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

To: stilts who wrote (11991)	1/3/2000 6:44:00 AM
From: Edwarda	Read Replies (2) \| Respond to of 21876

As for your assertion that you're long Lu, and therefore there's nothing wrong with your spreading alarm on this thread, all I can say is that Chicken Little didn't have a hidden agenda either. Did that make her less or more foolish? Your raising straw dogs, fly-specking, and baseless innuendos are certainly not benefitting any longs, especially given the recent history of some prominent shorts to try to blow accounting smoke at existing and potential Lu investors. No investor with an ounce of sense thinks that any stock story is without potential negatives. Part of avoiding being blasted out of the water is knowing to look for those negatives so that they do not show up as a surprise and keeping an eye out for them. Otherwise, a thread becomes nothing but a cheering section. Chuzz is merely sharing sensible concerns as to where there may be trouble and those concerns are valid to any balanced and experienced investor.

To: stilts who wrote (11991)	1/3/2000 8:47:00 PM
From: Chuzzlewit	Respond to of 21876

Stilts, let me make some points here. First, the securitizations I am familiar with are planned before the sale of assets, and make use of differential interest rates. The buyer signs an interest bearing note at the time of the sale and the note is securitized at a lower interest rate. Financial guarantee insurance is generally available for this kind of deal. By contrast, this particular transaction was designed to extract some cash from a sale to a customer who has presumably defaulted. Second, the sale of $625MM of receivables for $600MM does not necessarily imply only a 4% discount as you assumed, because any credit sale has some provision for non-payment. While the net receivable transferred may be $625 the gross amount transferred could be greater. The reduction in provisions for doubtful accounts (on a percentage basis) suggests that some of that provision may have been transferred, in which case the discount was more than 4%. Third, the central issue I raised (sufficiency of cash flow) is vitally important. Try looking at it this way: LU works on a gross margin of roughly 48.6%. A 4% discount reduces the gross margin to 44.6% on this and similar deals. I am less concerned with the details of this deal than I am with LU's financing model going forward. If future securitizations involve converting A/Rs to interest bearing notes prior to securitization, I have no problem. But if not, problems may exist. I never raised the question of the wisdom of this particular transaction -- it made the best of a bad situation. I did raise the issue of how the deal was accounted for, and further, how Lucent will finance future deals. It is bad business to finance purchases at less than the WACC. This is neither "flyspecking" nor baseless innuendo. These are real issues that need to be asked by serious investors. Only a fool ignores these kinds of issues, and only a worse fool dismisses these questions with inane concerns about "benefitting longs".