Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: EnricoPalazzo who wrote (51248)	5/6/2002 9:14:50 AM
From: Mike Buckley	Read Replies (2) \| Respond to of 54805

Ethan, Negative cash flow from operations is never a good sign. Great companies are usually cash-positive from an early age ... I disagree. For a company early in its growth, negative cash flow can be an indicator that the company is plowing its cash back into the company's efforts and, thus, can be a good sign that the company is being properly managed to execute at that point in time. Changing the metric to free cash flow and using Siebel as an example, after adjusting for the tax benefit relating to employee stock options, its free cash flow was negative from 1994 through 1997 when its revenue was $222 million. For those who don't believe in making that adjustment, free cash flow was negative until 1996 and in 1997 was so small that for every dollar of revenue it barely produced a penny of unadjusted free cash flow. To help put that in context of the company's history, it wasn't until 1998 that the company bought Scopus. I like to think of free cash flow in relation to the adoption of the product, not how young the company is. When Siebel was four years old it became free-cash-flow positive. If after ten years Elon's free cash flow is still negative, I believe we should look at that more in terms of the relative adoption of the product than the relative age of the company. When Siebel was three years old its tornado began. At a glance, it doesn't appear that ELON has enjoyed the benefit of a tornado yet even though it is much older. --Mike Buckley