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Still Accumulate Procter & Gamble

Procter & Gamble (PG): Continue at 4 STARS (accumulate)

Analyst Howard Choe

Excluding charges, the company posted September quarter EPS of $0.96 vs. $0.92, $0.03 above S&P guidance. Sales declined 2% (volume +1%, forex -2%, price -1%). The healthcare division was standout again with sales up 19% due to successes in oral care, Iams pet, and pharmaceuticals. Other divisions are making slow progress. The company continues to make profitability gains with operating margins up 180 bps (cost of goods -140 bps., SG&A -40 bps). S&P is raising fiscal 2002 guidance to $3.38 from $3.35 (includes goodwill). Shares still attractive for this major consumer staple at 21 times fiscal year 2002 estimates.

Openwave Systems (OPWV):

Maintains 3 STARS (hold)

Analyst Scott Kessler

The company, which developed much of the technology behind the wireless application protocol (WAP) standard, reported results in line with the preannouncement. It posted pro forma September quarter per-share loss of $0.03 vs. $0.03, equal to S&P and Street estimates. Revenues rose 45%, but fell 19% sequentially, due to a challenging tech spending climate that was exacerbated by the September 11 attacks. Gross margin held firm at 84.7%. Sales and marketing expenses were notably higher than S&P expected. Based on a less positive outlook offered by Openwave, S&P is again slashing its fiscal 2002 (Jun.) estimate from $0.20 EPS to a per-share loss of $0.05. However, with $2.26 in cash/investments per share and significant takeover appeal, S&P rates the stock hold.

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