Hitesh, I think some of your comments require some caveats.
While it is true that many of the projects LU designs and manufactures require lengthy periods of time, the real issue is one of revenue recognition. In general, revenue is recognized only when the customer is in receipt of goods, or, for major projects, on a percent completion basis. Unfortunately, many companies take liberties with these rules (e.g. NETA and Sequent). These practices often show up as lengthening DSOs. I don't know that such is the case with LU. A large, uncompleted contract which is not subject to percentage completion rules inevitably results in increases in inventory -- remember that the labor is capitalized and becomes part of inventory.
Other considerations are the terms of the contracts. My understanding is that it is now commonplace for telecom equipment firms to finance the deals by offering extended payment terms. Ascend was the first company to publicly acknowledge that practice.
Specifics aside, increasing inventory and A/R are concerns for two reasons. First, there is the issue of write offs of potentially uncollectible accounts. Second, there is the issue of the amount of capital that must be tied up in unproductive assets. Even if LU is simply following standard industry practices high levels of inventory and A/R are real concerns to financial analysts. Mr. Fun and I discussed this issue at some length a few weeks back.
TTFN,
CTC
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