Changewave Research: 3Q/4Q 2004 Nasdaq Economy Survey

ChangeWave Research: 3Q/4Q 2004 Nasdaq Economy Survey September 20, 2004

ChangeWave Research 3Q/4Q 2004 Corporate Sales Survey Latest Alliance Survey Shows Significant Deceleration in 3rd Quarter Corporate Sales; Capital Spending Growth Rate Continues to Slow

Overview The latest ChangeWave Alliance quarterly sales survey, completed September 15, 2004, shows a significant deceleration in corporate sales for the 3rd Quarter. In addition, this is the third consecutive survey in which the growth rate for capital spending declined. On a positive note, the surge in prices found in the previous two quarterly surveys has abated, indicating inflationary pressures are under control. A total of 1,178 Alliance members participated in the survey. Far Fewer Winners: A total of 27% of Alliance respondents project that their company sales will come in "Above Plan" for 3rd Quarter – a 9-percentage point decline from the last quarter. More Losers: There was also an increase in the percentage of losers for the 3rd Quarter, with 24% of respondents reporting their company sales will come in "Below Plan."

The Last 13 Quarterly Sales Surveys: As the following chart shows, the current pullback in sales represents a significant weakening in the growth rate from the high point reached three quarters ago (Dec 2003).

Overall Quarterly Sales Survey Results Last 13 Surveys Com parison Sep '01 – Sep '04 Above Plan How is your company doing w ith regard to meeting its sales plan revenue objectives for the current quarter? Are you coming in above plan, even, or below plan? Below Plan 60% 55% 50% 50% 45% 43% 40% 38% 34% 36% 37% 36% 35% 31.5% 28.5% 31% 34% 30% 29% 27% 25% 24% 26% 20% 24% 20% 23% 23.5% 19% 19% 15% 18% 17% 18% 16% 10% 12% 5% 0% Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 7-15 2001 2001 2002 2002 2002 2002 2003 2003 2003 2003 2004 2004 2004

4Q Outlook: There has been a reduction in visibility going forward. Only 34% of Alliance members now say their company will come in "Above Plan" for 4th Quarter 2004 – a 9-percentage point drop from the previous quarter. And, the percentage of respondents who say

Copyright ©2004 ChangeWave Research All rights reserved. ChangeWave Research: 3Q/4Q 2004 Nasdaq Economy Survey their company will come in “Below Plan” has significantly increased since last quarter – rising from 10% to 14%. Further Decline in Growth of Capital Spending: For the third survey in a row, respondents reported a decline in the growth rate of capital spending. Only 16% of Alliance members think they’ll see an increase in their company’s overall Capital Budget for the 4th Quarter – a 5-percentage point drop from the previous quarter and a 7-point decline from six months ago. Another 13% of members think they’ll see a decrease in their company’s 4Q Capital Budget – which is 1-point higher than last quarter – while 59% think it will remain the same. In sum, while the overall rate of growth in capital spending is still a net positive (16% increase vs. 13% decrease), these are the lowest percentages registered in a ChangeWave Quarterly Sales survey since June 2003. Inflation Pressures Under Control: Alliance member companies are normally characterized by downward price pressures on a wide spectrum of their IT products (e.g., computer hardware). Currently, only 13% of respondents report rising prices for their products, down 4-points from the high reached last quarter and a signal that inflationary pressures are coming under control. Bottom Line: The survey findings point to a deceleration in corporate sales for the 3rd Quarter and reduced visibility for the 4th. In addition, this is the third consecutive survey in which the growth rate for capital spending has declined. These results closely mirror the sluggish findings in ChangeWave’s 4Q 2004 IT Spending Survey, and point to a slowdown in overall economic growth for the second half of 2004. We note that this ChangeWave study focuses exclusively on economic growth for the 3rd and 4th Quarters of 2004. It does not address potentially rosier growth scenarios for 2005 or beyond, such as:  CompTIA’s recent Yankee Group study suggesting revenue growth of 10% or more in 2005.  Cantor Fitzgerald recently telling clients “We are finally hearing investors point to valuations based on 2005 estimates. That means they've basically written off the results for the remainder of this year..."  Smith Barney forecasting the S&P 500 and the Dow will each rise 20% by the end of 2005. We also note that investors often look beyond current economic conditions when making valuations, and it is particularly worth mentioning this in a Presidential election year in which the outcome could have a major impact on investor sentiment. That said, the data from this survey strongly suggests that the very rapid economic growth seen in 2003 will not be replicated during 2004.

