Sample Business Plan ViASIC

United States I Merrill Lynch 3 January 2001 InvestorSupport Bulletin Intra-Day Technical Special Note & Design Software Technical & Design Software • Integrated Measurement Systems (IMSC, not rated) a chip test equipment vendor in which Cadence Design Systems (CDN, $24 7/8, C-1-1-9) holds a small minority certain customers pushed out orders into 2001. IMS' results have been reflected in position, announced last night that itsalong with interest and other items, and the impact Cadence's "other income" line item, 4Q00 results would fall short of expectations as is not expected to be material. • IMS develops and markets "IC validation systems" (for debugging, failure analysis, yield enhancement, and "prototype volume production test" and '"'virtual test software <../html/virtual_test.html> (products used by test engineers for digital test pattern generation and verification). These are typically expensive capital expenditure items ($250,000-$2 million), and are often quickly subject to deferral for some months when the semi outlook slows. Our check with each of Cadence Design and Mentor Graphics (MENT, $23 1/18, C-2-19) last night indicates that, while IMS' "IC validation systems play a variety of roles in bridging the gap between electronic design automation (EDA) to automated test issue for their EDA software business, which, in our opinion, will be driven by the equipment (ATE)", as a practical matter neither sees a corresponding or complementary continued growth of customers' product development spending and the need for implementing new design environments. Neither competes directly with IMS. • IMS, in its conference call, noted that the shortfall was concentrated in the mixed-signal and digital IC areas but it remained encouraged by the prospects for the design start expected quarterly revenues (compared with 50% for all of FY99), was not one of those prototyping. IMS' largest customer, Intel, which accounted for about 25-35% of who pushed out orders. • We expect that each of Cadence and Mentor will report good bookings for 4Q00 and Cadence and Mentor. results that are in line with our forecasts. We are reiterating our ratings on each of (J. Vleeschhouwer) • 11 (1) RC#11200307 Merrill Lynch & Co. Global Securities Research & Economics Group Global Fundamental Equity Research Department United States [ ;Merrill Lynch 10 January2001 Investor Support Bulletin Morning Part 6 Notes Summary Cadence Design Systems (CDN, $28.94, C-1-1-9) 00E $0.43; 01E $0.85 • We participated in an analyst panel presentation to the company's annual worldwide sales meeting, which brought together more than 800 reps, and subsequently met with management for an the sales meeting, which sets the tone for the company's global The main points of update. selling effort, and of our meetings were as follows: We believe that business was good in 4Q00. We estimate that the company had a better than 20% sequential increase in bookings in the quarter; including what we believe were renewals in Japan at better than parity with the original contracts. We would expect a normal sequential decline from 4Q00 to 1Q01 for bookings. We still expect a better than 25% increase in product bookings for FY01, and while the company notes it is keeping a prudent eye on semi market conditions, it has not seen signs of an adverse impact on its business. The one area that could be affected by capital spending changes, as compared with R&D spending, which we believe is more stable with respect to software tools, is the Quickturn emulation business, which accounts for under 10% of importance in the mix now of systems companies should also aid the The growing revenues. sustainability of, and need for, the investment in new design technologies. The overall assessment of the Japan market is that there remains a compelling need for investing in more advanced design tools and methods. application engineer (AE) capacity, after having already grown here in 2000 to support In 2001, the areas, of investment focus at the company will be continued increases in as key product areas field marketing, and a new sales orientation the company refers to "consultative selling". organization and which is a theme at the sales meeting, is to create "solutions" around Theindividual products and to establish still closer customer relationships, the sales just a the idea behind the latter, which will take some time to inculcate through beyond in sales quotas). "transactional" orientation (over time, the new sales model could lead to larger increases • • verification, IC package, FPGA, and PCB design. The solutions will focus on system-level deign, system on chip design, functional in its "Silicon Ensemble" physical design installed base with the signal integrity (SI) and In terms of technology, the company continues to see a substantialIntegrationopportunity PKS technology. In addition, its next generation design platform, upgrade Ensemble ("Nano") has seen expanded customer evaluations. Sometime during 1Q01, we would expect Cadence to have a Synopsys-like event to disclose more about its "synthesis place & route" progress with customers. • • • • • • Merrill Lynch & Co. Global Securities Research & Economics Group Global Fundamental Equity Research Department RC#11201015 Morning Notes Summary- 10 January2001 Merrill Lynch • In design services (Tality), a key objective will be to focus on the need to more quickly attain profitability. For example, the company will emphasize growing resources and facilities outside of San Jose in a more effective scaling of resources. Cadence will be reporting 4Q00 results on Jan. 23d. We are estimating revenues and earnings of $380 million, up 42%, and $0.20 a share before goodwill. We are estimating a 55-60% increase year/year in product bookings to about $240 million. Also, the recent appreciation of the euro is not expected to affect the model at current levels. We are reiterating our intermediate Buy rating. • • (J. Vleeschhouwer) Tech Strategy- MLO • We are coming up on the third birthday of the Merrill Lynch 100 Technology Index (MLO), a modified equal-weighted index consisting of the top 100 technology market caps after screening for liquidity. We believe the MLO is an excellent benchmark for tech investors. The index has an appropriate number of constituents, incorporates international exposure, and offers an objective set of construction rules. The MLO was down by 36% last year and more than 50% off its March high. The best-performing sectors were Storage, Computer Services, and the Supply Chain. The worst were the Internet, Computer Hardware, and Wireless. The MLO was reconstituted in December. Twentyone names were deleted, including 11 in the Internet space. Two-thirds of the additions were from either Communications Equipment or Software. Software, Comm Equipment, and Sottware are the largest sectors in the MLO by market capitalization. • • • (S. Milunovich) Opinion KeyIX-a-b-el:ioveslerent iskRalJng(X): Low,B- Average, - AboveAverage, High.AppmciolJon R AC DPotential R a_g (a:Int.Tenn- 0-12 too.;b:LongTerm- >1yr.): 1 - Buy,2- Accumutate, Neural.4 3Reduce, - Sal,6 - No Raling.incomeRang(c):7 - Same/Higher,- Same/Lower, NoCashDividend. 