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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: MikeM54321 who wrote (8215)	3/6/1999 4:57:00 PM
From: Frodo Baxter	Read Replies (1) \| Respond to of 9980

>Almost. But not quite. I'm finding the your figure of FX contract losses around $212 million quite interesting. I don't think I've ever used such precision, as I don't have the information to do so. But it's likely somewhere between $200 to $300 million. So I say $250. >Also knowing Stitch knows SEG in significantly greater detail than I do, the FX losses must be hard to dig out of the published financials. Not that hard if you actually look. After all, it's under the section in the filings called "FOREIGN CURRENCY RISK." :) As I recall, I don't think a single analyst really took SEG to task for this huge boondoggle. But then, there's a reason that analysts publish their reports after a quarterly conference call, but not after an SEC filing... >If I have your dates right, the bottom line is, their annual net income is significantly better than it appeared during fiscal year 6/98. They show net income from total operations to be negative $530 million. You are saying an estimated $250 million, of their loss, is from FX trading losses during that particular fiscal year? The second part is true. As for the first, "The 1998 results of operations include a $347 million restructuring charge, a $223 million write-off of in-process research and development incurred primarily in connection with the acquisition of Quinta Corporation, a $76 million charge for mark-to-market adjustments on certain of the Company's foreign currency forward exchange contracts and a $22 million reduction in the charge recorded in 1997 as a result of the adverse judgment in the Amstrad PLC litigation" -7/3/98 10K Ahh, the vagaries of big bang accounting! Despite this, the numbers are still pretty inscrutable, since companies have wide discretion in shoving all manner of things into restructuring charges, and until very recently, in IPR&D. It's crap like this that makes me more and more a fan of free cash flow. My opinion is that SEG didn't benefit one bit from the Asian crisis, because they were overly aggressive in hedging. SEG competitors who didn't hedge as much or at all, benefited more because their costs went down much more and they could pass this through to customers. Interestingly enough, SEG quit hedging because of the "volatility" of the currencies. Huh? I thought volatility was the reason to hedge to begin with! Translation: We didn't know what we were doing (it's not really necessary to lock-in rates on pegged currencies... DUH!), we took a bath, and we're not going to do it anymore. So of course SEG has no FX program in place as the currencies begin their recovery.