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To: orkrious who wrote (16204)	10/28/2000 4:33:32 PM
From: Zeev Hed	Respond to of 60323

Jay, all I can say is that I wish someone found a rationale explanation for the increase in DSO. Maybe retailers are given extraordinary terms for their paying back SNDK for those shipments. I would not be surprised if they use an accounting system in which they recognize shipments to retailers in a "statistical fashion" (namely recognize as sales 30% within two weeks of shipments, another 30% within let say a months and another 30% after six weeks, and leave 10% for returns and and allowances for let say, 2 months after shipments), but demand payments for a shipment let say 90 or 120 days after shipments. That will avoid needing to have a tracer on each MMC to see when it was sold to end demand. If that is the case, and the retail channel has an unusually long payment period, and assuming that retail sales have increased from the 25% in the first quarter to let say 35% of all sales, then that would explain the increase in DSO from 73 days to 80 or so days in the last quarter. If anyone has an input on this it would be appreciated. Zeev

To: orkrious who wrote (16204)	10/28/2000 7:28:12 PM
From: JMD	Read Replies (5) \| Respond to of 60323

Jay, "I cannot fathom SNDK stuffing the channel." Speaking for myself (and I'm pretty sure Zeev as well), there is no accusation of 'channel stuffing' by SNDK in the course of this discussion. 'Channel clogging' is probably the more accurate term, and the distinction is far from academic. When a company actively engages in stuffing channels, it is almost invariably to "make their quarter" and, IMO, is damn near fraud. They KNOW their wholesalers can't possibly sell all the stuff they're sending but treat the shipments as revenues nevertheless. Of course, this catches up to them the next quarter when all the returned merchandise clobbers that period's revenues. Absolute best case, it is amateurish revenue shifting. Often it is far worse. What we're trying to figure out in SNDK's case is simply why they are not doing a better job of getting cash in the can quicker. (I have an old, rusty MBA and prefer lustier verbiage than 'managing receivables'). We've determined that they're using conservative (and really the only appropriate) method of revenue recognition: putting a notch on the bed post only when the end user has plunked down his hard earned. So far, so very good. But as Zeev points out, that should REDUCE DSO. If they're still out 81 days, it suggests that, maybe, their sell through ain't so hot, i.e., their stuff is sitting on shelves. But that doesn't square with their reported inventory numbers which seem low in relation to sales. All of which means that I (and I'm going to throw Zeev in the hopper again) am/are confused camper(s). Apologies in advance to this very good board if accounting issues are causing eyes to glaze over, but trust me guys, DSO is not what you want to be confused about. I have breezed over it exactly twice in my stock investing life and gotten hit big time, both times. Just send me a PM if you want me to take my green eye shades elsewhere. best, mike doyle