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To: jim kelley who wrote (84484)	12/9/1998 10:11:00 PM
From: Chuzzlewit	Respond to of 176387

Jim, let me give you a couple of easy answers, and then give me some time to delve into the complex question of their financial position (which I'll answer in a later post). Question 2: How can the analysts be showing 1.75 earning for next year when these restructuring costs and employee layoff charges are just beginning? One of the mysteries of life! Actually, what they do is ignore all "non-recurring charges", so things like charges for employee layoffs, restructuring, etc., is excluded. In fact, this sort of thing is a major problem in trying to figure out what is going on as the result of mergers and acquisitions. Acquiring companies love to write of a whole bunch of things under the aegis of merger-related costs and in-process R&D. The result is that by taking a huge "non-recurring charge" now, they avoid having some of these items appear on a recurring basis down the line. The question of the timing of tax refunds is one that I am not competent to answer. But I would note that in order for an item to be current liability implies that this is an amount payable within the next year. But that distinction is not true of an asset. In other words, if it isn't an intangible (like patents and goodwill), and if it isn't a fixed asset (like property, plant and equipment), it's generally considered a current asset. I will check Edgar and get back to you when I have digested their stuff. TTFN, CTC

To: jim kelley who wrote (84484)	12/9/1998 10:35:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Re: CPQ working capital, part II Jim rather than editorialize about what I think, I have snipped some appropriate sections from CPQ's 10-Q filing in the liquidity section. If you are not familiar with this, it is a gold-mine of information concerning short-term funding requirements. From time to time, Compaq may sell accounts receivables when it is economically beneficial to do so. Accounts receivable sold in the third quarter of 1998 were not significant and for the quarter ended December 31, 1997 were $1.1 billion snip For the nine months ended September 30, 1998, cash expenditures for restructuring activities were $110 million. Future cash expenditures for currently planned restructuring activities are estimated to be $1.6 billion. snip Compaq currently expects to fund expenditures for capital requirements as well as liquidity needs from a combination of available cash balances, internally generated funds and financing arrangements. Compaq from time to time may borrow funds for actual or anticipated funding needs or because it is economically beneficial to borrow funds instead of repatriating funds in the form of dividends from Compaq's foreign subsidiaries. In addition, on October 3, 1998, Compaq entered into a one-year $1 billion unsecured revolving credit facility to replace a similar facility that expired on September 21, 1998. Compaq also has a $3 billion syndicated credit facility that expires in September 2002, which was unused at September 30, 1998. Compaq has established a commercial paper program, supported by the syndicated credit facility, which was unused at September 30, 1998. Compaq believes that these sources of credit provide sufficient financial flexibility to meet future funding requirements. Compaq continually evaluates the need to establish other sources of working capital and will pursue those it considers appropriate based upon Compaq's needs and market conditions. Bottom line from CTC: the company expects recurring liquidity crunches, and to meet these requirements it intends to factor receivables (which renders DSO is a meaningless metric, and so it cannot be used as an indicator of possible channel stuffing), and it intends to see what there is to see. Note the final sentence in the above-quoted paragraph. I hope this helps, but it is difficult to do this accurately without recourse to more detailed information. TTFN, CTC