The ChangeWave Alliance is a group of 4,700 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™ www.ChangeWave.com

Table of Contents

Summary of Key Findings...... 4  Chart One: 3Q 2004 Sales Results...... 4  Chart Two: 2Q 2004 Sales vs. 3Q 2004 Sales...... 5  Chart Three: Last 13 Surveys Comparison...... 5 What’s in the Pipeline...... 6  Chart Four: 4Q 2004 Projected Sales Pipeline...... 6  Chart Five: 3Q 2004 Sales Projections vs. 4Q 2004 Sales Projections...... 6 Putting the Findings in Context...... 7  Chart Six: 3Q 2004 “Above Plan” Survey Results – A Comparison...... 7 Current Willingness of Customers to Buy Products...... 8  Chart Seven: Willingness of Customers to Spend Money...... 8  Chart Eight: Willingness to Spend – A Comparison...... 8 Inflationary Pressures Under Control ...... 9  Chart Nine: Price Pressures in the Current Marketplace...... 9 Decrease in Growth Rate for Capital Spending...... 10  Chart Ten: Overall 4Q Capital Budgets...... 10  Chart Eleven: Overall 4Q Capital Budgets – A Comparison...... 11 Survey Methodology...... 11 Additional Findings and Highlights...... 12 3rd Quarter Cancelled Orders...... 12  Chart Twelve: 3Q 2004 Cancelled Orders...... 12  Chart Thirteen: 3Q 2004 Cancelled Orders – A Comparison...... 12 Company Sales for Final 2 Weeks of 3rd Quarter...... 13  Chart Fourteen: Company Sales for Final 2 Weeks of 3rd Quarter...... 13  Chart Fifteen: Company Sales – A Comparison...... 13 Product Inventories for the 3rd Quarter...... 14  Chart Sixteen: Product Inventories during the 3rd Quarter...... 14  Chart Seventeen: Product Inventories – A Comparison...... 14 Backlog of Orders for the 3rd Quarter...... 15  Chart Eighteen: Backlog of Orders for the 3rd Quarter...... 15  Chart Nineteen: Backlog of Orders – A Comparison...... 15 Hiring Trends in the 3rd Quarter...... 16 Layoff Trends in the 3rd Quarter...... 17 Customer Visibility into Next Quarter...... 18  Chart Twenty: Customer Visibility into Next Quarter...... 18  Chart Twenty-One: Customer Visibility – A Comparison...... 18 Individual Sector Rankings – 3Q 2004...... 19 ChangeWave Research Methodology...... 20 About ChangeWave Research...... 21

I. Summary of Key Findings

Downturn in 3Q Visibility Declines for Inflationary Corpora 4th Quarter Pressures Abate  34% say their company te Sales  Only 13% report rising will come in "Above for prices for their companies Plan" for 4th Quarter 2004 Nasdaq products – down 4-points – a 9-point drop from from the high reached last Econom previous quarter y quarter and a signal that And Capital Spending inflationary pressures are  27% say 3Q 2004 Growth Declines coming under control company sales will  16% see increase in store  The number of come in "Above Plan" for their company’s respondents reporting – a 9-percentage point overall 4Q Capital Budget falling prices has risen by decrease from the – a 5-point drop in three 3-points in three months previous quarter months  24% say 3Q sales will  13% see a decrease

The latest ChangeWave Alliance quarterly sales survey, conducted September 7-15, 2004, shows a significant deceleration in corporate sales for the 3rd Quarter. In addition, this is the third consecutive survey in which the growth rate for capital spending declined. On a positive note, the surge in prices found in the previous two quarterly surveys has abated, indicating inflationary pressures are under control. A total of 1,178 Alliance members participated in the survey. Far Fewer Winners: A total of 27% of Alliance respondents project that their company sales will come in "Above Plan" for 3rd Quarter – a 9-percentage point decline from the last quarter. More Losers: There was also an increase in the percentage of losers for the 3rd Quarter, with 24% of respondents reporting their company sales will come in "Below Plan."

