Continental Europe

Research

21 January 2004

Small/Mid Cap morning report

FRANCE

Gemplus Further confirmation of the recovery but valuation remains high. REDUCE (2.05)
GEPL.PA, GEM FP
Gemplus was up 8% yesterday to a 19-month high of 2.05, mostly due to an interview in La
Tribune of TPG's chairman (TPG owns 26% of Gemplus), in which he predicted a profit for 2004.
We see this as hardly ground-breaking, our estimates (and those of most analysts) have included
this scenario for many months.

The group also announced having hired Ernie Berger as new head of North American operations,
and that the Financial & Security Services division would be split in two units, Financial Services
and ID & Security (i.e. a similar organisation to Oberthur's). We rate both decisions as logical and
rather positive.

After the recent run in the share price, Gemplus (EV/sales 03E 1.16x, 04E 0.98x, 05E 0.85x)
now only trades at a small discount to Oberthur (EV/sales 03E 1.23x, 04E 1.07x, 05E 0.97x),
whereas Oberthur has already demonstrated a spectacular turnaround (H1 03 EBIT margin 6.7%).
We estimate Oberthur has recovered c. 9 months earlier than Gemplus.

Oberthur will report FY 2003 sales on 28 January and Gemplus FY 2003 results on 11 February.
Gemplus' current valuation not only fully takes into account a recovery but also very significant
medium-term growth in sales and profitability. Gemplus (and Oberthur) are fully valued in our
opinion, although the market will probably focus on the positive outlook which should be outlined
when results are published. REDUCE recommendation maintained.

NicOx Biolipox moves NCX 1510 into Phase II trials. HOLD (4.08)
NCOX.LN, COX FP
NicOx has announced that its partner, Biolipox, has moved NCX1510 into phase IIa trials in
allergic rhinitis.

NCX1510 is a non-disclosed antihistamine NO-derivative.

This is a co-development deal, with development costs and profits on any sales shared equally.

The Phase IIa trial expects to enrol 36 patients suffering from allergic rhinitis in an out of
season, allergen challenge study. Results are expected to be available by mid-2004.
We believe this is an example of how NicOx can leverage its platform technology in areas
outside its core expertise to progress product candidates rapidly through the clinic at a reduced
cost by partnering with specialist players.

We believe this will come as a small positive surprise - the collaboration with Biolipox was
initiated in June 2001 and extended around a year ago, but we have not received any update of
clinical progress to date. We therefore believe the move into Phase II trials following the
successful completion of a Phase I programme will be viewed as positive. We expect to receive
greater detail at the NicOx business review day on 27 January. We maintain our HOLD
recommendation.

SALES US SALES
Max von Doetinchem +44 (0)20 7155 8212 Andrew Nunneley +44 (0)20 7155 8203 Rupert Coull +1 212 376 1204
Rozzi Walton +44 (0)20 7155 8211 George Moffet +44 (0)20 7155 8202

London Frankfurt Milan Paris Hong Kong Beijing Singapore Johannesburg New York
IMPORTANT DISCLOSURES ARE INCLUDED AT THE END OF THIS REPORT
Small/Mid Cap morning report- 21 January 2004

Soitec AMD reports Q4 results. HOLD (4.83)

SOIT.LN, SOI FP
Last night, AMD reported Q4 sales of $1,206m and EPS of $0.12 per share, representing
revenue growth of 76% y-o-y and beating expectations of $1.1bn revenues and $0.04 EPS.

For the first quarter, AMD predicted slight sales declines but expects to remain profitable.
Current consensus for Q1 is for revenues of $1.03bn and a loss of 1 cent per share.
Sales increased in all regions highlighted by record sales in China and Latin America.

AMD saw growth across all microprocessor brands, including the AMD Athlon XP, AMD Athlon
64 and AMD Athlon Opteron processors. The company added new customers such as Daimler
Chrysler, Qualcomm, Pirelli and Bristol-Myers Squibb.
AMD broke ground on a 300 millimetre manufacturing facility, Fab 36, which was announced in
November and is expected to be in volume production in 2006.

