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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: my2centz who wrote (54450)	3/22/1999 8:36:00 PM
From: rupert1	Respond to of 97611

Thanks for your work. The $6.99 billion Accounts Receivable in January, 1999 is said to have been swollen by accounts carried over from the DEC acquistion. If this is the case, then the basis of your calculations is skewed. The A/R figure from Brazil would be much lower. I was aware of the passage in the Annual Report. It was apparent that Mason did not give very convincing details to the CSFB guy, who confessed to being a bit puzzled. Perhaps it was too complex and Mason, himself, did not have all the calculations in. He probably gave a worse case scenario. However, he did say that $200 million would produce a hit of 2 cents on EPS. or, read differently, it was the CSFB guy who calculated that it was 2 cents on his original figures, (which comes to the same thing). Another factor to consider is that COMPAQ has some kind of manufacturing plant in Brazil. Ordinarily, the reduction in the Brazil real should lower the cost of manufactured products within Brazil and exported from Brazil. But this may be too simplistic. I don't know how much is produced for the Brazilian markets in non-Brazilian plants, or what components the Brazil plant has to import. The cost of imports would be higher with devalaution. A third factor has to do not with the loss on receivables, but with the reduction in ongoing income from Brazil arising from the need to convert Brazilian revenues into US dollars. I'm afraid it is one of those issues that can only be quantified when all the variables are weighed. My gut feeling is, though, that the hit is going to be substantially less than $200 million. IDIOTS "For certain markets, particularly Latin America, Compaq has determined that ongoing hedging of non-U.S. dollar net monetary assets is not cost effective and instead attempts to minimize currency exposure risk through working capital management. There can be no assurance that such an approach will be successful, especially in the event of a significant and sudden decline in the value of local currencies."