MRV Communications (MRVC) opinions? Message Board

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Technology Stocks : MRV Communications (MRVC) opinions?

MRVC 9.975

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Aug 15 5:00 PM EST

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To: Sector Investor who wrote (38947)	5/9/2002 5:06:04 PM
From: akmike	Read Replies (1) of 42804

Cisco sells hardware and software--the margins on the software could easily approach 90%. The margins on the hardware probably are closer to 50%. Cisco took huge inventory writedowns and as Greg said they have set that equipment aside and subsequently sold some of it. They have disclosed each quarter how much those revenues amounted to. The number for the last Q escapes me but I remember that it was in the 10's of millions compared to 4+ billion of revenue. If they were booking revenue as Greg has alluded to from discounts and/or trade-ins then that flies in the face of my understanding of GAAP and also does not square with the increasing cash flow that was reported. I believe a more likely scenario of Greg's reported trade-in anecdote is that Cisco sales people were told of the written down inventory and authorized to "turn it into cash within these guidelines". The guidelines could well have allowed to take old equipment in trade for part of the price and let the customer account for the transaction however they wish. The reported revenue (cash received, not trade) would be reported in gross revenues and the aggregate amount of all cash received in this manner reported to the investment community at the conference call. As the inventory disposed of in this manner had already been written off completely, there would be no need to treat the trade in on the companies books unless it is disposed of for cash subsequently. This process would enhance margins (which is why the dollar amounts were disclosed for transparency). Over and above the small amount of margin improvement coming from this and identified as such, Cisco reported significantly improved margins.

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