Chart One 3rd Quarter 2004 Sales Results - Current Survey How is your com pany doing with regard to m eeting its s ales plan for 3rd Quarter (Jul-Sep) 2004? Are you com ing in above plan, even, or below plan?

50% 42%

40% 27% 24% 30%

20% 7% 10%

0% Above Plan (3Q) Even (3Q) Below Plan (3Q) Don't Know (3Q)

A Comparison: The 27% "Above Plan" finding for the 3rd Quarter represents a significant 9-percentage point decline over the previous quarter.

Chart Two 2Q Sales June '04 Survey 2nd Quarter Sales Results - June '04 Survey vs. 3rd Quarter Sales Results - Current Survey 3Q Sales Current Survey

50% 42% 39% 36% 40% 27% 30% 24% 19% 20%

0% 2Q "Above Plan" Jun vs. 2Q "Even" Jun vs. 2Q "Below Plan" Jun vs. 3Q "Above Plan" Current 3Q "Even" Current 3Q "Below Plan" Current

The Last 13 Quarterly Sales Surveys: As the following chart shows, the current pullback in sales represents a significant weakening in the growth rate from the high reached in Dec 2003.

Chart Three: Overall Quarterly Sales Survey Results Last 13 Surveys Comparison Sep '01 – Sep '04 Above Plan How is your com pany doing with regard to m eeting its sales plan revenue objectives for the current quarter? Are you com ing in above plan, even, or below plan? Below Plan

60% 55% 50% 50% 45% 43% 40% 38% 36% 34% 37% 36% 35% 31% 31.5% 34% 28.5% 29% 30% 27% 25% 24% 26% 20% 24% 20% 23% 23.5% 19% 19% 15% 18% 17% 18% 16% 10% 12% 5% 0% Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 7-15 2001 2001 2002 2002 2002 2002 2003 2003 2003 2003 2004 2004 2004

What's in the Pipeline? There has been a reduction in visibility going forward. Only 34% of Alliance members now say their company will come in "Above Plan" for 4th Quarter 2004 – a 9-percentage point drop from the previous quarter.

Chart Four 4th Quarter 2004 Projected Sales Pipeline Next, we want a glim ps e into your sales pipeline for the next quarter (4th Quarter Oct-Dec) 2004. Do you think you'll com e in above plan, even, or below plan?

70% 60%

50% 41% 34% 40%

30% 14% 20% 12%

10% 0% Above Plan (4Q) Even (4Q) Below Plan (4Q) Don't Know (4Q)

More Losers for 4th Quarter 2004: The percentage of respondents who say their company will come in “Below Plan” has increased 4-percentage points to 14%.

Chart Five 3rd Quarter Sales Projections of Jun. '04 Survey vs. 4th Quarter Sales Projections of Current Survey

3Q Jun. '04 80% Survey 4Q Current 70% Survey 60%

50% 43% 41% 38% 34% 40%

30% 14% 20% 10% 10%

0% 3Q "Above Plan" Jun vs. 3Q "Even" Jun vs. 3Q "Below Plan" Jun vs. 4Q "Above Plan" Current 4Q "Even" Current 4Q "Below Plan" Current

Putting the Findings in Context

The following chart reflects the relationship since September 2001 between our Alliance “Above Plan” Quarterly Survey results and the movement of the Nasdaq 100 Index (QQQ).

Chart Six Alliance "Above Plan" Survey Results for '01 - '04 vs. Nasdaq 100 Index (QQQ) 50 Nasdaq 100 Index Alliance Surveys

12/9 3/16 6/16 Survey Survey Survey 30 9/16 Survey 9/15 Survey 6/17 3/12 Survey 20 Survey 12/10 12/11 6/26 Survey 3/18 Survey Survey 10/1 Survey Survey 10/3 10 Survey

0 9/01 12/01 3/02 6/02 9/02 12/02 3/03 6/03 9/03 12/03 3/04 6/04 9/04

Current Willingness of Customers to Buy Products Focusing on the immediate future, we asked respondents to rate the current willingness of their existing customers to spend money on their company’s products and services. One-half of all respondents (50%) said their existing customers currently have a "Green Light" to spend (i.e., spending is normal) – a 7-percentage point drop from the previous quarter.

Chart Seven How w ould you describe the current w illingness of your existing customers to spend money on your company's products and services?

