cashflow.com

Equity Research

2 August 2001Americas / United States

Investment Strategy

Cash Flow.comWhy Its Important to Focus on CashEconomics

Update Volume 9 This report outlines a practical framework for analyzing the cash economics

of business models.

Our analysis indicates that knowledge-oriented companies tend to havesuperior cash economics than their physical asset oriented counterparts.

Exemplifying this trend, the income statement of companies such as Dell,Yahoo!, and Amazon.com understate their ability to generate cash.

This potential for higher cash flows helps explain for the valuation premiumsthat investors observe in knowledge-based sectorsUS Investment Strategy

Michael J. Mauboussin212 325 [email protected]

Alexander Schay212 325 [email protected]

Cash Flow.com 2 August 2001

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Executive Summary Cash is king. In recent years, scores of startup companies have barged into the

consciousness of investors. These companiesepitomized by the dot.comphenomenonhoped to reshape the corporate landscape. But all companies areultimately held to a singular standard: the ability to generate long-term cash flows.Investors can draw two lessons from the gyrations in technology companyvaluations. First, many will try and few will succeed. This pattern has played outtime and time again in the business annals. Second, as corporate landscapetransitions from a reliance on physical to knowledge assets, the pattern of cashflows is changing. Specifically, companies are increasingly expensing theirinvestments, while their tangible assets remain relatively modest. As a result,income statement analysis is misleadinginvestors must follow the cash.

What you see is not what you get. Investors calculate free cash flow by subtractinginvestments from a companys cash earnings. Most physical asset intensivecompaniescompanies that rely on physical assets for their source of competitiveadvantage-have a cash inflow from earnings and a cash outflow from investmentssuch as working capital and capital spending. Thus, cash earnings for thesecompanies will typically overstate their free cash flow. For example, Barnes andNoble generated $225 million in cash earnings for the 12 months ending on January30, 2001. However, it also invested over $450 million during the period, translatinginto negative free cash flow of $225 million. For every $1 in investment, Barnes andNoble generated $2 in new sales.

What you see is not what you get, part two. Knowledge oriented companieswhichrely on people as their source of competitive advantageoften have superior casheconomics. Yet they generate cash in a totally different way. Some can generatecash from their balance sheets through a combination of negative working capitaltotals and relatively modest fixed asset investments. This means that cash earningsfor a knowledge company can dramatically understate the companys total free cashflow. Amazon.com is a case in point: in 2000, a $1 investment supported $10 in newsales. Some knowledge companies will see their ratio of investment to new salesdiminish.

Heed the balance sheet. Investors anxious to own cash cows have naturallyfocused on the income statement. However, our analysis indicates that looking atthe balance sheet of a knowledge company can unveil an important source of cash.Investors must look at both financial statements, as it is free cash flowthe sum ofa firms cash earnings and investmentsthat drives shareholder value creation. Webelieve that understanding these fundamental differences in the cash economics ofbusiness models will become increasingly important as the digital revolutiontransforms the world.


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IntroductionOn the final exam [for a business valuation course], Id probably take an Internetcompany, and [ask], How much is it worth? And anybody that gave me an answer, Idflunk...

Warren Buffett1

Some investors claim that we are in a new age where old rules do not apply. Wedisagree. Yes, for companies with no earnings, old valuation rules-of-thumb like price-to-earnings ratios have lost their relevance. But the fundamental drivers of value remainthe same. When investors spend their hard-earned cash to buy a piece of a companysequity, they are buying a share of the companys future cash flows. And whetherinvestors are purchasing nascent Internet companies or mature manufacturingcompanies, the goal is the sameto buy into a stream of cash flows with a currentvalue greater than the price they paid.

To understand how the market values any company, then, we first need to understandthe cash economics of business modelsa companys propensity to generate orconsume cash. What is obvious is that many knowledge companies are currentlyincurring losses as they spend millions in marketing, while their off-line competitors reapcash earnings. What is less obvious is that these companies invest much less in theircomputers and office space than their more traditional peers spend on bricks-and-mortar and working capital. We believe that understanding these fundamentaldifferences in the cash economics of business models will become increasinglyimportant as the digital revolution transforms the world.

This report is broken into four parts. First, we have outlined a practical framework foranalyzing the cash economics of business models. Second, we have introduced agraphical way of highlighting differences between business modelsthe casheconomics matrixand apply this framework to compare companies. Third, wegeneralized from our case studies to outline a cash economics lifecycle for companies.Finally, since the market values a companys ability to generate cash, we have used thiscash economics analysis to explain one possible source of the continuing highvaluations of some knowledge companies.


