JO, I thought I had gone over some of this, but it is confusing as hell. So let me backtrack just a bit and continue thinking out loud. DSO represents the amount expressed in days that is owed by customers to the company. The last decent numbers I have are the December 1998 numbers which showed the following: A/R were 261MM and sales were 272MM, so DSO was about 87 days. I don't know what portion of revenues were for services, so let's assume for the sake of argument that it was zero. Now, the cost of revenues is roughly 14.5%, so the approximate amount of inventory sitting in the channel cannot be more than $37.7MM -- and that would assume that there was zero sell through -- that is, sales from the channel to the ultimate consumer were nil.
If DSO indeed swelled to 140 days and sales were of the order of $250MM for Q1 (sorry, I don't have the actual number at my fingertips) then receivables must have ballooned to around $384.6MM. These kinds of increases are monstrous, and I cannot understand how this happened. But the conclusion is that if Edwarda is correct and we assume the run rate remains around $250MM then net sales of around $134MM would come out of the channel, thus reducing channel inventory to around 90 days, but then we would expect sales from NAI to end customers to total around $116MM ($134 + $116 = $250MM). But sources are telling us $20MM in revenues. Remember revenue is net sales from NETA (which includes writedowns and allowances for bad debt). The only way I can see that happening is by massive A/R write-downs.
Something is extraordinarily fishy here.
TTFN,
CTC |
