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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: John Koligman who wrote (85717)	12/16/1998 4:28:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Hi John, Here is the problem in a nutshell: last year CPQ's operating cash flow was $2,800MM for the quarter ending 9-30. This year, for the same quarter it was $700MM. These numbers have nothing to do with restructuring costs, merger charges etc. They are strictly cash flow from operations. Anyhow, CPQ tells us everything is hunkydory, but then we discover this little gem: the company has set up charges for restructuring which it has not yet funded. How much? glad you asked! $1,634MM. It has also set up other special charges like in-process R&D. Jim Kelley has enumerated a whole bunch of them, so I won't repeat those here. It boils down to this: credibility. It does not appear to me that there is sufficient cash flow from operations to cover all of these additional charges. Now, there is a maxim in finance: use long term financing to fund long-term projects. Well, what are these? They certainly don't look like long-term projects to me. So, it may come as quite a shock when Compaq needs some money. They will probably say it is for general corporate purposes. I say it is to fund an acquisition, the cost of which they miscalculated. Now, much of their future depends upon making this deal truly accretive, because as things now stand it doesn't look great. One thing I should point out, however, is that layoffs should increase operating cash flow (through reduction in salaries and closure of facilities), and the bulk of them are yet to come. The question Jim Kelley raised is how do they pay for these things. I don't know. Maybe you should ask Pfeiffer. The 10-Q section on liquidity is vague on this issue. P.S., Oh Robbie. Yoohoo! Are you out there? Have you read your 10-Q yet? TTFN, CTC