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Technology Stocks : Network Associates (NET) -- Ignore unavailable to you. Want to Upgrade?

To: Susan Saline who wrote (4757)	4/6/1999 10:05:00 PM
From: Taby	Respond to of 6021

I believe the major concern was the SEC issue which turn out to be positive.I think the earnings shortfall should not have caused a drop from 67 to 21.

To: Susan Saline who wrote (4757)	4/6/1999 11:14:00 PM
From: HandsOn	Respond to of 6021

Good luck I lurk at LS thread, and admire You as a trader. I put in a GTC order at 21 1/2 but cancelled it before the close.

To: Susan Saline who wrote (4757)	4/7/1999 12:17:00 AM
From: Chuzzlewit	Read Replies (2) \| Respond to of 6021

At the risk of sounding pollyannish, there were many positives in the report, but to understand it you must get away from the earnings mindset. It distracts you from reality. The first thing that you must come to grips with is that the purchase price of a company is a sunk cost. It is irrelevant after the fact. That means that all of the goodwill restatements in the world are irrelevant. Strip them from your thinking and focus on what happened. When you do that you discover the following: 1. The cost of sales dropped dramatically. They fell from to 19.3% to 17.9%. Marketing and Sales dropped slightly from 30.2 to 29.8%. G&A dropped from 11.3% to 8.5%. Aggregate expenses (not counting R&D) dropped from 60.8% to 56.2%. R&D dropped from 14.0% to 13.7%. So total (including R&D) dropped from 74.8% to 69.9%. That's not too shabby, and probably represents only the first leg of potential synergies. So on the cost front things look good. On the cash front things are not quite so rosy, although they are not bad. Accounts receivable went up by about 40% -- more than I would like since sales went up by 34.6%. This is probably due to an increasing proportion of sales in Europe. I am disturbed by the large increase in deferred tax liability ($62 MM), and I hope to find some discussion of this in the 10-K when it is issued. Deferred tax liabilities can be an issue because they may reflect more than mere timing. They could be indicative of liberal definitions of sales or failure to include certain expenses. We shall have to await the annual report for more detail. On the other hand, deferred revenues are up nicely, indicating either that NETA entered the 1st quarter with deals in the pipeline, or the deals were significantly larger and required greater deposits. The real disappointment is in the forward looking statements. It appears as if NETA is captive along with other companies in a Y2K lockdown. Lengthening of the sales cycle should be a one-time issue (I assume Larson is talking about the time it takes to close a deal) as the company migrates to larger suite sales. I hope to have more exhaustive analysis tomorrow. TTFN, CTC