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

To: Sawtooth who wrote (12401)	1/7/2000 9:20:00 PM
From: Maverick	Respond to of 21876

receivables and inventory increased significantly over the last 4 qtrs, LU was counting sales before they happened. Excerpts from Motley Fool follow. fool.com A brief look at Lucent's balance sheet shows a few chinks in the armor, ones that should have been pretty visible to investors during their due diligence. The company's long-term debt level of $2.5 billion is relatively high, but sustainable. Where Lucent gets low marks is in its cash and asset management. The company's receivables and inventory loads increased significantly over the last four quarters, which meant that the company was counting sales before they happened. In accordance with GAAP (Generally Accepted Accounting Principles) accrual methodology, companies may book accounts receivable as current sales rather than waiting for the cash to actually come in. In Lucent's case, both the level of receivables and the average lag time for payment of those receivables were ballooning. This is a cash drag on the company, as it lets the cash sit in some other company's bank account. For a company with the market weight of Lucent, poor performance for accounts receivable shows a lack of attention, since the company should by all measures be able to be strict in its terms to its customers. Today the impression is that it will take Lucent longer than one quarter to get things cleaned up. This is a company that has back-end loaded its revenues for several quarters, a vicious cycle that when broken tends to uncover other frailties when it pops. Still, the fact that Lucent points to its inability to meet certain demand for its products shows that the overall health of the telecommunications sector is still strong, and that other equipment providers should not be punished for the transgressions and operational errors of Lucent. In particular, this may turn out to be a boon for the largest competitors for Lucent in the data and telephony markets: Cisco (Nasdaq: CSCO) and Nortel Networks (NYSE: NT), as they could now have a perceived operational advantage over their huge rival.