A strong performance from AMD is relevant to Soitec, which supplies AMD with 200mm SOI
wafers for the Athlon 64 and Opteron processors but after Soitec reported Q3 sales on Monday,
this news should mostly be in the price. We remain HOLDers of Soitec.

GERMANY

Hochtief Rejects to make an offer for TBI. BUY (23.80)

HOTG.DE, HOT GR
Hochtief this morning announced that it will not bid for British airport operator TBI. Only six weeks
ago Hochtief indicated its interest in the company, which amongst other airports also owns the
fast-expanding Luton airport near London. According to TBI, no negotiations took place between
TBI and Hochtief to discuss the matter.
Hochtief is trading on adjusted EV/EBITDA multiples (ex Leighton minority share) of 3.9x2004 and
3.3x2005. The stock is trading on a 4% discount to the 2003 NAV and on a 28% discount to our
SOTP value for the group (excl. holding discount). We reiterate our BUY recommendation.

NORDIC REGION

Visma Q4 snap in line. BUY (NOK 76)

VIS.OL, VIS NO
Sales NKr387m (+30% YoY) vs consensus NKr367m (range NKr 345-378m) vs Caz
NKr378m.
of which Services sales NKr149m vs consensus NKr147m (range NKr140-155m) vs Caz
NKr145m. This represents an organic development of -2%. This follows a 9% organic decline in
Q3 so is a welcome stabilisation. We had expected a 5% organic decline in Q4.

of which Software sales NKr238m vs consensus NKr219m (range NKr190-232m) vs Caz

NKr233m. This represents an organic development of 11%. This follows a stunning 14% organic
growth in Q3.

EBITDA NKr52m (+74% YoY) vs consensus NKr50m (range NKr 42-57m) vs Caz NKr53m.

of which Services EBITDA NKr9m vs consensus NKr9 (range NKr8-10m) vs Caz NKr12m.

of which Software EBITDA NKr47m vs consensus NKr47 (range NKr45-51m) vs Caz NKr45m.

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 Small/Mid Cap morning report- 21 January 2004

EBIT NKr24m (+154% YoY) vs consensus NKr29m (range NKr 23-34m) vs Caz NKr31m.

PBT NKr36m (+203% YoY) vs consensus NKr31m (range NKr 20-40m) vs Caz NKr33m.

Net income NKr85m (+219% YoY) vs Caz NKr39m.

Sales was well above Caz and consensus expectations in both divisions, particularly in
Software, which had an excellent December.

However, Group EBITDA came in line with Caz and consensus expectations. The margin in the
Services division was slightly disappointing but set up costs of the Statoil and Narvesen contracts
were expensed. Further, there were some redundancies starting in Q4 which caused costs.
Acquired Software units did dent the margin slightly more than anticipated.

Services acquisitions are now on hold until the Services margin gets to 10%.

There were large tax income accruals during the quarter due to acquisition activity.

Guidance is that the IT market shows more improvement with more prospective customers.
There is a positive outlook for 2004 in Software after a strong December.

We will lift our 2004 sales estimates for both divisions, but leave the Group EBITDA largely
unchanged. We will lift our 2004 EPS slightly.

The sales trend is encouraging, and as there were some one-time costs expensed in Services
in Q4, we believe that the results will be taken positively.

There is a conference taking place in Oslo this morning. We are roadshowing the CEO in London
tomorrow and we will issue a note after that point.

Tandberg Q4 2003 preview. HOLD (NOK 60)

TAA.OL, TAA NO

Tandberg issues Q4 2003 results on Thursday 29 January at the close of trade. This will be
followed by a conference call with management. Our expectations are as follows:

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Small/Mid Cap morning report- 21 January 2004

