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Technology Stocks : Network Associates (NET) -- Ignore unavailable to you. Want to Upgrade?

To: AlienTech who wrote (5562)	7/23/1999 5:30:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 6021

Alien, here is a little bit of financial analysis: First receivables: In the current period receivables declined to $199MM, but how much of that was real (meaning payment was actually received), and how much was a result of a reserve for bad debt? According to ML $31.8MM was expensed as a bad debt, so starting from Mar 99 results we have $292,518 - 31,800 - 199,394 = $61,324MM decrease in A/R. Let's midpoint the receivables (i.e., assume that the receivables were all incurred in the middle of Q1). That means that in 19 weeks only 23.5% (61,324/(292,518-31,800)) were paid down. How does Larson reconcile this with his comments about DSO? How does this constitute an improvement in cash collection? A second ominous point: deferred revenues were down substantially. Deferred revenues represent cash received for work not yet done. Hence, deferred revenues represent a "window" for seeing future business. In March they stood at $188,938 but in June they were only $145,790 -- a decrease of $43 MM. But revenues for the period were $25MM. How did deferred revenues decline more than revenues booked for the period? Were there substantial contract cancellations? And what part of the $25MM in reported revenues derived from the existing pool of deferred revenues? Note that the operating "burn rate of cash" is greater than you might think. The sale of stock due to the exercise of employee stock options generated $13.1 MM in cash. Cash and marketable securities totalled $771.9MM. in March. The total stood at $620.2MM in June. That's a burn rate of $151.8MM, and if you add the 13.1MM to that you get a burn rate of $164.9MM for the quarter. Now let's consider revenues. Making the simplified assumption that the reduction in receivables represents a true sale of product, and adding that number to the revenues the company recognized for the quarter we have an estimate of sell-through for the quarter of $61MM + $25MM, or about $86MM. That tells me that demand for NETA's offerings have dried up. I could go on with this analysis, but there is nothing of substance to be gained from flogging a dead horse. Again, I wish longs all the luck in the world, but I feel well rid of this company, together with Larson's hubris and arrogance. TTFN, CTC