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Technology Stocks : The Learning Company (TLC) -- Ignore unavailable to you. Want to Upgrade?

To: paul richards who wrote (5764)	9/22/1998 6:40:00 PM
From: paul richards	Respond to of 6318

here's more insight from thestreet.com: Meanwhile, readers continue to add to the discussion here on The Learning Co.'s (TLC:NYSE) decision to sell off, or factor, its receivables to a third party. Analyst Randy Befumo, of Legg Mason Fund Adviser (yes, that Randy Befumo, the former Fool) writes: "I would argue the real problem is not how long customers take to pay for the goods, but how full the distribution channel is. If TLC has been making its numbers by progressively stuffing the indirect channel (a la Compaq [CPQ:NYSE] in '96/97), there will eventually come a time when the channel will just not take more product and all of the extra revenue growth the stuffing created will unwind, causing significant negative revenue growth for two or three quarters. "The prefactoring DSO count is the best leading indicator (although imperfect) for how much TLC product is out there waiting to be sold. The revenue recognition is aggressive, but the real economic problem is that by filling the channel the company has pulled future sales forward, robbing Peter to pay Paul." David Hamilton, of Burlington, Ontario, adds: "You're right in saying that after factoring the accounts receivables the company can get the cash. What you should point out, though, is that when a company factors their receivables, they only get a percentage (90% to 95%) of the face value of the receivables. This compensates for the time value of money and the credit risk associated with the receivables. "Factoring is in essence a way to generate cash -- selling an asset below its value to have the money to spend today. Although many companies do it, it isn't a good sign to see most of the receivables factored. It implies that a company is burning cash. More companies go bankrupt from a lack of cash rather than cumulative losses."

To: paul richards who wrote (5764)	9/22/1998 7:08:00 PM
From: Trader Dave	Respond to of 6318

regarding factoring: libor plus 60 basis points is cheaper than a 2% early payment discount. Channel stuffing would have caught up with tlc long ago. a/r and factoring combined are high, but they've been essentially constant for 8 quarters. now paul, what's your thinking on market share and revenues for the balance of the year?