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Technology Stocks : Network Associates (NET)

NET 232.87

+3.1%

Nov 7 9:30 AM EST

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To: Chuzzlewit who wrote (5708)	8/18/1999 2:43:00 PM
From: Conan	Read Replies (1) of 6021

Chuzzlewit: Here is my own analysis of cash flow as requested by a previous poster: Net Loss from income statement: -$159.5M Add back depreciation: $ 41.8M (a non-cash charge to income) $ 36.5M Add back allowance for doubtful accounts (one time charge) Add interest on notes $ 8.6M Subtract deferred taxes -$ 15.5M Change in A/R $ 24.9M Change in prepaids $ 10.0M Change in A/P -$ 8.6M Change in Deferred Rev -$ 46.8M Total -$108.6M Essentially, this is the operations portion of the cash flow statement. So it looks like the company is experiencing negative cash flow from operations--even when we ignore the decrease in deferred revenues. This analysis using the cash flow statement gives a picture of what happened to the company in Q2 independent of the fact that they only recognized $25M in revenue in the quarter. The additions and subtractions listed above undo the effects of non cash charges like depreciation as well as one time events like the write off of AR for the bad European distributor. How are we to explain the loss of cash to the tune of $100M in the quarter due to operations? Do we expect this to change in the coming quarter? Will the fact they may recognize about $175M in revenue this quarter change anything? I don't think so. What am I missing? Chuzzlewit, you have always talked about cash flow being the most important aspect of evaluating NETA. What are your comments? Regards, Conan

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