Spyglass Message Board - Msg: 11654560

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Technology Stocks : Spyglass

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To: Art Bechhoefer who wrote (1120)	10/20/1999 5:12:00 PM
From: Lane Hall-Witt	Read Replies (1) of 1412

I don't know that the problem you're pointing to is so much an earnings statement issue as a cash-flow statement issue: the company is booking revenues and costs as the work is completed, but before payments are made. So revenues and earnings could look better than cash flow. This is the issue I had in mind when I noted the large increase in accounts receivables in an earlier message this morning. Basically, SPYG runs the risk of subsidizing the work it's doing for clients if it takes too long to get paid for completed services -- which is a sub-optimal use of assets, unless they have a real plan for making money as creditors to their customers. In the rather creative world of Internet "metrics," this is a problem: free cash flow trumps earnings as a marker of business success. At least that's the argument that lies behind calling AMZN a "value" stock. SPYG would probably generate much more interest among investors and speculators if it could point to significant free cash flow. Alas, as things stand, it's saddled with mere profits.

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