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Technology Stocks : Citrix Systems (CTXS) -- Ignore unavailable to you. Want to Upgrade?

To: jhg_in_kc who wrote (7856)	4/19/2000 8:32:00 PM
From: JMD	Respond to of 9068

jhg, need to repeat that 'channel stuffing' is one, but only one, of the possible reasons for an increase in A/R. I mentioned it only because some software companies (and their investors) have gotten in trouble in this manner. It is a potential concern, but one which the analysts will pounce on until a satisfactory explanation is forthcoming (and there are certainly plenty of satisfactory reasons). Again, it's a yellow flag--not a flashing red. For the poster who asked about 'deferred revenues' and DSO, here are two quick, layman explanations. If company X sells you a lamp for $400, they record the sale right away for the full $400. But if Microsoft sells you Office 2000 for $400, they will record current revenues of $340 and deferred revenues of $60 [numbers approximate]. Why? Because unlike the lamp company, MSFT will face ongoing expenses with Office, like keeping a team of programmers killing bugs and a service and support staff to answer your questions. In effect, they reserve $60 until their true cost of sales is known, at which point they will then bring the remaining deferred revenues into current revenues. This is considered the appropriate and conservative means of recognizing revenues from software license sales. (In MSFT's case, the deferred revenue account totals many, many millions of dollars). This is obviously a very cool thing to have on your balance sheet, defers taxes as well as revenues, and effectively tells the world that you're reserved for a rainy day (and not desperate to record every last nickel to make your numbers today). DSO = Days Sales Outstanding and is a ratio comparing your accounts receivable for any given period with your sales for that period. It is a measure of how quickly the company turns sales into cash. So if MSFT sells $400 worth of Office 2000 to me today, and I pay them 30 days from now, the DSO is 'a number'. But if I pay them 60 days from now, that number goes up, and so on. Thus an increase in DSO means that a company is having difficulty forcing its customers to pay cash on the barrelhead. In CTXS' case, the explanation seems to be that they're selling more big ticket items to large organizations who are taking more time than the little guys (for little dollars). Little guys can be pushed; Fortune 500 companies pay when they get around to it. These are pretty simplified explanations, but I think it fairly captures the gist. best, mike doyle