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Leading analyst and top management from five sector firms examine the imaging technology sector in this special 23-page Imaging Technology issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info519.htm.

TWST: We were talking about Pitney Bowes (NYSE:PBI) earlier. Are there any other names in the group that you particularly favor right now?

Ms. Cross: The other two stocks that we have buys on in the near term are Hewlett-Packard (NYSE:HWP) and Xerox (NYSE:XRX). Xerox is another company that we think has some value near term. The company has a number of products that will be launched this year and they’re working to clean up the balance sheet, which may provide catalysts to move the stock higher.

TWST: What are some of the new technologies Xerox is coming out with?

Ms. Cross: Probably the most touted technology that Xerox is launching is what they call their iGen3, which is a digital color printing press. It’s more than just a glorified copier; it’s a new technology that uses toner and allows printing of color pages at 100 pages per minute. We believe this will provide customers with a faster alternative to Xerox’s existing 60 pages-per-minute color copier and Canon’s 50 pages-per-minute color copier. Xerox will begin taking orders for the iGen3 in April and it will be interesting to see the adoption rates. We believe iGen3 should help to drive numbers for Xerox in the latter half of 2002 and even more so in 2003. The digital color printing press market is interesting because not only does Xerox have an offering, but there is also a competitive alternative from the Kodak/Heidelberg joint venture called NexPress. NexPress launched its 75 pages-per-minute digital color press in September and has seen strong demand.

TWST: As we look out to the rest of 2002, and further into 2003, what issues and challenges are going to be major factors for the group?

Ms. Cross: First of all, most of the companies that I cover are undergoing restructurings of some form or another. As revenue has slowed or declined over the past couple of years, the companies have instituted cost-cutting measures. Xerox’s restructuring is probably the most significant, with over 1.1 billion taken out of its annual cost run rate and the closing of some major operations. Positioning for the future and spending R&D dollars in the right areas will also be key to success. Xerox, for instance, has been spending R&D dollars for the last several years on the iGen3. They should now start to see the fruits of their labor in revenue and earnings contribution. Xerox is also working very hard to put out lower-cost-based platforms. In order to be price competitive and regain share from Canon and Ricoh, the company must lower its cost of production. Besides that, I think it is just literally a case of waiting, positioning and watching to see when the economy really starts to improve and IT budgets open up. I believe many of the companies within the imaging technology group have cut unnecessary costs from their businesses in order to better position themselves for the future. This should leave the companies with much more leverage in their models going forward.

This special issue includes:

1) Imaging Technology Stocks - In an in-depth (3,600 words) Analyst Interview, Shannon S. Cross, Director at Merrill Lynch Global Securities, examines the outlook for the sector including and shares specific stock recommendations.

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