5 8 9Copyright 001 MerrillLynch, ierce,Fennel" SmithIncorporated 2 F & (MLPF&S).All rights reserved.Any unauthorized useor discl osureis prohib_ed. 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In addE_on, awesters secun_es In suchasADRs,whose valuesare_nfluenced bythecurrency of_e underly_ security, egeeth, assume ely currency risk, 2 i Merrill Lynch Daily News & Analysis of the Technology Sector Technology °'°ha' I MORNING EDITION Melissa Bildner Assistant Vice President (1) 212-449.9968 melissa_bildner@ml.com lO an.a ,O0 Technology Bits and Bytes More Resources. Better Answers. sM Apple Computer (AAPL; $17.19; D-3-2-9) MacWorld Fails to Re-energize Company (Steve Fortuna 212-449-1011) • Despite some interesting announcements and a solid display of exciting technology, we don't walk away with the sense that the nearto-medium-termprospects for the company are any brighter than previously thought. We remain negative on the more consumerfocused PC names, such as Apple, given the weakness in the marketand the likelihood that the malaise will continue. • For fiscal '01, we remain well below the "Street" on both the top- and the bottom-line. Oursales estimate is $5.0bn with an earnings loss of $0.65. Highlights from MacWorld-San Francisco: OS/X will be available in shrink wrap on March 24th- will be bundled with new machines startingthis summer. Beefed-up PowcrMacs with processor speeds up to 733 MHz and CD-RW drive. Introduction of music management and DVD authoring software. New slim profile notebooks offering wide screen, G4 processor, and lightweight titanium construction. Maintain Neutral intermediate rating. Semiconductor Capital Equipment (Brett Hodess 415-676-3546) * Veeco (VECO, $46.75, D-2-1-9) and Cymer (CYMI, $30.88, D-3-1-9) will be presenting at the competitor'sconference tommorrow. Because of Regulation FD, companies are distributing press releases containing the information they plan to present. Veeco has announced that orders for the the fiscal fourthquarter (Dec) are approximately $184mm, better than our estimates of $140-$150mm and exeeding "Street" estimates. Bookings foropto-electrunic equipmentexceeded the company's expectations at 45% of orders.We believe these higher than expected orderswill result in increased estimates. Cymer has announced that they are comfortable with their previous forecast that fiscal fourth quarter(Dec) revenue should grow 4-5% over the $97.9mm recorded in the third fiscal quarter,and that fourth quarter operating profit should be approximately 26%. Cymer will also confirm that 2000 revenue growth will be in the range of 65-68% over the $220 million recorded in 1999. These results are in line with our estimates. However, Cymer will also highlight thatthey are cautious regardingtheir growth rate in the first half of 2001 as lower installation rates of steppers at chipmakers led to increased inventories of Cymer light sources at their direct customers. Due to this near terminventory issue, we are maintaining our intermediate-term Neutral rating. We reiterateour intermediate-termAccumulate rating. Tech Strategy -MLO (Steve Milunovich 212--449-2047) • We are coming up on the third birthday of the Merrill Lynch 100 Technology Index (MLO), a modified equal-weighted index consisting of the top 100 technology market caps after screening forliquidity. We believe the MLO is an excellent benchmark for tech investors. The index has an appropriatenumber of constituents, incorporatesinternationalexposure, and offers an objective set of construction roles. • The MLO was down by 36% last year and more than 50% off its March high. The best-performing sectors were Storage, Computer Services, and the Supply Chain. The worst were the Internet, ComputerHardware, and Wireless. The MLO was reconstituted in December. Twenty-one names were deleted, including 11 in the Internet space. Two-thirds of the additionswere from either Communications Equipmentor Software. Software, Comm Equipment,and Semiconductors are the largest sectors in the MLO by market capitalization. Semiconductor Capital Equipment (Brett Hodess 415-676-3546) • The 24 th annual Semiconductor Equipmentand Materials Industry(SEMI) Trade group Industry Strategy Session is underway this week. Most major semiconductor/semiconductor equipment market research firms are presentand have provided updates to their capital spending outlooks for '01. Each company has significantly reduced their estimates as summarizedin the following table. Note that the negative 2% Capital Spending average forecast is lower than our Merrill Lynch 6% growth survey of only 4 weeks ago. These forecasts assume an average US GDP of just over 3% in '01. Table 1: Forecast for 2001 over 2000 Semi Sales and Capital Spending % Change 2001/2000 Semi Sales % Change Semi Cap Spend % Change Forecaster Old Forecast New Forecast Old New VLSI Research 11% 5% 4.5% 0.5% Dataquest 20% 5-10% 15% -6% IC Insights NA 7% NA -4% Average NA 9% NA -2% Source: VLSI, Dataquest, IC Insights, Merrill Lynch • Ourmeetings with companies indicate that pushouts and slow downs in new orders continue to increase, but that cancellations of backlog have not yet begun. Several companies have noted that cancellations could begin in the next month or two. 300mm demand remains solid. There have been no indications of pushouts or delays on 300mm equipment. We continue to forecast 18%of capital spending on 300mm in 2001 vs. 5% in 2000. Forecasts for photomaskdemand remains robust, with this segment projected to grow 26% in 2001 over 2000 to a $3.1 billion market.This reinforces our 1-1 rating on Photronics (PLAB, $28.88, D-l-I-9. • The conference reconfirms our opinion that technology related investmentremains on track but that capacity investment is fast moving to the side-lines. Forecasters and company comments indicate that semiconductor capital spending could decline quarterover quarter for the next 3 to 4 quarters. Thus, we continue to be cautious, with neutral ratings on most oftbe pure play semiconductor RC#10201022 Technology Bits and Bytes TM - MORNING EDITION ;Merrili Lynch equipment companies for the intermediate term as further estimate reductions could be substantial in the near term. Historical, semiconductor equipment stocks have reflected the end of a down turn only 1 quarter before the order bottom. Enterprise Hardware- Storage (Tom Kraemer 212-449-7140) • We met yesterday with management from EMC (EMC, $63.75, B-I-1-9) and McData (MCDT, $49.75, D-2-1-9). We continue our view, which is supported by our surveys, that while there is certainly changes and softness in overall IT spending and priorities, storage spending has been maintained. We believe storage spending looks to be non-discretionary. • The management of both EMC and MCDT indicated they are not seeing any slowdown from customers. Spending plans are continuing to go ahead. Both companies are in their quiet periods so they did not comment on the quarter. The companies remain bullish on spending intent and we think this bodes well for the storage sector in general, including Brocade (BRCD, $81.81, D- 1- 1-9). • With regard to Hewlett Packard (HWP, $31.56, B-3-1-7), we saw benchmarks for its Superdome server, its high end UNIX server. The company has been indicating it expects this product to be the catalyst to reaccelerate its UNIX server business. We view the benchmarks as tepid. It did not beat the high end servers IBM (IBM, $92.56, B-3-1-7) introduced about a year ago and is more expensive than Sun Microsystem's (SUNW, $29.44, B-2-1-9) product on a price/performance basis. This does not look to us like a strong catalyst to produce a turn in HWP's UNIX business. Cadence Design Systems (CDN, $28.94, C-1-1-9) Analyst Pand Presentation (Jay Vleeschhouwer 212-449-7292) • We participated in an analystpanel presentationto the company's annual woddwide sales meeting, which brought together more than 800 reps, and subsequently met with management for anupdate. The main points of the sales meeting, which sets the tone for the company's global selling effort, and of our meetings were as follows: We believe that business was good in 4Q00. We estimate that the company had a better than 20% sequential increase in bookings in the quarter; including what we believe were renewals in Japan at better than parity with the original contracts. We would expect a normal sequential decline from 4Q00 to IQ01 for bookings. • We still expect a betterthan 25% increase in product bookings for FY01, and while the company notes it is keeping a prudent eye on semi market conditions, it has not seen signs of an adverse impact on its business. In design services (Tality), a key objective will be to focus on the need to more quickly attain profitability. For example, the company will emphasize growing resources and facilities outside of San Jose in a more effective scaling of resources. Cadence will be reporting4Q00 results on Jan. 23rd. We are estimating revenues and earnings of $380 million, up 42%, and $0.20 a share before goodwill. We are estimating a 55-60% increase year/year in product bookings to about $240 million. Also, the recent appreciation of the euro is not expected to affect the model at currentlevels. Exodus (EXDS, $17.69, D-l-l-9) GlobalCenter Acquisition (Tom Watts 212-449-1214) • The GlobalCenter acquisitionwas voted on by shareholders on January 9th which should enable deal closing today on the 10th. Pro forma financial guidance for 2001 should be provided on the Q4 call. The dot.cornfallout and anticipated decrease in IT spending might drive the company to shift growth more to the 2H 2001. We feel this anticipation has been built into the stock price, however, we believe the market will reactpositively if the company relays continued strong sequential growth above 20% for the IH. Exodus will reportQ4 earningson January24th after the market close. We expect the company to meet our expectations. Our revenue estimate for Q4 is $277.8 M, which equates to a 21% sequentialgrowth rate. OurEBITDA estimate stands at $33.3 M. Look Ahead 1/10-12 1/29-31 1/31 1/31 2/5, 6 Look AheadContinued ML Computer Services Outlook 2001 3/22,23 ML 4 th Asia Pacific Technology Conference, Conference, Miami, FL Taipei, Taiwan Enterprise Storage Conference, Santa Barbara, CA ML Hosts Adobe Systems, Boston, MA EamingsPreview 1/10 Apple Analyst Day, Cupertino, CA n_pora_g M,,'_zn Lvnd, Internet Infrastructure Services Conference, NYC co,,,,,v Ticker Time Rev EPS Con, O0REV O0EPS 01 REV M_.27 IMotorola I Mo_t aeforeO_nl $337_ SI0.000.0I $0.151 So.151 $37.516.01 $0.61 $0.851 494. $39.500.01 Ol EPS $1.03 S0.sol [1BM, CDT,SUNW,VECO]MLPF&S M wasa mannger ofthernustrecentpublic offerb_j f securitiasf itts company _in thelest o o w threeyears. [AAPL, RCD,CYMI,EXDS,MCDT,SUNW,VECO] Thesecudlios thecompanyorenetlisted S of hutIxadeover-the-counter the UnitedState s. In the US, retailsalesand/ordislribufion in o_this report maybe madeonlyle stetes whorethese securi_es exempl[Tom are regY_'z a_neerhavebeenepa_'_ed sale. MLPF lor &Sor Esofrgzates usuaily m akea rnerketn ifzesecudJesoftNs company. i Opinion Key IX-a-b-c]:Invesl_nent RiskRating(X): - Low,B- Average,C - Above A Average, - Hi_. Appreciation D Poten_al R a_ng(a: Int.Term- 0-12 too.;b:LongTerm- >1yr.):1 - Buy,2 - Accumu_ute, Neulxal, 34Reduce,5- Sell,6- NoRaSng.income Ra_9(c):7 - Sernetrl_her, - SenteJLower,- NoCashDividend. 8 9 Copyright 2001 Merrill ynch,Pierce, enner& .S_ Incorporated L F (MLPF&S).Allrightsreserved.Anyunau_orizeduseor discl osmeis prohibP.ed. reporthasbeenpreparedandissuedb MLPF&S ]his 7 aed/oroneof its aflfliates and has been approved publica_nin theUnitedI_gdom byMerril Lynch, ierce,Fenner&._ for P Lini_d, which is regulatedby SFA;has beenconsidered and e_atributed Ausixa_a y Mer_ LynchEqtddes _ b (Australia) Limited (ACN006 276 795), akensed securi_s dealerundertheAuslxaUan Corporalions Law;,is disU-ibutedHo ngKongbyMerrgl in Lynch(AsiaPaciFic) Ltd,whichis regulated bytheNongKongSFC;andisdistzbuted in Singapore byMem'llLynchIntemalienal BankLid(Merchant ank)andMerrL! ynch B L (Singapore) Ltd,whichareregulated bythe Monetaej uthorityfSingapore.he informationerein Re A o ] h was obtained [Tom various seurces: wedo notg_Jarantee itsaccuracy otcompleteness. Addi_onal ioformalionvaiabte. a Noidtetthe informa_onoranyapte_nexpressed ons_x_san offer, r an/_/ta_on tomakeanoffer,to bo_ orsellanys ecorities anyop_ons, n c o or futures o0_er eriva_vesebted to suchSeCLmlios or d r (_related veslments'_. b MLPF&Sanditsalflllates tonytredefortheirownaccountssodd-lotdeaiaLmarketmaker,block a posiiJoner, specialist and/er arbbageur anysecurkius fthisissuer(s)orte retetedinveslrnents, in o andmaybeen theeppusiteside 01pubfic orders.MLPF&S,itsagiiates, ectors, officers, _ employees andemployee benefit progxarns ayhavea longorshor tposition anysecurities m in ofthisissuer(s) rin related o invese'nents. MLPF&S orits affiliates ayborn m _ne te ilmeporferrn invesonent banking otherse_k:es or for,er solicit investelent anl,,ingr etherbuskless b e Eem,anyentry men.ned inthis reporL researchreports prepared/or enera/circula_onndis ci_uiated_r