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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,
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To: Sword who wrote (59666)10/4/2000 1:05:49 PM
From: Paul Berliner   of 122087
 
CFRA, the esteemed firm which weeds out companies with aggressive accounting practices and/or deteriorating financial conditions, released a very harsh and eye-opening report today on MSFT, accusing the company of meeting numbers this year by changing prior accounting and amortization policies, as the law of big numbers catches up with the co. The most interesting fact in the report, available on MultexNet, is that the company has been OCF negative the entire year if you reverse a recent reclassification they made whereby Stock Option Tax Benefits, a financing cash flow item, was reclassed into the operating cash flow section. 95% of companies report that line item in FCF.

Additionally, back to the subject of the put warrants, CFRA notes the following:

Growing Off-Balance Sheet Liability

CFRA estimates the current value of the put warrants liability to be a minimum of $2.1 billion (at June 30, 2000: warrants to put 157 million shares at strike prices ranging from $70 to $78 per share). Furthermore, and based on June 2000 information, CFRA estimates that the liability increases by an additional $157 million for each
$1 decline in MSFT common stock. The outstanding put warrants expire between September 2000 and December 2002 and permit a net-share settlement at the Company’s option (i.e. MSFT has the option to settle the liabilities with cash or via the issuance of additional shares).
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