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Technology Stocks : LEGATO SYSTEMS LGTO -- Ignore unavailable to you. Want to Upgrade?

To: Edwarda who wrote (689)	1/24/2000 3:27:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 1138

Edwarda, This is what I've come up with so far for the full year. Note that the peculiar way that LGTO reports earnings makes this analysis "iffy". For example, do they include depreciation in operating earnings? If so, I have underestimated operating cash flow because I assumed that amortization of intangibles. included depreciation. FY 1999 -------- Operating Income (pre-tax and ex interest) $42,382 Add: depreciation and Amortization 21,785 Less: Increase in A/R <20,036> Increase in other current assets < 4,053> Plus: Increase in A/P 5,099 Increase in Deferred Revenue 24,571 -------- Cash Flow from operations $60,748 Capital spending 5,971 Merger expenses 16,438 -------- Free Cash Flow $38,339 Cash Flow per fully diluted share: $ 0.429 These numbers exclude taxes and interest.

To: Edwarda who wrote (689)	1/24/2000 3:37:00 PM
From: A. Wayne	Read Replies (2) \| Respond to of 1138

Edwarda, I agree with your postings. I've seen auditors turn on a dime. I was an internal auditor for several years with a large engineering company (hated the job, moved to budgeting). I've seen the public auditors march in acting like gods and start demanding all kinds of accounting changes. You typically get several junior auditors and a team leader. The junior auditors do a lot analysis but don't have the knowledge and experience to recommend accounting changes. Even the team leader may not be able to do this. This team could spend a lot of time (several months) at the company without a feeling that a change in accounting procedures should be recommended. They may have to take all their data and preliminary recommendations back to their office for senior Price Waterhouse review. At this point they are not likely to reveal to the client their "findings" or recommendations. Senior audit management ("partners") may send the "Team" back for more analysis. etc,etc. It can be a frustrating process for company management to know what the public auditors are thinking until pretty much the last minute, they do not like to show their hands. It's always possible that there are crooks in the company. I believe the more important thing to consider is the company on track with future revenue and profit growth? We should discuss the future potential of the company and how that relates to the current stock price. Is it cheap at $29 with a 50% growth rate? Is the growth rate 50%, 70%, 30%? Forward looking PE? Let's talk about these issues. Wayne