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

To: Steven N who wrote (55600)	4/5/1999 10:58:00 AM
From: rupert1	Read Replies (3) \| Respond to of 97611

StevenN: The unusual rise in accounts receivable has been dealt with several times on this thread. It is said to arise from the consolidation of COMPAQ and DEC accounts. The Jubak reference is typical of the journalists/analysts I mentioned earlier. They feed of each other. His article was about fundamental analysis, and he purported to be urging it on his readers. Yet he highlighted a rumour about COMPAQ which could easily have been dispelled had he studied the COMPAQ results. The rumour was that the enlarged receivables were a sign of channel stuffing. There was no channel stuffing. The inventory in channel was given in the results. I would have thought that an informed fundamental analyis would have suggested that such a large rise in receivables would have an unusual cause. I would then have looked for the unusual cause.

To: Steven N who wrote (55600)	4/5/1999 1:31:00 PM
From: rupert1	Respond to of 97611

Steve: I sent the following e-mail to Jim Jubak of MSN Investor ___________________ Mr. Jubak: I would like to comment on the following passage from your recent article: "Investors who care about fundamentals long have known that unusual surges in such bookkeeping categories as accounts receivable -- the measure of what a company's customers owe -- signal trouble. In the fourth quarter of 1998, for example, Compaq Computer (CPQ) reported a very impressive 48% increase in sales from the same quarter of 1997. But the company also showed a huge 142% increase in accounts receivable over the same period. Was Compaq experiencing the same problems that had sunk the stock in late 1997? When the company reported slow sales in January, Wall Street certainly leaped to that conclusion and punished the stock." 1. The surge in Accounts in 4Q 1998 compared to 4Q 1997 might reasonably have caused you to investigate it . Had you done so, you would have discovered the following: (a) In 4Q 1997 the company had used factoring much more extensively than it did in 4Q 1998. (b) 4Q 1998 included new, consolidated COMPAQ-TANDEM-DEC accounts. (c) DEC had previously sold Accounts Receivable to GE for VAX lease deals. CPQ Capital bought those receivables back from GE in order to offer co-ordinated lease plans across the whole of CPQ's high end alpha line. (d) Inventory build up which took 10-12 weeks to clear after 4Q1997 was down to 3-4 weeks in 4Q1998. 2. The company did not "report" "slow sales" in January, 1999. The company agreed with an analyst that there was some softness in the industry, as a whole, in the first six weeks of the year and that it affected COMPAQ in sales of desktops to the SMB sector and that this might be associated with delays awaiting the Pentium III. The company also said that the devaluation of the Brazil currency would cause a one-time charge. The company said that the sales of all its other lines and services was on track. 3. You may or may not be right in your guess why investors sold but I hardly think your piece is representative of fundamental analysis. I will publish this e-mail on the SI Compaq message board. Signed