80% 70% 60% 50% 50% 40% 40% 30%

20% 8% 10% 2% 0% Green Light Yellow Light Red Light Don't Know

Chart Eight: Willingness of Existing Custom er to Spend Money Green Light Last 7 Surveys Com parison Mar '03 – Sep '04 Red/Yellow How w ould you describe the current w illingness of your existing customers Light to spend money on your company's products and services?

70% 68% 62% 57% 60% 53% 51% 53% 50% 50% 42% 40% 41% 40% 41% 30% 32% 35% 20% 26%

0% Mar Jun Sep Dec Mar Jun Sep. 7-15 2003 2003 2003 2003 2004 2004 2004 Forty-two percent (42%) said their customers have either a "Yellow Light" (i.e., spending is downsized, though not completely stopped) or a "Red Light" (i.e., spending is virtually on hold). This represents a 7-percentage point rise from the previous quarter.

Inflationary Pressures Under Control Alliance member companies are normally characterized by downward price pressures on a wide spectrum of their IT products (e.g., computer hardware). Only 13% of respondents report prices are rising for their products, down 4-points from the high reached last quarter and a clear signal that inflationary pressures are coming under control.

The number of respondents reporting falling prices has risen by 3-points in three months. Question Asked: For the past thirteen quarterly surveys we’ve asked our members, “With regard to your own company, how are the prices for your products doing in the current marketplace?”

Chart Nine Price Pressures in the Current Marketplace With regard to your own com pany, how are the prices for your Rise in Prices products doing in the current m arketplace?* Fall in Prices 40%

35% 32% 29% 29% 31% 30% 28% 27% 27% 25% 26% 25% 22% 21% 20% 17% 18% 15% 15% 13% 10% 13% 9% 10% 8% 8% 8% 8% 8% 6% 7% 7% 5%

0% Sep Mar Sep Mar Sep Mar Sep 7-15 2001 2002 2002 2003 2003 2004 2004

*Note that a total of 60% report their company’s prices are holding firm in the marketplace.

Decrease in Growth Rate for Capital Spending

We asked the Alliance a question on their company’s overall Capital Budget to get an accurate reading on 4th Quarter 2004 capital spending.

Question Asked: “Investments in IT are just one part of an overall Capital Budget. Looking at your own company's overall Capital Budget - and adjusting as best you can for seasonality - do you think you'll see an increase in your overall Capital Budget, a decrease, or will your overall Capital Budget remain the same for the 4th Quarter (Oct-Dec) 2004 vs. the current quarter?”

Increase in 4th Quarter Capital Budget 16% Decrease in 4th Quarter Capital Budget 13% Remain the Same 59% Don’t Know 11%

Chart Ten Overall Capital Budgets March 2004 vs. June 2004 vs. Current Survey

80% Mar. '04 Survey Jun. '04 Survey 70% Current Survey 59% 60% 55% 56%

30% 23% 21% 16% 20% 12% 13% 9% 10%

0% Increase in Capital Budget Remain the Same -- Capital Decrease in Capital Budget Mar. '04 vs. Jun. '04 Budget Mar. '04 vs. Jun. '04 Mar. '04 vs. Jun. '04 vs. Current Survey vs. Current Survey vs. Current Survey

Further Decline in Growth of Capital Spending: For the third survey in a row, respondents reported a decline in the growth rate of capital spending. Only 16% of Alliance members now think they’ll see an increase in their company’s overall Capital Budget for the 4th Quarter – a 5-percentage point drop from the previous quarter and a 7-point decline from six months ago. Another 13% of members think they’ll see a decrease in their company’s 4Q Capital Budget – which is 1-point higher than last quarter – while 59% think it will remain the same. Thus, while the overall rate of growth in capital spending is still a net positive (16% increase vs. 13% decrease), these are the lowest percentages registered in a ChangeWave Quarterly Sales survey since June 2003.

Chart Eleven: Overall Capital Budgets Last 7 Surveys Comparison Increase in Mar '03 – Sep '04 Capital Budget Do you think you'll s ee an increase in your overall Capital Budget, a decreas e, or Decrease in will it rem ain the sam e for the next quarter vs. the current quarter? Capital Budget 40%

35% 30% 30%

24% 23% 25% 21% 19% 20% 16% 16% 15% 15% 12% 13% 10% 12% 11% 5% 8% 9%

0% Mar Jun Sep Dec Mar Jun Sep. 7-15 2003 2003 2003 2003 2004 2004 2004

Question Asked: “Would you say your company's capital budget is more affected by short term business conditions (e.g., rise in oil prices) or long term economic trends (e.g., interest rates)?”

