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Three analysts and top management from nine sector firms examine the Electronic Supply Chain sector in this special 53-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info415.htm

TWST: Eric, how about your view on what took place?

Mr. Gomberg: I think the word you used before, “euphoria,” is exactly right. I think 2000 was marked by a euphoria, where there were so many concurrent developments, whether in cell phones or PDAs, or the Internet with so many startups, basically venture companies funded by public equity, that you had the stars in alignment, and people had the feeling that this was never going to end. Many of the component manufacturers found them-selves caught short on capacity, and given a feeling that this wasn’t going to end anytime soon, people felt free to order and, as it turned out, significantly over-order. Now we find ourselves in a situation with both too much product in inventory and a steep, dramatic, sharp decline in demand, and it’s still not clear when exactly that’s going to turn.

TWST: Eric, where does the industry stand today?

Mr. Gomberg: I think there is still a lot of uncertainty as to where demand is, when the bottom is going to be reached. And really, how do we extrapolate what 2002 looks like off of 2001? Will all these interest rate cuts actually generate some growth next year off of this year? I think the biggest black hole is still trying to assess the inventory situation at the contract manufacturers, not just the absolute dollar amounts, but what it’s comprised of in terms of specific component groups. Talking to most of the component manufacturers, they have the least certainty as to demand from the contract electronics manufacturers. That said, I would think that the CEMs themselves would be the first to see earnings growth when it returns, due to the outsourcing trend, and due to the fact that they’ve taken a lot of cost out of their overhead.

TWST: Eric, how about your to-do list? What homework should investors being doing now?

Mr. Gomberg: Well, again, I would echo some of Jerry’s comments. It’s a very tenuous, volatile market, and I think you’ve got to pick your spots. That said, for someone who has to be owning technology and has a longer-term horizon in the connector space, I think Amphenol is very attractive. In the printed circuit board area we like Merix (Nasdaq:MERX) very much. In the semiconductor packaging area, which we think will continue to have poor fundamentals in the near term, with many of the companies pretty highly levered, we do like Amkor (Nasdaq:AMKR), which we think has the best technology breadth, the best geographic breadth and the widest array of customers. We think that over time they will be one of the winners in the packaging space.

TWST: Eric, how about your views on the question of competition and overlap?

Mr. Gomberg: There’s only really a handful of top-tier EMS players for OEMs to choose from. I don’t think that the business is driven by pricing. It’s driven by capabilities, by long-term relationships and also by systems capabilities. The majority of cost of goods sold is comprised of materials costs with margins that are generally very thin, and the margin is comprised of value-add, whether it’s in the test or the assembly business. But you can’t draw blood from a stone, and these guys operate on thin markets and drive their profits by moving product quickly across their balance sheets and generating strong returns on capital.

This special issue includes:

1) Electronic Supply Chain - In an in-depth (7,400 words) Analyst Roundtable, Eric Gomberg, Vice President at Thomas Weisel Partners, Mark Hassenberg, Managing Director at Credit Suisse First Boston and Jerry Labowitz, Heads a team that covers Electronics Manufacturing Services at Merrill Lynch Global Securities, examine the outlook for the sector including, inventory problems, excess production capacity and share specific stock recommendations.

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