Fig 1 Tandberg Q4 results expectations

NKrm Q303a Q402a Q403e YoY QoQ

North America sales 247.0 310.8 225.0 -28% -9%
Europe sales 113.0 156.7 130.9 -16% 16%
Asia sales 47.6 43.9 53.2 21% 12%
Group sales 407.6 511.4 409.1 -20% 0%
COGS -133.6 -171.9 -135.0
Gross profit 274.0 339.5 274.1 -19% 0%
Gross margin 67.2% 66.4% 67.0%
SG&A -172.1 -182.5 -175.9
SG&A/sales 42.2% 35.7% 43.0%
EBITDA 101.9 157.0 98.2 -37% -4%
EBITDA margin 25.0% 30.7% 24.0%
Depreciation -7.0 -6.0 -7.0
Amortisation -4.2 -3.9 -4.0
EBIT 90.7 145.6 87.2 -40% -4%
EBIT margin 22.3% 28.5% 21.3%
Net interest 6.7 2.6 16.3
PBT 97.4 148.2 103.4 -30% 6%
Tax -29.2 -40.2 -31.0
Effective tax rate -30.0% -27.1% -30.0%
Net income 68.2 108.0 72.4 -33% 6%
EPS 0.52 0.84 0.55 -35% 6%
CEPS 0.55 0.87 0.58 -33% 6%
Unit sales 4908 5496 5145 -6% 5%
ASP (NKr) 69,500 83,151 66000 -21% -5%
Source: Cazenove

Unlike Q1 and Q2, Tandberg did not give quarterly guidance at the Q3 stage, saying that the
environment remained challenging and the visibility limited. At the mid-quarter update on 19
November, Tandberg said that a year-end budget flush was not happening, with ongoing tight
public and enterprise budgets, and reiterated that visibility remained challenging. Nonetheless, the
CEO said that the performance was developing in line with developments already seen in 2003
which we presume to mean positive QoQ sales growth on a constant currency basis.

Our Q4 constant currency sales growth assumption is 3%, in line with Polycom's guided Q4 2-
5% QoQ constant currency sales growth.

This is one of the lower estimates in the market as, despite the IT market rebound, we are
cautious of assuming that positive enterprise seasonality in Q4 significantly offsets the negative
Federal seasonality, particularly given that Q3 2003 was the best ever Federal quarter for
Tandberg, contributing 25% of Group sales.

At the mid-quarter update, ASP was guided to be flat QoQ in Q4. We do not believe that the
industry will see price pressure on a product line basis for some time given that it is a niche,
oligopolistic market. However, Tandberg has for a while had the product mix move towards the
lower end and this has caused the recent declines in ASP. This is being caused by the mix moving
from third/third/third of sales high/mid/low end to the 15%/35%/50% split expected by
management in the long-term, which reflects the rough split of number of large/medium/small
conference rooms in the average office. From a 2% constant currency decline in ASP in Q2, we
expect a further 2% decline from Q3 into Q4, aided by the high Federal seasonality in Q3, which
encouraged high end sales in Q3.

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 Small/Mid Cap morning report- 21 January 2004

Geographically, Tandberg said at the mid-quarter update that EMEA was stabilising after recent
weakness, indicating a good European enterprise performance in Q4, while North America was
said to be on plan at the mid-quarter update.

The gross margin has been stronger than we expected throughout 2003, due in part we believe
to the rapidly growing MCU sales and VAS (Value Added Sales - principally software). At the mid-
quarter update, the gross margin was said to be in line with Q3. We expect it flat QoQ at 67%.

Tandberg appears now to have stopped giving quarterly guidance at the Q3 stage. We believe
that Tandberg will be cautious of guiding for Q1 2004 or any further out. The reasons for this are
twofold: Sales have declined QoQ for the last three years Q1 over Q4 and, post the two recent
warnings, Tandberg is naturally cautious of issuing guidance beyond the short term. For the time
being, we expect a flat QoQ sales performance in Q1 2004. Note that "seasonality" is not very
well established in this industry or Tandberg's topline given that Tandberg in its recent past (i.e.
post the new chip generation in 1998) has been through a very volatile competitive and economic
time.

Tandberg is currently in the middle of a WC reduction programme, targetting 55 DSOs by

around the end of 2004. Tandberg had WC inflows in both Q2 and Q3. During Q3, DSOs were
brought down from 81 days in Q2 to 74 days in Q3. At the Q3 stage, Tandberg guided for DSOs
to have another notch down in Q4. We see a further inflow of NKr9m in Q4 taking DSOs from 74
to 68 days at YE2003.