Short Term Business Conditions 23% Long Term Economic Trends 39% Equally By Both 27% Don't Know / No Answer 12%

Thirty-nine percent (39%) of respondents say their company’s capital budget is more affected by long term economic trends, while 23% see short term business conditions as having more of an influence on their capital budget. Another 27% say it is affected equally by both.

II. Survey Methodology

This report is based on a survey of ChangeWave Alliance members conducted online between September 7 - 15, 2004. The goal of the survey was to get an up-to-date picture of the health of the “Nasdaq” Economy and its sectors, including any changes during the 3rd Quarter of 2004. To this end, the survey was composed of a sample of 1,178 accredited members of the ChangeWave Alliance.

III. Additional Findings and Highlights

3rd Quarter Cancelled Orders A total of 9% of members reported an increase in the number of cancelled orders for the 3rd Quarter. This is 1-percentage point more than the previous quarter’s 8%.

Chart Twelve 3rd Quarter 2004 Cancelled Orders Have you noticed any change in the num ber of cancelled orders for the 3rd Quarter (Jul-Sep) 2004 vs. the previous quarter?

80% 69% 70% 60% 50% 40% 30% 16% 20% 9% 6% 10% 0% Increase in No Change Decrease in Don't Know Cancelled Orders Cancelled Orders

The percentage of members reporting their companies are experiencing a decrease in cancelled orders is 6%, 4-percentage points less than the previous quarter.

Chart Thirteen: Cancelled Orders Increase in Last 7 Surveys Com parison Cancelled Orders Mar '03 – Sep '04 Decrease in Have you noticed any change in the number of cancelled orders Cancelled for the current quarter vs. the previous quarter? Orders 20%

15% 15% 15% 13% 13% 11% 10% 10% 7% 9% 9% 9% 6% 8% 8% 5% 6%

0% Mar Jun Sep Dec Mar Jun Sep 7-15 2003 2003 2003 2003 2004 2004 2004

Company Sales For Final Two Weeks of 3rd Quarter We also asked members to look ahead and characterize their company’s prospects with regards to sales for the final two weeks of the 3rd Quarter – normally the make-or-break period for meeting a sales plan. Sixteen percent (16%) said sales would be above expectations, down 4-points from the previous quarter.

Chart Fourteen How would you characterize your com pany's sales for the final two weeks of this quarter?

80% 70% 60% 52% 50% 40% 30% 20% 14% 14% 10% 2% 3% 0% Significantly Somew hat Meeting Somew hat Significantly Above Above Expectations Below Below Expectations Expectations Expectations Expectations

Seventeen percent (17%) said sales would be below expectations during the final two weeks of the 3rd Quarter, up 3-points from the previous survey.

Chart Fifteen Last Two Weeks of Quarter - Jun. '04 Survey vs. Las t Two Weeks of Quarter - Current Survey

80% Jun. '04 Survey 70% Current Survey 60% 51% 52% 50%

30% 17% 20% 14% 14% 11% 10% 3% 2% 3% 3% 0% Significantly Somew hat Meeting Somew hat Significantly Above Above Expectations Below Below Expectations Expectations Expectations Expectations

Inventories Stabilizing: We asked respondents to describe their product inventories for the current quarter and for the second survey in a row, there was little change. A total of 12% of respondents report their product inventories have decreased during the 3rd Quarter, while 10% report they have increased.

Chart Sixteen How would you describe your product inventories during the 3rd Quarter?

60% 50% 50%

40% 28% 30%

20% 10% 12% 10%

0% Inventories Have Inventories Have Inventories Have Don't Know Increased Stayed the Sam e Decreas ed

Chart Seventeen 1Q 2004 Product Inventories - Mar. '04 Survey vs. 2Q 2004 Product Inventories - Jun. '04 Survey vs. 3Q 2004 Product Inventories - Current Survey

80% Mar. '04 Survey Jun. '04 Survey 70% Current Survey 60% 49% 51% 50% 50%

20% 15% 14% 10% 10% 10% 12% 10%

0% Inventories Have Inventories Have Inventories Have Increased Stayed the Same Decreased

Backlog of Orders for the 3rd Quarter Order Backlog Remains: We also asked respondents if they have noticed any change in their backlog of orders for the current quarter. A total of 25% report an increase in their Order Backlog during the 3rd Quarter, 5-percentage points lower than last survey. Significantly, 20% of respondents report a decrease in Order Backlogs – 9-percentage points more than last survey. Another 55% report no change in their Order Backlog.

