10.23.2001
Better outlook going forward - Upgrade to Outperform

• Nokia and Motorola both claim the handset market will bottom out in 4Q. Nokia states handset sales will return to 25-30% growth rate in 2002. As a leader in Taiwan’s handset market, ACM should continue to benefit from ODM of GSM phones through 2002. Although we expect ACM to report negative earnings of NT$-123m in 3Q and possible earnings forecast revision for 2001 in the near future, we believe most of the bad news is already reflected in the depressed share price. Expect positive investment income from subsidiary AU Optronics (2409.TT) next year, as well as rising shipments of handsets, LCD monitors and optical storage equipment. Thus we believe the worst is over for ACM and will upgrade our recommendation from Neutral to Outperform.