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To: The Phoenix who wrote (41361)	10/23/2000 4:00:14 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 77397

Operating margins are down because of increased "in process R&D" due to acquisition. Ex-in process R&D, op margins are still down to like 24% from 28%.

To: The Phoenix who wrote (41361)	10/23/2000 4:15:03 PM
From: Wyätt Gwyön	Respond to of 77397

Inventory turns remained at 7.8 days. Receivable days went from 32 to 37 days. Inventory turns does not refer to a number of days. It is the number of times inventory turns over within the year. Divide 365 by that number to get days of inventory. I will check on the 55-65 figure. In any case, using 7.8 turns, that implies ~47 days. Receivables increases by five days, meaning the operating cycle (days inventory + DSOs) rises to 84 from 79--not favorable. Also keep in mind that receivables and inventories increased in excess of revenue increase, which may have something to do with the falling margins. From the 10-K: Accounts receivable increased 83.9% during fiscal 2000. Days sales outstanding in receivables increased to 37 days for fiscal 2000, from 32 days for fiscal 1999. The increase in accounts receivable and days sales outstanding was due, in part, to growth in total net sales combined with conditions in a number of markets, resulting in longer payment terms. Inventories increased 87.2% during fiscal 2000; however, inventory turns remained constant at 7.8 times. The increase in inventory levels reflected new product introductions, continued growth in our two-tier distribution system, and increased purchases to secure the supply of certain components. Inventory management remains an area of focus as we balance the need to maintain strategic inventory levels to ensure competitive lead times with the risk of inventory obsolescence due to rapidly changing technology and customer requirements.

To: The Phoenix who wrote (41361)	10/23/2000 4:40:45 PM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 77397

re: Inventory levels and receivables, Looks healthy to me. I'm not so sure. The cash flow statement shows: 2000 1999 Accounts receivable (1043) 45 Inventories (887) (443) -------------------------------------- Adding these together: A/R + Inv (1930) (398) So changes in the operating cycle, and the levels of AR and inventories, resulted in a deduction of (1.93)BB from cash flow in FY00, compared to (.398)BB in FY99. In particular, A/R has gone from a positive item to a billion+ negative item. Meanwhile, among contributions to cash flows, we have: Tax benefits from employee stock option plans 2000 1999 2,495 837 That is, an increase of 1.658BB, or an increase of almost threefold. So the operations-related items--namely inventories and receivables--have worsened, even as the main contributor to the cash flow increase is "tax benefits". Ideally, one would like to see cash flows improving due to operation-related items. All "free cash flows" are not created equally.