Chart Eighteen Have you noticed any change in your backlog of orders -- as m easured by days to s hip a product once orders are placed -- for the 3rd Quarter (Jul-Sep) 2004 vs. the previous quarter?

70% 55% 60% 50%

40% 25% 30% 20% 20% 10% 0% Increase No Change Decrease in Backlog in Backlog

Chart Nineteen 2nd Quarter Backlog of Orders - Jun '04 Survey vs. 3rd Quarter Backlog of Orders - Current Survey

80% Jun. '04 Survey

70% Current Survey 59% 55% 60%

40% 30% 25% 30% 20%

20% 11%

0% Increase in Backlog No Change Decrease in Backlog

We also asked those members who reported an increase in their Order Backlog, to estimate their actual backlog (# of days) for the current 3rd Quarter (Jul - Sep). Column One shows the results for the current quarter, Columns Two, Three and Four for the previous three quarters:

(n = 95)

Column One Column Two Column Three Column Four Order Backlog Current Previous Previous Previous # of Days Quarter Quarter Quarter Quarter 3Q 2004 2Q 2004 1Q 2004 4Q 2003 1-10 Days 8% 7% 10% 10% 11-20 Days 18% 21% 22% 19% 21-30 Days 18% 23% 20% 14% 31-60 Days 21% 22% 16% 21% 61-120 Days 11% 10% 10% 14% More Than 120 Days 14% 13% 15% 12% Don't Know 11% 4% 7% 10%

Hiring Trends

For the third time we asked respondents about hiring trends in their company for the quarter.

Question Asked: We are two-thirds through 3rd Quarter 2004. How would you characterize the number of new hires (full or part-time payroll employees) in your company at this point in 3Q 2004 compared with the same point in the previous quarter (2Q 2004)?

Current Previous Previous Hiring Trends Quarter Quarter Quarter 3Q 2004 2Q 2004 1Q 2004 More new hires at this point in 3Q 2004 compared to 2Q 2004 26% 30% 31% Equal amount of new hires in 3Q 2004 compared to 2Q 2004 20% 20% 17% Less new hires at this point in 3Q 2004 compared to 2Q 2004 12% 11% 10% No new hires at this point in either 3Q 2004 or 2Q 2004 32% 32% 35% Don’t Know / No Answer 10% 8% 8%

*Note: In the 1Q 2004 survey, this question was asking about the 1st Quarter 2004 compared to 4th Quarter 2003. In the 2Q 2004 survey, this question was asking about 2nd Quarter 2004 compared to 1st Quarter 2004. In the current survey, we are asking about 3rd Quarter 2004 compared to 2nd Quarter 2004.

A total of 26% of respondents say there are more new hires in their company at this point in the 3rd Quarter 2004 vs. 2nd Quarter 2004, down 4-points from the previous survey.

Twelve percent (12%) say there are less new hires in their company at this point in 3rd Quarter vs. 2nd Quarter, up 1-point from the previous survey.

Layoff Trends

For the second time we asked respondents about layoff trends in their company for the quarter.

Question Asked: And, how would you characterize the number of layoffs of full or part-time payroll employees in your company at this point in 3Q 2004 compared with the same point in the previous quarter (2Q 2004)?

Current Previous Layoff Trends Quarter Quarter 3Q 2004 2Q 2004 No layoffs at this point in either 3Q 2004 or 2Q 2004 57% 59% More layoffs at this point in 3Q 2004 compared to 2Q 2004 9% 8% Equal amount of layoffs in 3Q 2004 compared to 2Q 2004 13% 11% Less layoffs at this point in 3Q 2004 compared to 2Q 2004 12% 14% Don’t Know / No Answer 10% 8%

*Note: In the 2Q 2004 survey, this question was asking about the 2nd Quarter 2004 compared to 1st Quarter 2004, whereas in this survey we are asking about 3rd Quarter 2004 compared to 2nd Quarter 2004.