generafinformaifon nly. itdoes not haverega rd _othe spec_c inveslmenlobjeclives, i g a o financial _a_on andtheparticular eedsof an)'speci',c s n person whomayreceive this report.Investors shouidseekfinancial advice regarding theappropriateness ofinveslb_ inany s ecuriltes orinveslment t,'ategtes s discussed recommended thisreport nd should or in a understand that statements regord=lg futmeprospects aynot bereaked, investors m should note thatincome fromsuchsecurilles, any,may fluctuate if andthateachsecurity'srice or vabe mayriseor Pal.Accordingly, p investexs mayreceive backlessthanoriginaly iovested.Pastperformance netnocessarly guide is a to[utoreperformance. Foreign currency ra_ of exchange mayadversely ftectthevalue,priceor hcomaof anysecurity a orrelatedinveslorent meniio nedinthis repo_ In add_on,_nvestors s_s in suchas ADRs,whose valuesore inSuenced bythe currency theunderlying of security, effeclively ssume a currency risk. 2 Merriil 10 January 2001 • _:-C_ Lynch GLOBAL Semiconductors Chip Shots-North America Semiconductors I ×./ _-_r_g_ [ ".."_._:\_i--/-t:'. . ,/. \ _i_! Global Team Asia Pacific DanielHeyler (886)2376-3728 SunChung (82)2 3707-0554 Europe Andrew riffin G (4420)7772-1414 RonDennis (4420)7892-4517 Japan HitoshiShin (813) 3213-7142 Richard aye K (813)3213-8214 North America Joseph sha O (1)212449-0930 Mark J.Lipacis (1)212449-9063 Chris Danely (1)415676-3518 Carina ernia P (1)415676-3575 Brett Hodess (1)415676-3546 Samuel Wilson (1)415676-3544 Sameer Desai (1)415676-3547 Week in Review: Semiconductor stocks as measured by the SOX were up for the week by l 1%. Versus the broader indices we track, the sector outperformed - although all indices were up for the week primarily on the news of the Fed's rate cut last week. As we enter quarterly earnings season next week, we are not expecting to come across much good news in our universe. Although we are well-prepared for the bad news for fourth quarter, we are expecting to hear less than optimistic outlooks, which will mostly affect our estimates for 2001. • In this issue... Industry News Scalpel lithography technology is dissolved Semiconductor * Joint venture to commercialize Company News Semiconductor • * • • Broadcom acquires ServerWorks for $957 million in stock in ClientPro PC line services agreement Micron Electronics Hyundai/ChipPac to use AMD processors enter foundry/packaging Mosel Vitalic pushes back 200mm fab Table 1: Returnsfor the SOX, MLO,NasdaqComposite S&P500Indices & Closing Value asof118/00 634.20 450.50 2395.90 1295.86 SOX MLO NASDAQ COMP S&P500 Source: Faclset, _g I Week 11.2% 7.3% 4.5% 1.0% 30Day -0.6% -23.9% -17.9% -5.4% 90Day -20.7% -35.1% -28.7% -8.0% LTM -18.4% -37.5% -27.8% -7.2% Merrill Lynch & Co. Global Securities Research & Economics Group Global Fundamental Equity Research Department RC#30201029 Semiconductors- 10 January 2001 Merrill Lynch Broadcom's additional reach and resources, we believe that Serverworks will be positioned to reach a larger market. We expect the deal to close in the next sixty days and it will be $0.02 to $0.03 accretive to 2001 pro-forma earnings. ServerWorks revenues in 2000 were approximately $190 million. • Micron Electronics ClientPro PC line to use AMD processors in Semiconductor Semiconductor Industry News stocks as measured by the SOX were up for the week by 11%. Versus the broader indices we track, the sector outperformed - although all indices were up for the week primarily on the news of the Fe(fs rate cut last week. As we enter quarterly earnings season next week, we are not expecting to come across much good news in our universe. Although we are well-prepared for the bad news for fourth quarter, we are expecting to hear less than optimistic outlooks, which will mostly affect our estimates for 2001. • Joint venture to commercialize Scalpel lithography technology is dissolved AMD has announced that Micron Electronics will use its ASM lithography and Applied Materials have recently decided to dissolve eLith LLC, a joint venture formed fourteen months ago to commercialize Scalpel electronbeam projection technology (EPL). ML Comment: The dissolution of the eLith joint venture should add more momentum to alternative next generation lithography(NGL) solutions such as extreme ultra violet technology (EUF). The decision to abandon EPL had to do with the lower throughput of electron beam based technology versus optical based solutions such as EUV. We not expect EUV solutions to be required until the 50 nm node in the 2010 time frame. Semiconductor • Company News for $957 Athlon processors for its ClientPro line. In doing so, Micron is extending the AMD's processors into it segment for small/medium business and government customers. Prior to this announcement, AMD processors were incorporated only into Micron's consumer-line, Millenia PCs. ML Comment: We view this announcement as a positive for AMD. who has had its sights set on breaking into corporate market for some time. Given that Micron is not one of the leading corporate PC manufacturers, we see this news a small, symbolic victory. AMD still has a lot of ground to break in the market, and we believe that the challenge will be great. • Hyundai/ChipPac services agreement enter foundry/packaging ChipPac and Hyundai announced a multi-year agreement whereby ChipPac will become the primary outsource supplier of semiconductor packaging and test services for Hyundai. ChipPac will also provide package design and technical support for all of Hyundafs foundry customers. ML Comment." We believe this strategic agreement to be positive as it will give fabless customers a "turn-key" solution for chip manufacturing. In 1999, 26% of all chip products were outsourced to merchant packaging and test houses with that were projected to grow to 50% by 2010, according to Dataquest. In addition, we believe ChipPac stands to benefit as Hyundai migrates is memory capacity towards foundry capacity. • Mosel Vitalic pushes back 200ram fob Broadcom acquires million in stock ServerWorks Broadcom announced its intention to buy ServerWorks for $957 million in stock or 11 million shares. Based in Santa Clara, ServerWorks is a private company, which specializes in high-performance I/O and memory products for the server platform. After the acquisition is complete, ServerWorks will be a wholly-owned Broadcom subsidiary. Raju Vegesna, ServerWorks become the GM of the subsidiary. ML Comment: CEO, will We view this acquisition positively for Broadcom. As the company continues to shape its end-toend solutions for high-speed broadband, we believe that ServerWorks will contribute the technology for advanced 1/0 devices for all aspects oflO Gbps communications (Infiniband, Ethernet and Fibre Channel) and help Broadcom expand its presence in those markets. We believe