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

To: abbigail who wrote (11917)	12/28/1999 3:11:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to of 21876

Abbigail, There are a number of cash issues that trouble me, not the least of which is the use of a non-consolidated entity for the financing. When Lucent uses a non-consolidated vehicle that means that the cash-flow attributable to that vehicle is not included in the cash flow statement, and is probably accounted for as an investment. Lucent will need to improve inventory management and accounts receivable management in order to establish decent operating cash flow. You rhetorically asked In this type of business, what good is positive cash flow anyway? Cash is the life-blood of any growing company. A company cannot pay its bills with earnings -- it must use cash. When you run out of cash to fund growth you must either stop growing or seek cash from outside sources (either debt or equity). Earnings depend on accounting conventions, but cash flow does not. Such issues as the depreciation period, purchased R&D and restructuring reserves impact earnings but have no affect on cash flow. That's why it pays to watch cash flow very closely. TTFN, CTC