Twelve percent (12%) of respondent say there are “Less” layoffs at this point in the 3rd Quarter 2004 vs. 2nd Quarter 2004, but this is down 2-points from the previous quarter.

On the other hand, 9% say there are “More” layoffs at this point in the 3rd Quarter 2004 vs. 2nd Quarter 2004, up 1-point from the previous quarter.

Question Asked: “Does your company sell its goods and services primarily to the Business market, the Consumer market or the Government market?”

Current Previous Survey Survey Sep. ‘04 Jun. ‘04 Primarily Business Market 51% 56% Primarily Consumer Market 21% 20% Equally in Both Markets 14% 12% Primarily Government Market 12% 12%

Customer Visibility into Next Quarter We asked Alliance respondents to describe the visibility of their existing customers into the next quarter.

Chart Twenty How would you des cribe the visibility of your exis ting custom ers into the 4th Quarter?

40% 30% 27% 30% 24% 19% 20%

0% See Uncertain about Do Not See Don't Know an Uptick for an Uptick for an Uptick for 4Q Sales 4Q Sales 4Q Sales

Customer visibility trends weakened this quarter, as can be seen in the Chart below. Twenty-four percent (24%) of respondents report their customers see an uptick for 4th Quarter sales – 10- percentage points less than last quarter. Nineteen percent (19%) report their customers do not see an uptick for 4th Quarter sales – 4 percentage points more than 3 month ago.

Chart Twenty-One Visibility of Existing Custom ers into 2nd Quarter - Mar. '04 Survey vs. Vis ibility of Exis ting Custom ers into 3rd Quarter - Jun. '04 Survey vs. Visibility of Existing Cus tom ers into 4th Quarter - Current Survey

80% Mar. '04 Survey Jun. '04 Survey 70% Current Survey 60%

50% 34% 40% 31% 26% 27% 30% 24% 22% 19% 20% 14% 15%

0% See Uncertain about Do Not See an Uptick for Sales an Uptick for Sales an Uptick for Sales

IV. Individual Sector Rankings – 3Q 2004

The list below presents the ChangeWave Sector Rankings, based upon the 3rd Quarter sales findings of our current survey (i.e., the rankings are based upon the percentage of companies reported as coming in “Above Plan” vs. “Below Plan” for each sector in the 3rd Quarter).

The biggest improvement since our previous quarterly survey occurred in Transportation/Aerospace.

The biggest pullback occurred in Semiconductors.

3rd Quarter Individual Sector Rankings

1. Transportation/Aerospace 2. Natural Gas 3. Government/Defense 4. Distributed E-Power 5. Optical Networking 6. Wireless 7. Finance/Investing Services 8. Electronic Manufacturing Services 9. Healthcare/Pharmaceuticals/Biotechnology 10. Education/Training 11. B2B Software and Services 12. Semiconductor 13. Telecom

In viewing this chart, remember that we are ranking the actual economic sectors themselves – and NOT the stock market. There’s a difference.

The above ChangeWave Sector rankings are among the most valuable findings of our survey and highlight one of the Alliance’s great strengths. By pooling the observations of our 4,700 “Field Experts,” we are able to track individual sector performance in real-time and quickly alert Alliance members and ChangeWave subscribers on investable opportunities as they arise.

Next week you will receive an in-depth, sector-by-sector breakdown of the current quarterly survey results.

V. ChangeWave Research Methodology

This report is based on a survey of ChangeWave Alliance members conducted online between September 7 - 15, 2004. The goal of the survey was to get an up-to-date picture of the health of the “Nasdaq” Economy and its sectors, including any changes during the 3rd Quarter of 2004. To this end, the survey was composed of a sample of 1,178 accredited members of the ChangeWave Alliance.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (58%) have advanced degrees (e.g., Master’s or Ph.D.) and 94% have at least a four-year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

VI. About ChangeWave Research

ChangeWave Research, a subsidiary of Phillips Investment Resources, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 4,700-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy - well in advance of other available sources. ChangeWave surveys its 4,700 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at www.ChangeWave.com.

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

For More Information:

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Helping You Profit From A Rapidly Changing World ™ www.ChangeWave.com