that the l OGbps aim will become a market reality in 2002. Additionally, by acquiring the leader in multiprocessor server plaOCorms, Broadcom is laying the ground for its presence in the server and storage I/0 markets, which will grow along with the expansion of bandwidth, With over 120 design wins, Serverworks already has a well-established base of customers who have incorporated its system I/0 solutions into their servers. Through Mosel Vitalic is delaying construction of its eight inch fab to be located in Tainan. Ground breaking was to occur last year, but currently no date has been set. The lab was to manufacture LCD drivers. The company is still looking to build a 300 mm fab in Canada and will re-submit a proposal to the government this year. ML Comment: The announcement does not surprise us as we had expected a number o fob projects to be put on hold f in 2001 as capital spending slows down. At the same time, we expect 300 mm and O.13 micron plans to remain on target. (Continued) 2 Merrill Calendar of Events Jan16 Jan 16 Jan16 Jan17 Jan17 Jan17 Jan18 Jan18 Jan18 Jan19 Jan22 Jan23 Jan23 Jan23 Jan24 Jan24 Jan 24 Jan 25 Jan25 Jan 25 Jan 25 Jan 25 Jan31 Feb8 Feb13 Feb26-Mar 1 Jun11-15 Lynch Semiconductors- lO January 2001 INTC Earnings Release AMCC Earnings Release EXAR Earnings Release AMDEarnings Release VTSS Earnings Release XLNX Earnings Release ALTREarnings Release CNXTEarnings Release TXCCEarnings Release LSCCEarnings Release TXNEarnings Release CYEarnings Release ISILEarnings Release FCSEarnings Release LSIEarnings Release PLXT Earnings Release SNDK Earnings Release ATML Earnings Release BRCM Earnings Release MCHPEarnings Release PMCS Eamings Release STMEarnings Release ARMHY Earnings elease R TQNT Earnings Release FCSAnalyst Forum Intel evelopers D Forum, Jose,CA San Embedded Processor Forum, Jose, A San C [TXCC,QNT] MLPF&S oneofitsaffiliates amanagerofthe mestrecent ffering T or was o ofsecurilies offfdscompany i_inth e lestthreeyeays. w [IStL,STM.BRCM, LXT,YTUN.ATML,IFX,SNDK.MCHP, SM,AEIS,ASYT]MLPF&Swas m P T a anager ofthemostrecentp!Jbic olfering ofsecmiffes fthiscompany o wifhin Past the three years. [ISIL,LLTC, _CC,BRCM, NXT,EXAR,PMCS,TXCC,TENT, VTSS,PLXT,ATML, YUDF,SNDK, SNLF.WBEKF,ARMHY,INTC,MCHP,VIA1T,A M C H S L]R, LSCC,XLNX,FJTSF,HTHIF,M1ELF, IPNF, OSSF.CHR], N T UMC,AM, KLAC, AT, LRCX.NVLS.AEIS. SYT,CYMLESIO,KLIC, RI/_UTEK]The secur_es A P ofthecompany arenotlisted butIxade over-the-counter United inthe States. In theUS. retsasalesandk_r isthbu_en fthisreport d o maybemadeeely_s_ateswhere_esesec_i_esareexemptfr_mre_s_a_norhavebeenqua_z1edf_rse_MLPF&S Orits afl_liatesusua_makeamarketinthesecuW_sof_iscompany. [HYLIDF. SNLF, BEKF,VlATF.UMC]ThecounWinwhich S W thiscompany isorganized certain bes lawsor reguin_om _ or _t resfrctownershipf thecompany'ssharesbyno_anals o ofother our_ies. c Opinion Key[X-a-b-c]:inveslnmnt RiskRang(X): A- Low,B- Average.C- AboveAverage, - High.Apprecia_on D Poten_al R a_ng(a:Int.Term- 0-12 me.;b:LongTerm- >1 yr.):1 - Buy,2 -Aseumulate, - NeuUaL 3 4Reduce, - Sel, 6- NoReting. Income 5 Ralthg(c):7 Same/Higher, Same/Lower, NoCashDividend. 89COp'J_M2001 Merrm Lynch, Pierce,Fenner& Snf:fh _ncorpmated (MLPF&S).Ag,,kjhts reserved.Anyunouthodzed or d'sel osureiSpmhbimd.ThiSreporthas beenpreparedandissuedby MLPF&S use and/or one of ils affiliates nd has beenapproved a forpublicalbn the United in Kingdom byMerrilLynch,Pierce, enrmr& SmithLimited, F which is regulated SFA;hasbeenconsidered by anddisbibuted Ausea_ by Merrill ynchEqul_ in L (Ausb'aP,Limited a) (ACN006 276 795),a icensedsecunties dealerundertheAustxaPan orperalJons C Law;isdislxibuted Ho rig Kong Merri0 in by Lynch(Asia Pacific) td,which L isreg_Jated bytheHongKongSFC;andisdisputed in S_ngaporey Merrill b LynchInterna_enal BankLid(Merchant ank)andMerrill ynch(Singapore) Ltd, hich B L Re w areregulated bythe MonotaejAuthority ofSingapore.Theinforma_n hereinwasobtained fromvarioussuorces; wedo notguarantee itsaccuracyr completeness. o Add_onelnformaffen i available. Nei_er theinforme_onoranyopinion n expressed con._s an offer, r an invita_on o tomakeanoffer,tobuyorsellanys ecori_es anyopens, futuresorothei" or derivatives reintedto suchsecor[6es ('reletedinvusl_nents'). MLPF&Sanditsat_iates maytradeIor theirownaccosts asodd-lot ealer, arket d m maker,block posllionor, pecmllst s aorl/or arbl'za_eor any securities fthisissuer(s)orin related in o inveslxnents, andmaybe ontheopposite side ofpublic orders.MLPF&S,itsaffiliates, directors, olficers, employees andemployeebenefit programs mayhavea long shor t position anysec_ or in of _ issuer(s) rin relatedinvesl_nents. o MLPF&S oritsaff'Jiates ay m from dmete_neperforrninves_nentbankin_or_therse_vicesf_r'orsuf_iinves_nontbanlong_retherbusinussfT_m'anyen_ty men_oned inthisreport. [his research reportis prepared forgeneralcirculationndis cbcoleted generalinformation a for only. it doesnothave rega rd to the specificinvesfment objectives, financial situa_on andthepar, k:ularneedsof anyspecific person who mayreceive thisreporLinvestors should seekfinancial dvice a regordin theappropriateness 9 ofinvesdn_ anys ecurifies in orinves_entslxategies _scussed d orrecommended inthisrepmtandshould understand that statements regatd_gfotore prospects aynotberealized, investors hould m s notethatincome fromsuch securi_es, ifany, may fluctuate andthat eachsecunly's riceor valuemayriseor Pal.Accordthgl"investors p j. mayreceive hacklessthanoriginoly invested.Pastperformance noteecussen_/aguide is tolucre performance. Foreign eLerencyatesof exchangemayadve;se)yaffectthevalue,p_ice incomeof anysecor_ or rebtedloves_ten!menlo nedin this_eport _ addison,nvestorsin secu#Jes r or i suchas ADRs,#nose vabe_areinfluenced bythe cunennyoftheunderlying security, efpac_vely assume currency risk. 3 Semiconductors- 10 January 2001 ; mmdll i=vnch Table 3: Summary Eamings and Valuation Information ($/$mm) Price 118/01 ML CY01 CY01 Opinion EPS PIE 2.58 1.60 1.12 1.48 2.73 2.17 1.61 0.69 1.42 0.18 0.87 1.55 1.84 0.72 0.99 1.60 0.40 0.63 0.88 3.00 0.95 1.95 3.05 1.55 35.22 0.15 18 9 24 33 9 19 30 93 66 95 26 13 39 44 40 32 19 46 16 8 6 19 12 18 5 8 6 174 Mkt Arm Cap Rev'01 17,572 3,296 1,524 1,760 2,768 965 16,054 1,231 4,510 2,658 39,286 10,571 87,808 14,976 17,442 729 CY01 PIS 5.3 0.9 2.9 13.0 1.7 3.7 5.9 23.9 13.2 2.2 6.1 1.9 9.4 12.7 8.3 11.1 2.7 6.8 2.6 2.0 0.3 2.7 2.6 1.7 0.9 1.8 0.9 41.5 5.7 3.9 2.5 7.1 3.7 7.8 0.5 0.4 0.4 0.6 1.2 0.4 ($/$mm) Foundry CHRT TSM UMC Price ML CY01 118/01 Opinion EPS $28.56 B-3-1-9 $19.88 C-2-1-9 $8.94 C-2-1-9 2.54 1.11 0.95 2.90 2.35 2.40 3.15 2.80 2.70 2.40 3.00 3.65 Rsll 0.11 Rstr 1.24 1.65 1.85 1.94 1.15 2.40 0.47 0.95 1.70 0.40 CY01 P/E 11 18 9 16 17 8 13 14 9 6 10 9 Rslt 129 Rslr 4 10 13 13 7 23 8 8 16 24 Mid Ann Cap Rev'01 4,070 1,915 7,195 7,655 