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Technology Stocks : Network Associates (NET)
NET 192.45+3.3%11:10 AM EST
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To: Just_Observing who wrote (4383)3/19/1999 12:16:00 PM
From: Chuzzlewit  Read Replies (1) of 6021
 
Just Observing, thanks for a good post. Let me add to something that you said:

For reference about DSOs, please note that SYMC, who competes with NETA, has DSOs of only 34 days last quarter.

This is somewhat misleading because there are important differences between the two companies. I believe that NETA does substantially more European business than SYMC, and it is customary to extend more liberal terms in Europe. There might also me a correlation with deal size and DSO.

So far as I'm concerned, increasing DSO is a problem only if it is the result of bogus sales ("channel stuffing") or customers likely to default.

The tendency to discount towards the end of a quarter is fairly widespread, and is one of the downsides to "managing" earnings expectations. In today's environment you are in a damned if you do, damned if you don't situation. When Dell didn't play that game last quarter (revenues fell short of expectations by $200 MM) the stock got hammered. A year ago or so Ashby at ASND stopped the practice of back-end loading the quarter and ASND was killed in the marketplace. But ultimately his decision was correct because the stock approximately doubled in a few quarters.

I think firms need to stop the practice of "managing" expectations. They should get out of the business of providing "guidance" to the analysts. So long as companies engage in these practices analysts will be duty-bound to use company-provided estimates which in turn create the imperative to "make the number".

TTFN,
CTC
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