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Three analysts and top management from eight sector firms examine the computer software sector in this special 53-page Computer Software issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info494.htm.

TWST: George, would you begin by telling us what you focus on in the computer software industry?

Mr. Godfrey: Our focus is on the enterprise software applications used by Global 2000 companies. The different verticals that I focus on are systems management, ERP, integration, customer relationship management and the platform space. The companies that comprise these verticals include Microsoft (Nasdaq:MSFT), Computer Associates (NYSE:CA), Siebel Systems (Nasdaq:SEBL) and TiBco Software (Nasdaq:TIBX), just to name a few.

TWST: George, how have the computer software stocks performed in 2001?

Mr. Godfrey: Not too well. If you look on an absolute basis, I would say that the vast majority were great underperformers — 20% or more. Relative to the market, the performance really wasn’t that bad. As the NASDAQ market goes, generally most of the software stocks follow. Microsoft was the one that really bucked the trend, although you’d never really know it as the stock was actually up about 70% or so from the close of 2000 into 2001, and that’s because there was such a depressed price level in December 2000

TWST: We have not really discussed TIBCO. Would you tell us about them?

Mr. Godfrey: Sure. TIBCO, an add rated stock, is in the integration space. TIBCO’s products provide the messaging capabilities between disparate applications regardless of what the applications are written in or what platform they run on. So you can have an order entry system running on a Unix platform and a customer relationship management application running on Windows NT, and if you wanted to have those two products communicate with one another, you could use a TIBCO messaging application to exchange data between the two applications.

TWST: George, how should investors be approaching the group?

Mr. Godfrey: I would say they should do their homework before they start investing in one of these companies to really understand what the upside opportunity is and what the risk or downside opportunities or problems could be. I think we touched on a number of the characteristics that you want to find in any one company, and I’d say the more work that you do on identifying which companies possess those characteristics and then monitoring those characteristics quarter by quarter are really going to be what lead you to a great investment because things can change quite quickly. Either the demand for a company’s product can dry up or they can mis-execute or underestimate a competitor, and within just one or two quarters, the problems really start emerging.

TWST: George, what would your final word be?

Mr. Godfrey: My final word on the software space would be to pay attention to the details in the company’s financial statements and to watch the companies’ that continue to roll out the new products or build their revenue streams because the acquisition of new customers and the growth of the revenue stream are really going to be what’s key to generating a key investment. Then pay attention to detail on the financial statements because recognition of revenue is something that software companies either fairly or unfairly get criticized for, and it’s something you want to be paying attention to.

This special issue includes:

1) Computer Software - In an in-depth (8,800 words) Analyst Roundtable, George Godfrey, Director at ABN AMRO, Inc. and Christopher C. Shilakes, First Vice President at Merrill Lynch, examine the outlook for the sector including stock performance in 2001, share of IT budgets and share specific stock recommendations.

2) Computer Software Stocks - In an in-depth (2,200 words) Analyst Interview, Melissa Eisenstat, Managing Director at CIBC World Markets, examines the outlook for the sector and shares specific stock recommendations.

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