3,173 4,223 39,382 10,550 7,914 2,780 5,683 2,155 1,870 1,685 CY01 PIS 2.1 0.9 0.8 3.7 3.7 1.5 3.4 2.1 2.0 1.0 2.3 1.8 Rslt 1.3 R_ 0.1 1.7 1.7 1.6 1.4 3.2 0.4 1.5 2.1 0.6 BroadRangeSupplier ADI $46.00 C-2-1-9 FCS $14.81 C-3-1-9 ISIL $27.06 D-3-1-9 LLTC NSM $48.50 C-2-1-7 $23.50 C.3-1-9 CapitalEquipmentLargeCap AMAT $45.75 C-3-1-9 KLAC LRCX NVLS TER $40.38 C-3-1-9 $19.27 D-3-1-9 $40.89 D-3-1-9 $39.63 D-2-2-9 STM $42.06 B.1-1-7 TXN $49.00 B-1.1-7 Communications AMCC BRCM CNXT EXAR LSI PMCS TXCC TQNT Vl'SS gO PLXT YTUN Memoff ATML CY HYUDF IFX MU SNDK SSNLF WBEKF $64.13 D-2-1-9 $93.44 C-2-1-9 $17.00 C-2-1-9 $22.75 C.2.1-9 $19.70 C-3-3-9 $72.31 C-2-1-9 $31.63 C.2-1-9 $39.31 C-1-1-9 $50.44 C-2-1-9 $7.50 D-2-1-9 $28.73 C-2-1-9 $14.19 C-2-1-9 $22.75 C-2-2-9 $5.40 D-3-2-9 $37.25 C.1-2.9 $36.94 C-1-2-9 $27.44 C-2-1-9 $174.88 C-1-1-7 $1.20 C-1-2-9 7,208 3,470 806 546 935 910 R_ 787 R_ 72 213 651 621 298 679 252 585 914 657 395 $542 415 516 R_ 584 Rs_ 479 122 382 216 215 575 565 389 443 1,189 24,742 1,869 4,488 2,011 986 163 6,954 3,598 12,221 1,296 2,887 228 3,471 9,734 208 488 420 880 77 72 CapitalEquipment.SmallCap AEIS $24.88 D-3-1-9 ASYT CYMI ESIO GSNX KLIC MKSI MTCH PHTN PRIA TWAV UTEK VECO Matedals CHPC ENTG PLAB WFR $3.63 D-3-2-9 $8.03 D-2-1-9 $26.81 D-1-1-9 $9.44 D-2-1-9 $15.44 D.2-1-9 $30.19 D-3-1-9 $32.75 D-2-1-9 $21.19 R_ $13.50 D-3-2-9 $17.38 Rslr $5.13 D-3-1-9 $16.88 D-2-1-9 $24.88 D-3-2-9 $24.88 D-2-1-9 $14.13 D-1-2-9 $26.56 D-2-1-9 7,009 2,675 3,435 1,720 2,667 10,655 23,077 8,663 22,510 8,777 1,992 1,190 30,624 33,923 4,314 2,412 5,713 6,387 8,224 198 Microprocessor/Microcontroller AMD $16.19 C-2-1-9 2.68 ARMHY $24.00 C-1-1-9 0.14 INTC MCHP VIATF $31.94 B-2-2-7 $24.31 C-2-1-9 $7.05 D-1-1-9 1.56 1.44 0.49 1.24 1.46 1.56 0.35 0.29 0.34 0.50 2.89 0.23 20 223,786 39,288 17 3,080 788 14 4,068 1,597 24 14 31 47 34 21 40 13 31 12,320 1,738 2,431 650 17,177 2,201 32,036 60,575 32,871 85,725 14,973 36,283 33,153 57,700 51,832 41,688 22,984 63,150 Programmableogic L ALTR $29.38 C-3-1-9 LSCC XLNX $19.94 C-2-2.9 $48.25 C-2-1-9 Integrated/Diversified FJTSF $16.32 B.2.2.7 HTHIF $9.85 B-2.2.7 MIELF NIPNF PHG TOSBF $6.97 B-3.3.7 $20.35 B-2-2.7 $39.69 B-1.2-7 $7.14 B-3-3-7 *RESTRICTED. SOLICITATION OFCOMMISSION ORDERS ISPROHIBITED. 4 _;_ Merrill Lynch 5January2001 Comment United States Technical & Design Software I Technical Software Technical & Design & Design Software: 4Q 2000 Earnings Preview Jay Vleeschhouwer FirstVice President (212) 449-7292 Jay_Vleeschhouwer@ml.com Reason for Report: Quatxerly Earnings Preview Investment Highlights: • We continue to see several key trends: in the mechanical design segment, a continued focus on the development and sale of "design infrastructure" software and solutions and on evolving sales and distribution models; in electronic design, or EDA, improving bookings trends as electronics customers begin a several year process of investing in new design- tools and methodologies for more advanced product implementation; and in design software, good adoption rates for recently upgraded leading products. We believe that each of Cadence Design and Mentor Graphics had good would again indicate improving execution and backlog. We expect Dassault 4Q00 demand. meet our 4Q Technology is expected thatbe in line, which Systemes will Parametric revenue forecasts, and to MSC Software's results should be in line in local currencies. Macromedia had continued good momentum for its web publishing software and its results should again be in line with our software growth expectations. • We are maintaining our intermediate Buy ratings on Cadence and Macromedia, our Accumulate ratings on MSC Software, Mentor Graphics, and Parametric, and our intermediate Neutral ratings on each of Autodesk, Dassault, and SDRC. • Fundamental • Highlights: In MDA, the fastest growing area remains the products and services for design infrastructure, which complements and extends product development software. PTC, SDRC, and Dassault continue to focus their product and selling resources on these increasingly important customer requirements. Pricing for MDA software itself remains fairly stable while vendors' unit growth remains a very mixed picture, with the most rapid growth still in the mid-priced packages. In EDA, the emphasis remains on the development and adoption of nextgeneration design implementation technology - i.e., "physical synthesis'/physical optimization, system level design, and verification product and services bookings from newly important end markets, and the execution of new business and licensing models. Advanced technology evaluation and adoption decisions began last year, with wider deployments and material revenue effects expected to continue in 2001 and thereafter. • Merrill Lynch& Co. GlobalSecuritiesResearch& EconomicsGroup GlobalFundamentalEquityResearch Department RC#30200502 i, Technical & Design Software - 5 January2001 Merrill Lynch growing parts of the business, though they are still a small proportion of revenues, and services revenue are expected to be up about 11%. Our pre-amortization operating income estimate is E73 million (39.8% of revenues), a gain of 29%. In terms of other issues, we would highlight the need to improve the effectiveness of the US distribution channel for the SME (small/medium enterprise) market. Given a current valuation of about 1lx estimated 2001 revenues, we are maintaining our intermediate Neutral rating on Dassault shares. For further background, see our reports dated October 27, 2000, September 13, 2000, July 24, 2000, June 26, 2000, March 13, 2000, March 3, 2000, and February 9, 2000. Macromedia 9) Autodesk (ADSK, $27.31, C-3-1-7) Autodesk will be reporting its 4QFY01 on February 22 d. We are estimating $236.0 million, up 7%, and $0.53 a share, excluding amortization, vs. $0.48 a year earlier. We are estimating revenues for Design Solutions, the largest revenue group, of$182 million, up 4%. The issues for Autodesk remain: growth in the key vertical business units - mechanical, AEC, and GIS - and adoption of the new "iDesign" series of products, securing and evolving the distribution channel(s), and sequential growth in Discreet. The shipment of Inventor version 4 could help the mechanical market group revenues, though again the overall issue is maintaining revenues for Mechanical Desktop, still the bulk of the group's revenues, while driving the growth of this new product, which clearly is at the heart of Autodesk's long-term MDA strategy. For further background, see our reports of December 14, 2000, November 17, 2000, August 18, 2000, August 15, 2000, May 22, 200, April 7, 2000, and March 13, 2000. Cadence Design Systems $24.81, C-1-1-9) (CDN, (MACR, $60.98, D-l-I- For 4Q00, we are estimating revenues and earnings of $380.0 million, up 41% and $0.20 a share, excluding amortization. We are expecting product revenue of $194 million, up 62% and services revenues are expected to be up by over 35%. We expect a better than 20% sequential in product bookings to $240 million, The fourth quarter momentum, we believe, ought to carry over into 2001 on the basis of additional contract renewals and the inclusion of newer technology in the bookings (e.g., VCC, SE-PKS, with Integration Ensemble becoming more material next year). The growth opportunities stem from the proliferation of electronics in more products and in more markets, by more customers, and from the generation changes occurring in chip design implementation, We are maintaining our intermediate Buy rating on Cadence shares. For further background, see our comments dated October 18, 2000, September 13, 2000, July 19, 2000, May 31, 2000, April 19,2000, and March 13, 2000. Dassault Systemes (DASTY, $65.25, C-3-1-7) For 4Q00, we areestimatingrevenues earningsof 184 and million euros(E), up 25%, and E0.36 a share,ncluding i amortization,or about$0.20 a share.In termsof revenue mix, we are estimatingCatiaunitgrowth of 8% to 9,400 and a gain of about 29% in Solid Works units to 6,000. For the year, therefore, this would mean a gain of 10% in Carla seats to 31,600 and a gain of 26% in Solid Works seats to 21,600. Deneb and Enovia license revenues could be the fastest For Macromedia's 3QFY01, we are estimating revenues and earnings of $106.7million, up 66%, and $0.27 a share, excluding non-cash and other items, vs. $0.15 a share. The company saw continued good momentum in its web publishing business,and the shipmentofDreamweaver 4 in December (addedto the momentumof Flash5, which shipped in September) should have provided the company with a strong finish to the quarter. We are estimating a 65% increase in software revenues to $101.9 million. We are assuming a small sequential increase in Shoekwave.com revenues, though the visibility there is less clear than for the software business; on the other hand, Shockwave is under 5% of the mix. Our concern remains that of revenue momentum, the effectiveness of its entertainment programming, and the need to contain the operating losses. After this quarter, of course, the company will be able to de-consolidate its losses for Shockwave as a result of the latter's pending merger with AtomFilms, which will reduce Macromedia's stake to only a minority position, which will be reflected on the income statement. The losses had been about $0.08 a share a quarter, and, appropriately, a focus at the new entity will be on reducing the losses. We are reiterating our intermediate Buy rating. For further background, see our comments of October 19, 2000, September 20, 2000, August 31, 2000, August 24, 2000, August 23, 2000, July 25, 2000, July 21, 2000, and April 27, 2000. Mentor Graphics (MENT, $26.63, C-2-1-9) For Mentor's4Q00, we areestimatingrevenues and eamings of $175 million, up 13%, and $0.37 a share. We expect HDL/FPGA tools, system design/PCB, and verification/analysis to continue to be among the better performers. While a year ago Mentor's momentum was based mostly on Calibre (which continues to do well and is being further adopted) and HDL/FPGA, other tools are (Continued) 2 ? Merrill Lynch Technical & Design Software- 5 January 2001 now entering a period of more rapid deployment growth as well. The bookings trends remained good throughout the quarter, suggesting good visibility going into 2001 too. Our FY00E assumes $583 million, up 14%, and $0.82 a share. We are maintaining our intermediate Accumulate rating. For further background, see our reports dated December 13, 2000, October 25, 2000, September 13, 2000, July 27, 2000, May 3, 2000, and February 2, 2000. MSC Software (MNS, $8.20, C-2-1-9) For 4Q00, we are estimating revenues and earnings of $50.2 million, up 9%, and net income of $6 million, which should translate into $0.36 a share fully-diluted, vs. $0.38 a share. As in previous quarters, the main variable for reported results is likely to be currency, which could result in a few cents per share risk to reported results - though, more importantly, underlying real performance was good again (the recent appreciation of the euro was probably offset by the deterioration of the yen, resulting in net currency risk). We believe MSC is continuing to see an improving contribution from itsvisualNastran Enterprise product family - up an estimated 10% for the quarter and 20% for the year - and visualNastran Professionalanalysis and simulation products as well as from its professional services, The combination of more favorable technical and market segment trends, a more consistent track record of meeting quarterly expectations (at least in real terms), and relatively low valuation, is the basis for our favorable view towards MSC shares. We are reiterating our intermediate Accumulate rating. For further background, see our reports dated November 6, 2000, September 20, 2000, July 27, 2000, April 28, 2000 and February 24, 2000 Parametric Technology $14.88, C-2-1-9) (PMTC, replacement and upgrade demand, and perhaps the facilitating effect of Windchill itself on product development capacity. On the margin, too, we get the sense that sales and Pro/Engineer technical development are stabilizing or improving. We are reiterating our intermediate Accumulate rating. For further background, see our reports dated October 18, September 7, 2000, August 15, 2000, July 19, 2000, July 7, 2000, June 15, 2000, and April 19, 2000. Structural Dynamics Research (SDRC, $9.75, C-3-1-9) On December 29th,SDRC issued a release concerning its 4Q00 outlook. SDRC announced it will incur a mostly non-cash 4Q00 charge for operational and organizational changes, the objectives of which are to improve costs and product integration. SDRC expects to report revenues and earnings of better than $115 million and $0.05 a share, the midpoint of its own range of $112-$118 million and $0.03-$0.07 a share, vs. our estimate of$117 million and $0.06 share. Most of the improvement reflects Metaphase deals that had been expected in earlier periods and which ended up closing in 4Q00; we doubt that much if any of the improvement was in the MDA business nor that SDRC will exceed the high end of the range by much, if at all. If nothing else, the announcement shows that the PDM/design infrastructure market remains active and is leading the revenue growth for most of the companies in this market. Indeed, recent conversations with Accenture (formerly Andersen Consulting) and Computer Sciences about their PDM/design infrastructure practices suggests a good level of prospective customer activity (CSC anticipates that its Windchill business could overtake its Metaphase business by the second half of the year, and