Lucent Technologies (LU) Message Board

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Technology Stocks : Lucent Technologies (LU)

LU 3.120

+11.4%

Oct 31 9:30 AM EST

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To: Sr K who wrote (21815)	11/17/2005 9:21:09 AM
From: Elroy	of 21876

I'll bet you YHOO EV uses basic shares (4.4 billion) whereas I'm using fully diluted share (5.2 billion) to calculate market cap. The pension credit has no affect on the EV to sales calculation. It does make the reported operating margin look much better than the cash (actual) operating margin. The pension credit is an accounting deduction to line item expenses and Cost of Good Sold, but its not a cash benefit. LU's net cash per share in Sep '03 was -$0.28, and in Sep '05 it was -$0.10. In that time they reported operating margins of between 9% and 13% on revenues of about $2.3 billion every quarter. So even though they reported operating profits of 8 x ~10% x 2.3 billion = ~$1.8 billion, they didn't increase their net cash per share at all. That's because the reported profits come primarily from the fact that their pension account is overfunded, not because their business is doing well. A pension credit is a great thing, but I don't want to pay a 20x multiple for it. We pay multiples on profitable business operations because they are expected to grow (or at least be stable), we don't want to pay multiples on an onverfunded pension.

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