Q3 net cash represents 21% of the market cap (NKr12.3 per share). A year ago, Tandberg
spoke about the excess of net cash, indicating that a special dividend or acquisition(s) were on
the agenda, while doing nothing with the cash was ruled out. At the Q3 stage, Tandberg hinted
strongly that a return of capital was not on the agenda, but that it would rather do acquisitions.
We expect a comment on acquisitions on the conference call.

We see the adjusted PER (pre-goodwill) for 2004e to be 27.4x on our estimates and 23.9x
(pre-goodwill) using the consensus of NKr330m net income pre-goodwill for 2004e. Stripping
out the cash, we see Tandberg trading on an EV/OpFCF 2004e multiple (post notional tax charge)
of 23.0x.

We believe that the earnings multiples are stretched, and market estimates overly optimistic for
2004 and vulnerable to disappointment. Further, we believe that there is a high probability of
acquisitions which may dilute the returns and gross margin. HOLD.

Bang & Olufsen Edinburgh roadshow. HOLD (DKK 305)

BOB DC, BOb.CO
Today we are roadshowing the CEO of Bang & Olufsen in Edinburgh.

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Small/Mid Cap morning report- 21 January 2004

Analyst Country Direct Dial Email

Stuart Powers Spain & Portugal +44 (0)20 7155 8218 stuart.powers@cazenove.com
Leonardo Anguiano Spain & Portugal +44 (0)20 7155 8220 leonardo.anguiano@cazenove.com
Shyam Shah Spain & Portugal +44 (0)20 7155 8219 Shyam.shah@cazenove.com
Ralph Jainz Germany +44 (0)20 7155 8204 ralph.jainz@cazenove.com
Alex Baring Germany +44 (0)20 7155 8205 alex.baring@cazenove.com
Justin Waine Switzerland & Germany +44 (0)20 7155 8213 justin.waine@cazenove.com
Sebastian Kuenne Switzerland & Germany +44 (0) 20 7155 8209 sebastian.kuenne@cazenove.com
Daragh Horgan Holland and Ireland +44 (0)20 7155 8208 daragh.horgan@cazenove.com
Thomas Heidstra Holland and Ireland +44 (0)20 7155 8216 thomas.heidstra@cazenove.com
David Fairweather France +44 (0)20 7155 8221 david.fairweather@cazenove.com
Ketan Gadhia France +44 (0)20 7155 8223 ketan.gadhia@cazenove.com
Trion Reid France +44 (0)20 7155 8224 trion.reid@cazenove.com
Francois Berlioz France +44 (0)20 7155 8222 francois.berlioz@cazenove.com
Gorm Thomassen Nordic Region +44 (0)20 7155 8206 gorm.thomassen@cazenove.com
Michael Yates Nordic Region +44 (0)20 7155 8214 michael.yates@cazenove.com
Ilan Chaitowitz Nordic Region +44 (0)20 7155 8207 ilan.chaitowitz@cazenove.com
Rob Langrick Nordic Region +44 (0)20 7155 8215 robert.langrick@cazenove.com
Catherine Heath Italy +44 (0)20 7155 8217 catherine.heath@cazenove.com
Simona Ferrari Italy +39 (0)2 5821 5545 simona.ferrari@cazenove.com

Disclosure
As at the disclosure date (the end of the month preceding the date of this report, unless that month end is within 10 calendar days of the report date in which case the
disclosure date is the end of the preceding month) the following applied:
Cazenove & Co. Ltd acted as a market-maker in the securities of S.O.I.TEC Silicon ON Insulator Technologies;
In the 12 months prior to the disclosure date, a company or companies within the Cazenove group managed or co-managed a public offering of the securities of
S.O.I.TEC Silicon ON Insulator Technologies;
In the 12 months prior to the disclosure date, a company or companies within the Cazenove group received compensation for investment banking services from
Hochtief AG.

Cazenove & Co. Ltd certifies that, as to each company covered in this report, the relevant analyst(s) certifies that his or her views accurately reflect his or her
personal views about the securities and issuers the subject of this report and that no part of his or her compensation was, is or will be, directly or indirectly, related to
the specific recommendations or views contained in this report.

Investors should assume that companies within the Cazenove group are seeking and will seek investment banking and other business from the companies covered in
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Additional information with respect to any securities referred to herein will be available upon request. This report has been prepared for information
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