures, and their cap ex, we’re going to see continued pressure on the hardware; people will try to buy less and buy it cheaply. So I anticipate continued pressure on the margins as well as potentially less sales physically in the short term going forward. Discounting is occurring regularly in the marketplace, along with the natural drop in price that occurs in the technology sector. This truly depends on the market turning around and on the financial markets opening and allowing more companies to raise the money they need for growth. Under this current climate, I think hardware companies will continue to see a lot of pressure. On the software side, I very much anticipate continued trends. When I say trends, I don’t mean going back to the 20% quarter-over-quarter growth that we saw a while ago, but rather continued growth/minimal growth quarter-over-quarter as people continue to go and buy storage software for existing hardware. Companies are trying to find better ways to utilize their hardware investment, and software is that solution.

TWST: Which storage software companies would you suggest to investors?

Mr. Hargil: On the software side, you have two major companies, two very large companies — Veritas (Nasdaq:VRTS) and Legato (Nasdaq:LGTO). As I mentioned, I am still concerned over the valuation on Veritas. I think it’s still very high and would be looking to buy it more on weakness. Legato, on the other hand, is a company that had been having problems in its business model; it has been working through those problems over the last couple of years and has paid the price for that. Therefore its price is substantially more in line with competitors and even somewhat lower than competitors. So potentially, if you’re looking for relative value, you may want to keep an eye on Legato.

TWST: What do you anticipate for the hardware and software storage companies in the second half of 2001 and looking out further to 2002 and 2003?

Mr. Hargil: I think the main message as we go forward here over the next several quarters is that we will be looking at hardware continuing to have a difficult time both in terms of absolute sales as well as margins continuing to decrease because of lower purchase numbers and discounts. On the software side, I would continue to look for innovative solutions that improve the way people can utilize their hardware. People who spend a few million dollars to buy a storage system are very motivated to spend a few hundred thousand dollars on software to make sure they utilize it in the best way. The software investment in relative terms is not a major investment, and I think that it is definitely a growth area going forward.

This special issue includes:

1) Document & Database Management Software - In an in-depth (10,300 words) Analyst Roundtable, Robert Austrian, Managing Director at Banc of America Securities LLC, Brendan Barnicle, Vice Principle at Pacific Crest Securities and Christopher Shilakes, First Vice President at Merrill Lynch & Co., examine the outlook for the sector including, long term trends, developments in technology and share specific stock recommendations.

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

3)Storage Hardware & Software Stocks - In an in-depth (2,600 words) Analyst Interview, Nitsan Hargil, Senior Analyst at Friedman, Billings, Ramsey & Co., Inc. examines the outlook for the sector and shares specific stock recommendations.

4)Enterprise Software - In an in-depth (2,000 words) Analyst Interview, Greg Vogel, Managing Director at Banc of America Securities LLC, examines the outlook for the sector and shares specific stock recommendations.

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