10.25.2001
Telecom focus to pay off in 2002

• On a recent visit we found Elan’s Telecom IC segment will remain firm’s main focus, along with expectations that China will open the door to Type II Caller ID in 2002. Elan expects gross profit margin to drop marginally in 4Q01 due to fierce price competition in off-peak season. Company expects non-operating losses to decline in 2H01, as investment losses will be curbed. Although negative investor sentiment toward Elan’s major shareholder (Hualon Microelectronics (unlisted)) has kept shares from being rerated to a higher valuation, we believe there is promising growth potential due to further telecom liberalization in China (2002) and new products in the pipeline. We suggest investors Accumulate stock on attractive valuation.