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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: gordon rundle who wrote (17411)	2/14/1998 12:05:00 AM
From: Obewon	Read Replies (3) \| Respond to of 97611

Another possible reason for factoring receivables above and beyond the currency issue already mentioned is that it's being done as part of CPQ's drive to reduce the number of vendors and retailers which which it deals. By factoring the receivables of those vendors with whom CPQ is eliminating its relationship, CPQ avoids a possible hit to its future collections. Possible scenario to avoid: Vendor A no longer sells CPQ as of Feb 1 but has standard practice to delay paying bill for merchandise until 60 days later. After last shipment received or even after notification of being dropped by CPQ, vendor A has little incentive to pay bill on time or maybe at all. Recall that CPQ is eliminating over 75% of its retail vendors, most of whom ship low volume of product. Is CPQ going to waste its resources in legally going after all of them? Probably not! To avoid this, CPQ sells these receivables, gets 97%-98% of the cash NOW, and lets the factor worry about collections. Risk management at its best! Remember that good investments reward investors with a return which is dependent on the LEVEL of RISK involved. OB