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

To: Chuzzlewit who wrote (8877)	7/27/1999 1:28:00 PM
From: Robohogs	Read Replies (1) \| Respond to of 21876

Fast growth companies need cash to expand. A/R and inventories are always mcuh larger than payables and they grow with revenues. And improving margins cause costs not to increase as much as revenues depressing cash from ops. as payables don't increase as much.

To: Chuzzlewit who wrote (8877)	7/27/1999 1:54:00 PM
From: Mr.Fun	Read Replies (1) \| Respond to of 21876

Chuzzlewit, Here's the flaw - the balance sheet items you are using to calculate operating cash flow for the March quarter are for Lucent reporting alone, and for June you are using Lucent combined with Ascend in a pooling arrangement. You have to go back and restate all of the balance sheets to reflect the combination. If you do that you'll get my number absent the changes in liabilities you state. The reason I did not include them is because I used Lucent's worksheet from their 10Q as a template and for some reason they weren't in the earnings from operations section - including them (using the LU/Ascend combined balance sheet) uses another $59 M in cash, reducing the positive operating cash flow to $161M. So a couple take-aways: 1. Lucent's operating cash-flow turned positive in the quarter after being down more than $300M in Q2 and down more than $900M in Q1. 2. Management has indicated a reduction of 5 to 10 DSO in accounts receivable for Sep. This suggests total AR will rise less than $100M and could decline. Management has indicated inventory turns will improve slightly in Sep. This suggests an increase of less than $200 M. 3. Operating Earnings are projected to top $1.5B in Sep. 4. There is no reason to suspect changes in other balance sheet items to be particularly different than this quarter. 5. Merger related expenses associated with the Ascend deal are higher than those associated with smaller deals, e.g. Nexabit. 6. It would not be surprising to me for Lucent operating cashflow to push $1B in Sep. 7. Even if LU op cash flows are half what I suspect they can be in Sep, they are clearly improving rather than deteriorating as intimated in your original post.