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To: rudedog who wrote (148458)	12/3/1999 4:26:00 PM
From: Mike Van Winkle	Read Replies (2) \| Respond to of 176387

rudedog re: This whole discussion has exceeded my ability to stay interested. I am in your debt for responding, but explain to me how you can consider equipment to be presold when there is an obligation to take it back or rebate to help a fireside sale in the next quarter due to a forecast problem? This type of arrangement is required before stuffing the channel. CPQ has tried to discontinue the practice but always seems to recontinue it in one form or another. There are many ways to do it, but it ends up in the next quarter. You of all people should remember past practices. No matter what, a batch type manufacturing and sale system requires forecasting and stocking the shelves. Sorry to bore you. Cheers Mike

To: rudedog who wrote (148458)	12/3/1999 4:36:00 PM
From: Mike Van Winkle	Read Replies (1) \| Respond to of 176387

rudedog re; Do you know that virtually the whole of the consumer line is pre-sold before it is manufactured This is the problem with thinking that is not process based. You think that the product is sold because it is off the dock and in the hands of the retailer. Not! It is not sold until the consumer has bought it and is satisfied. You will continue to make this error in thinking until you look at the whole supply, manufacturing, and sale cycle. Good luck, Mike

To: rudedog who wrote (148458)	12/3/1999 5:29:00 PM
From: Chuzzlewit	Read Replies (3) \| Respond to of 176387

Rudy and Mike, Focusing on margins is really pointless for a couple of reasons. First, I assume (hope?) that the consumer business will be incremental. That is, it will not take sales away from existing lines. So analysis based on margins and ASPs and the like are fallacious. Second, the way to view the move is to look at gross margin and cash return on cash investment. That means that we need to focus on the interplay between inventory turns and profit margin. Each, taken by itself is meaningless. Selling one unit for $100 with a 50% profit margin has the same result as selling 100 units with a 5% profit margin. I don't know what the cash investment is, nor do I know the expected returns, so I can't deal with that issue explicitly. But in general, if the cash return over time (gross receipts less cash expenses) implies a return in excess of the the company's hurdle rate the project should be undertaken regardless of profit margins. TTFN, CTC