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Technology Stocks : Dell Technologies Inc.

DELL 125.97

-1.0%

3:59 PM EST

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To: hpeace who wrote (29308)	2/5/1998 1:06:00 AM
From: Chuzzlewit	Read Replies (2) of 176387

hpeace, From the link in your post: "Our analysis indicates that if Mason (CFO of Compaq) can simply bring DEC's days outstanding of accounts receivable and accounts payable and DEC's inventory turns into line with Compaq's, he should be able to reduce the cost of acquisition from $9.4 to $3.5 billion. The latter amount is less than four times-that's right, four times- DEC's projected NOPAT in 1999." This is a very odd analysis, since neither accounts receivable nor accounts payable management affect profit. Improving them will certainly improve the cash flow of the company, but it will not affect the acquisition price because you are trading one asset (A/R) for another (cash). Increasing inventory turns increases profits by reducing inventory holding costs and risk, but the real key is gross profits, which is a combination of gross margin, inventory turns and inventory levels. Perhaps this is an example of doing the impossible? <VBG> Regards, Paul

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