Jay, "I cannot fathom SNDK stuffing the channel." Speaking for myself (and I'm pretty sure Zeev as well), there is no accusation of 'channel stuffing' by SNDK in the course of this discussion. 'Channel clogging' is probably the more accurate term, and the distinction is far from academic. When a company actively engages in stuffing channels, it is almost invariably to "make their quarter" and, IMO, is damn near fraud. They KNOW their wholesalers can't possibly sell all the stuff they're sending but treat the shipments as revenues nevertheless. Of course, this catches up to them the next quarter when all the returned merchandise clobbers that period's revenues. Absolute best case, it is amateurish revenue shifting. Often it is far worse.
What we're trying to figure out in SNDK's case is simply why they are not doing a better job of getting cash in the can quicker. (I have an old, rusty MBA and prefer lustier verbiage than 'managing receivables'). We've determined that they're using conservative (and really the only appropriate) method of revenue recognition: putting a notch on the bed post only when the end user has plunked down his hard earned. So far, so very good. But as Zeev points out, that should REDUCE DSO. If they're still out 81 days, it suggests that, maybe, their sell through ain't so hot, i.e., their stuff is sitting on shelves. But that doesn't square with their reported inventory numbers which seem low in relation to sales. All of which means that I (and I'm going to throw Zeev in the hopper again) am/are confused camper(s).
Apologies in advance to this very good board if accounting issues are causing eyes to glaze over, but trust me guys, DSO is not what you want to be confused about. I have breezed over it exactly twice in my stock investing life and gotten hit big time, both times. Just send me a PM if you want me to take my green eye shades elsewhere. best, mike doyle |
