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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (8758)	7/21/1999 6:48:00 PM
From: Jeng Chiu	Read Replies (2) \| Respond to of 21876

Analysts focus on accounts receivables when they believe a company is stuffing product sales to make the numbers... ship now, book revenues and profits now, pay later. It's a way to "borrow" from next quarter's earnings. Sometimes, this is a red flag indicating slower sales. Of course companies like LU and CSCO have always played the accounting game to write off huge amounts related to acquisitions. The SEC has recently stepped up efforts to minimize the shell game and make companies report "real" numbers related to net income and earnings. However, in defense of these companies, they follow GAAP, and they play these games to satisfy the often capricious investment community- "Each quarter must be at least x % better than previous year's quarter otherwise it's the end of the world" mentality. Companies like LU and CSCO are well aware of what it takes to keep shareholders content and reassured. Why do they play these games? To smooth out earnings and to keep their shareholders happy. High stock prices = 1. more money for the exec.'s through stock options. 2. They need a high market cap for acquisitions in the ever increasing competitive environment of Voice Data convergence. It's cheaper to issue more stock than to pay cash. The higher the stock price, the fewer shares they have to issue. Also the better the stock, the more enticing it is to the takeover target. In my opinion, LU is the dominant player in the industry and will continue regardless of whatever blips that may occur in the short term. They have tremendous research, marketing and execution- all the formulas for long term success. Once you entrench yourself as the incumbant, you have the advantage. And the longer you are the incumbant, the harder it is for others to displace you. It is LU's game to lose.