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Five analysts and top management from four sector firms examine the human capital management sector in this special 54-page Human Capital Management issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info483.htm.

TWST: How would you compare the strategies that the staffing companies have deployed as they’ve been faced with the challenges of a declining economy with reduced employment opportunities?

Mr. Marcon: It’s been quite a challenge. I think they’ve actually addressed and met the challenges as an industry as well as could be expected. There are a couple scenarios that could have played out. One scenario would have been for industry players to dramatically reduce prices in an effort to keep business and maintain share, which ultimately ends up being a huge negative for the company that does that, as well as for the industry. Another way of approaching it would be to cut costs in order to rationalize the business to meet whatever the revenue levels are that are present in the market. For the most part, this second scenario, rationally cutting costs and closing unproductive facilities, has been the way that most staffing companies have addressed this cyclical challenge. At the same time, they’ve maintained pricing discipline, which has been very encouraging.

TWST: How have the companies cut costs? Which companies have done this most successfully?

Mr. Marcon: The way that they’ve cut costs is by sticking to metrics in terms of productivity levels that account managers and recruiters, which is their biggest expense component, should reach. As the cycle has progressed, staffing companies have pruned their account managers and the recruiters who weren’t meeting the metrics and weren’t meeting their revenue objectives, and at the same time shuttered offices when entire offices became unprofitable. One of the companies that has just done an absolutely terrific job in terms of managing through this downturn in the economy is Robert Half International (NYSE:RHI). They’ve done exactly what I just mentioned. They have metrics in place, and when people don’t meet the metrics and don’t meet the productivity levels, they are invited to look for other opportunities.

TWST: Where should the investor start today?

Mr. Marcon: I think the investor should start with the highest quality franchise names, so Robert Half and Manpower would be names that we would recommend, and names that have strong balance sheets, so you’re not worried about whether there could be some real financial risk to a company if the economic recovery doesn’t, in fact, start. Another name along those lines on the small cap side would be Hall, Kinion (Nasdaq:HAKI).

TWST: And the valuation of Hall, Kinion, I assume from what you said earlier, would make this pretty much a value stock.

Mr. Marcon: It would. For a company that at one point in 2000 was trading at $46, and even after almost doubling from its low, it’s at $9 with more than $2 a share in cash, I think it’s a very low-risk stock from that perspective.

TWST: How would you differentiate among those three companies in terms of which offers the best investment opportunity over the next six to 12 months?

Mr. Marcon: If you take a look at Robert Half, it is the most richly valued, so I think it’s got upside, but probably not as strong as Manpower and Hall, Kinion. Manpower and Hall, Kinion ultimately could end up doing significantly better just in terms of pure price appreciation relative to Robert Half, because their multiples are lower at this point in time.

This special issue includes:

1) Human Capital Management - In an in-depth (16,600 words) Analyst Roundtable, Mark W. Allen, Managing Director at SunTrust Robinson Humphrey Capital Markets, Randall A. Mehl, Director at Robert W. Baird & Co., Brandt Sakakeeny, Director at Deutsche Banc Alex. Brown, Inc. and Adam Waldo, Senior Vice President at Lehman Brothers, examine the outlook for the sector including the effect of Fed rate cuts, investment approach and share specific stock recommendations.

2) Human Capital Management - In an in-depth (4,900 words) Analyst Interview, Mark S. Marcon, Analyst at Wachovia Securities, examines the outlook for the sector and shares specific stock recommendations.

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

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