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Technology Stocks : Oracle Corporation (ORCL) -- Ignore unavailable to you. Want to Upgrade?

To: DanZ who wrote (7862)	7/12/1998 9:06:00 AM
From: John F. Dowd	Respond to of 19080

Thank you very much. Good points and interesting article. The receivables and inventory buildup are always a sign of slowing sales and future slimmer margins. JFD

To: DanZ who wrote (7862)	7/13/1998 6:02:00 AM
From: lml	Respond to of 19080

Dan: I think you hit upon the primary reason for ORCL having larger receivables than MSFT. Consider the price of the products of each company & the customer base. ORCL sells bigger ticket items to an institutional base while MSFT sells smaller ticket items to a consumer base. Larger purchases, particularly software, require installation & quality assurance before the purchase is completely booked to income. Often, when a sales contract is signed, whatever the customer pays upfront but is not yet earned in terms of service is booked as a receiveable on the B/S rather than to income. This appears to be the ORCL accounting model. On the other hand, MSFT products, are primarily consumer based, albeit, many of its customers are small-to-mid-sized business. But the purchase price of Windows 98 or Office 97 or whatever doesn't require a huge outlay by the customer to warrant the generation of receiveables as seen with a purchase of ORCL software. I would expect, however, that as MSFT moves into selling more expensive backoffice software to a growing number of larger companies, we might expect to see its receivables to edge-up somewhat a reflect a B/S that more like ORCL. While the balance variance in receivables is noteworthy, I don't think it is nothing new, it may be one basis for a loftier PE since a sale of a Windows 98 or Office 97 is a complete sale while a sale of an Oracle 8 may not be a complete sale if for some reason the customer decides to bail prior to complete installation of the system. JMO.