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Technology Stocks : Network Associates (NET)
NET 232.91-6.2%Nov 4 3:59 PM EST
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To: AlienTech who wrote (4070)1/22/1999 12:42:00 PM
From: Chuzzlewit  Read Replies (1) of 6021
 
Alien, the four issues that drive stock prices in the long run are:

1. Free cash flow per share (not earnings per share);
2. the estimated long-term growth rate of free cash flow per share;
3. The riskiness of the estimated future cash flow per share; and
4. The long term interest rate.

Larson has a history of playing fast and loose with shareholders when he does an acquisition. If you recall, I was up in arms about the Network General acquisition because of dilution. While I was screaming dilution Larson was talking about the deal being non-dilutive. How could we both be right?

Simple, Larson talks about earnings, and he creates those earnings by taking bug writeoffs for "one-time" or "non-recurring" merger expenses and write-offs. I ignore that stuff because it has no affect on cash flow.

And if you look at the history of cash flow per share you will see why the stock has not appreciated much. That's why I keep warning the thread that what this company needs to demonstrate is the promised synergies and no more highly dilutive acquisitions.

The fact that the company is becoming a powerhouse does shareholders no good if every step of the way entails decreasing cash flow. Clearly, it is time for Larson to focus on shareholders.

TTFN,
CTC
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