Accenture still plans to at least double its headcount in this area). For 4Q00, we have been estimating Metaphase revenues of $49.5 million, up 34%, including license revenues of about $20-$21 million, which would imply the only quarterly gain in Metaphase license revenues in 2000. The question now is howsustainablethe apparent improvement in deal closings is, for both transactions that had been in the selection and approval process and for new prospects. We expect the company will have more to say about the new MDA and Metaphase product direction, marketing and branding plans on its January 2# conference call. We are reiterating our intermediate Neutral rating. For further background, see our reports dated January 2, 2001, October 25, 2000, October 6, 2000, September 18, 2000, July 20, 2000, June 14, 2000, and April 20, 2000. For Parametric's 1QFYO1, we are estimating revenues and earnings of $230 million, down 4%, and $05 a share including amortization. We expect a year/year decline in the MCAD business of about 10% - though a relatively fiat sequential comparison - and Windchill revenues of $50 million, up 31%. We believe the company was aiming again for sequentially higher bookings, and therefore improving backlog, in each of the MCAD and Windchill businesses (subject, for instance, to enough medium size deals having closed), This may then lead to further visibility for a better comparison from 1Q01 to 2Q01 and for a bottom, at last, in the reported MCAD license revenues. Our thesis on PTC has been that it is facing a substantial revenue opportunity for its Windchill design infrastructure software and that its core MDA business has foreseeable renewed - if only modest - growth based on improving sales execution, technology (i.e., the forthcoming Pro/Engineer "2001" and "Wildfire" releases), 3 4 -] (1) Table1: QuarterlyOutlookSummary Price Compan), Name Adobe Systems Autodesk Expected ConfCall MLQuarter YearAgo Cons MLFY'O0 MLFY'01 _., F_" Ticker Rating 3-Jan Reporting Date (EST) ADBE C-1-1-7 $57.94 3/15/01 5:00PM ADSK C-3-1-7 $27.31 2/22/01 5:00PM $24.81 $65.25 $8,20 $60.98 $26.63 $14.88 2/23/01 2/6/01 2/28/01 1/17/01 1/31/01 1/16/01 4:45PM 10:30 AM 11:30 AM 5:30PM 5:00PM 10:00AM 5:00PM 5:00PM Est.Rev. EPS* Rev. EPS' EPS Est. ev. EPS Est.Rev. EPS Comments R $357.5 $0.30 $262,2 $0.24 $0.30 $1,591.5 $1.32 $1,992.0 $1.56 Should einline b $236.0 $0.53 $220,2 $0.48 $0.52 $907.4 $1,82 $1,010.5 $2.20 Should einline b $380.0 E184.0 $50,2 $106.7 $175.0 $230.0 $117.0 $153,7 $0.20 $0.36 $0.36 $0.27 $0.37 $0.07 $268,0 E147.6 $46.2 $64.3 $155.0 $239.0 $0.00 $0.34 $0.39 $0.15 $0.30 $0.06 $0.22 $0.39 $0.36 $0.27 $0.38 $0.05 $1,268.7 E620.0 $176.0 $417.7 $583.1 $1,019.3 $0,43 $1.10 $0.75 $1.10 $0.92 $0.44 $1,556.5 $0.85 Shouldeatleast b inline E745.6 $1.34 Should einline b $202.0 $1.05 Shouldeinline, ubject b s tocurrency $560,0 $1.51 Software should eatleastnline b i $658.1 $1.08 Should einline b $1,235.0 $0.81 Shouldeinline b o_" Cadence Design ystems CDN C-1-1-9 S Dassault Systemes DASTYC-3-1-7 MSC Software MNS C-2-1-9 Macromedia MACR D-1-1-9 Mentor Graphics MENT C-2-1-9 Parametric Technology PMTC C-2-1-9 _e I Structural Dynamics SDRC C-3-1-9 $9.75 1/29/01 Synopsys SNPS C-2-1-9 $50.25 2/21/01 * excludingon.recurring n itemsandamortization ofintangibles. $0.06 $114.1 $0.13 $0.05 $448.9 $0.41 $495.0 $0.65 Has pre-announced 4Q00above midpoint $0.01 $216.9 $0.68 $0.02 $689.0 $0.89 $915.7 $2.21 Shouldeinline b _, ,- [ADSK, DASTY MACR,MENT,PMTC,SDRC,SNPS, ADBE'lJhe sucurJties fthecompany T o arenotlistedbutIxadeover-the-counter the UnitedStates. In the US, retailsa_esand/ordisthbutian in ofthisreportmaybe made onlyinstateswhere thesesecurities e exempt romregis_'adonr havebeenquarried sale. MLPF&Sorits affiliates sualymakea marketinthe securities a f o for u ofthiscompany. OpinionKey[X-a-b-c: Inves_ent RiskRating(X): - Low,B- Average, - Above A C Average, - High. AppreciationPotential D Rafieg (a: Int.Term - 0-12 me.; b: LongTerm- >1yr.): 1 - Buy,2- Accumulate, - Neural, 4 3 Reduce5- Sell,6- No Rating. Income Rating(c):7- Same/Higher, Same/Lower9- NoCashDividend. 8Copyright 2001Merr Lynch,P e ce, Farmer& Smith Incorporated (MLPF&S). All rightsreserved. ny unauthorized A use ordisclosure prohihfied. is This report hasbeenpreparedandissuedbyMLPF&Sand/orone ofits affiliates andhasbeenapprovedfor pub cofion n theUnted Kingdomby MerrifiLynch Pierce Fenner& Smith Limited, hichis regulatedbySFA;has bean conalderedand disCibuted Auslxafia MerrillL_/nch w in by Equities (Auscalia) Limited (ACN 006 276 795) a licensed securitiesdealerunderthe Anslz'alinn erpora_onsaw;is disthbuted HangKoegbyMerrillLynch C L in (AsiaPacific) Ltd, hichis regulated w bythe Hang KongSFC;andis distributed in Singapore yMerrillL_ch Internafional b BankLtd (Merchant ank)and Merrill ynch(Singapore) B L PteLtd,whichareregulatedby the MonetaPJ uthorit'j A ofSingapere.The information erein was obtainedfromvarious h sources; wedonotguarantee accuracy its orcompleteness. Additionalnformationvailable. i a Neitherthen/ormafionnoranyepireonexpressedcons_es an offer,or aninvitstion tomakean offer tobuy or senanysecuritiesorany oplJous_ futuresor otherderivatives relatedto suchsecurities relote.d £ mves_ants .'). ofp_lic erdefs. MLPF&S,itsafrfiiates, irectur , officers, mployees d s e and employee t_nofit programs mayhave a longo_shortpsi,ion inany securilJes fthisissuer(s) r in related o o investments. LPF&Sorits affifiatesmay from M time totimeperform Investment bankingorotherservices for,or.seficitnvese'nont i banking orotherbusmesa from,anyantdymentioned fills r_p_t: In ...... Thisresearch reportis preparedforgeneralcecule_n rmancml for_enoralinformation only.or R.does 9 .not.haveregardto the.specific s.o'alegl__scu.sseu obje.c_e_s:, slt_on .a_.the p mtJcu_r..nee.ds,,o_sYtaSndP_ person whomayreceive s report.Investors th should seek andi§ c,rculated advicereguraJngheepprolPnatenosa Inveslm m anysecuatzes r _nve. investment t o _,.tment orrecommenueu m_l:,.,elx.t.=,u._t.u._.,___-=_=:_....= ,, _¢atemeotseqardinq r futureprospects ay notberealized. Investorsshould m notethatincomeaom suchseourltles,f any,may tluctoate i annInot eacn sesuorysprce ur valuemay r_e or lau._ccorolngly, tnve_orsmay luz._v_ -I_ MLPF&S slee.. _ andits affiliaesrnay_ade fur theirownancountses odd-ot dealer,market ,= _-_._..__.___________._....o..,.____o^_---.._--_..^ maker,bloc_ POsitioner, epecla st and/orarbltrageu." any secur_es°f this Issuer(s._ In relatedInveslments, whosevalues epPeslte In or financial an° ma_v e °n =e D influenced bac KFluess; °eg_; _Yt ac_ _v_ _xch_;_ a;_,_y _ _ _i_e: _:_ _ y'_ or relatedtdves_ent mentionedinthis report, In addition,nvest.ers secur_essuchasADRs, i In are bythe currency the underlying ecurity, o_ s ellec_vely assumecurrency risk. I;" ...=