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Technology Stocks : Dell Technologies Inc.
DELL 126.42+2.8%Dec 19 9:30 AM EST
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To: Geoff Nunn who wrote (32548)3/5/1998 10:24:00 PM
From: Chuzzlewit  Read Replies (1) of 176387
 
Geoff, the way a channel can be stuffed with bogus sales is as follows:

Suppose you are a retailer and I say to you, Mr. retailer, if you want to carry my line you must take such and such amount of product. You say to the manufacturer "But I can't afford to pay for all of that stuff, and besides, if it doesn't sell by the summer It'll be worthless."

"Not to worry", says the wily manufacturer. "Pay me only for the units you sell. I'll take back whatever is left over by the beginning of the summer."

Now, the manufacturer books all of that inventory as a sale, and the retailer views it as consignment merchandise (so it doesn't show up on his balance sheet as inventory and accounts payable).

Now I'm not claiming that this happened here, but it has happened with other companies. In fact, there is a famous B-school case called "Scott Fertilizer" that illustrates this.

Regards,

Paul
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