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Technology Stocks : Lucent Technologies (LU)
LU 2.560-0.4%Nov 18 3:59 PM EST
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To: bill c. who wrote (9206)8/17/1999 6:01:00 PM
From: HeyRainier  Read Replies (2) of 21876
 
For any of the financial analysts in this thread, are any of you concerned about the increases in 'Accounts Receivable' and 'Inventory' relative to the company's sales growth?

I have these figures, from 6/98 to 6/99:

Accts Receivable: +63.8%
Inventory: +74.2%
Sales: +19.7% (TTM)

Inventory as a percentage of sales has increased to 18.7% vs. 12.8%, so it would seem that these figures would have a relatively larger impact on earnings as we move forward. Completed goods inventories grew 83.0% while work-in-progress and raw materials were up 64.0%.

This is not the kind of trend one wants to see in a fine company such as Lucent. Usually inventories build up more quickly relative to sales when there is a relative stagnation in sales growth. Accounts receivables move up in the current fashion when the company opts for more lenient credit policies in order to get sales out the door more quickly, but to the detriment of either (1) more stale receivables in the future or (2) a sort of "borrowing from the future" to get sales up higher in the current period.

Unless there's some compensatory surge in demand in the future, the short term gains may come at the expense of future earnings.

I would like to hear some others' thoughts on the matter.

--Rainier
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