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Cash Economics of Business Models There are businesses ... where you just constantly keep pouring [cash] in and pouring itin, but where no cash ever comes back. ... One of the things that keeps our lifeinteresting is trying to avoid those and trying to get into the other kind of business thatjust drowns you in cash...

Charlie Munger2

Vice Chairman, Berkshire Hathaway

Earnings growth rates and P/Es may dominate Wall Street banter, but as any smallbusiness owner knows, a companys value stems from its ability to generate cash.Common sense dictatesand the empirical evidence corroboratesthat the samecurrency that pays the bills also drives shareholder value.3

An investors first step in valuing a company, then, is to assess how much cash a firmgenerates or consumes in future years. There are two components to this:

Cash earnings. A company can generate or consume cash from its after-taxoperating profit. We can calculate this figure by subtracting a firms cash taxes fromits operating income.4 Note that a companys cash earnings may be radicallydifferent from accounting metrics such as net income owing to distortions fromnoncash accounting entries such as goodwill amortization and financing costs suchas interest expense.

Cash investments. A company can consume or generate cash by investing differentamounts in its on- and off-balance sheet assets. This investment includes bothchanges in net working capitalsuch as accounts receivable, which serve as cashloans extended to finance customer purchasesand in fixed assetssuch asinvestments in property, plant and equipment, and any investments in mergers oracquisitions.5

This analysis tells us exactly how much cash a company generates or consumes fromthese two components. In addition, the sum of these two amounts gives us free cashflow for that periodthe cash pool available to pay the firms capital providers. This iscritical because the market values a company by discounting its best guess of futurecash flows to the present value at the firms opportunity cost of capitala blendedaverage of the firms cost of debt and equity. The higher the cash flows, the morevaluable the firm.


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Exhibit 1: Driver of Cash Earnings and Investments Volume Pricing

Expenses R&D Leases

Tax Provision Deferred Taxes Tax Shield

A/R Inventories A/P

Sales

OperatingMargin

CashTaxes

WorkingCapital

CapitalExpenditures

Acquisitions/Divestitures

CashEarnings

CashInvestments

Free Cash Flow

Cash availablefor distribution toall claimholders

D

Source: CSFB analysis.

A companys propensity to generate or consume cash through earnings or investmentsdetermines the nature of its business model. As Exhibit 2 illustrates, companies tend tofall into one of four categories:

1. Profitable Buildout. Traditionally, successful companies have a cash inflow fromearnings, and a cash outflow from its investments in working capital and bricks-and-mortar stores or factories. Companies that fit this profile are in the upper-leftProfitable Buildout quadrant of our diagram.

2. Startups and Value Destroyers. There are two kinds of companies in the lower-left quadrant, with earnings and investment as outflows. The first type is a Startupthat is both investing in the business and incurring losses as it grows. The secondtypea Value Destroyermakes significant investments in negative-returnbusinesses. Since both of these scenarios necessarily imply a high cash burn-rate,companies in this quadrant face bankruptcy unless they start generating positivecash flowor have deep-pocketed owners.

3. Turnarounds and Emerging Capital Efficient Companies. Business models thatare in the lower-right quadrantcompanies with investment as an inflow andearnings as an outflowtend to be quite uncommon. In one scenario, a strugglingTurnaround company liberates cash tied up in its balance sheet, while incurringincome statement losses. This usually is a temporary phenomenon. A secondscenario involves an Emerging Capital Efficient Company with negative earnings,but with a capital efficient business model that generates cash from working capitalas sales increase. Since most companies that can manage their working capital thisefficiently are also profitable, this scenario occurs infrequently.

4. Super Cash Flow. Companies in the upper-right Super Cash Flow quadranthave both earnings and investment as a cash inflow. This kind of company is notonly profitable, but embarks on a one-time or continuous reduction in its net workingcapital. A company can do this by lowering the amount of capital it has tied up in


6

current assets like accounts receivable or inventory, or by increasing the credit itreceives from suppliers in the form of accounts payable. Only a company with acash-efficient business modelits customers pay it before it has to pay itssupplierscan stay in this quadrant for long.

Exhibit 2: Cash Economics of Four Categories of Business Models

InvestmentOutflow

InvestmentInflow

EarningsInflow

EarningsOutflow

Profitable Buildout Super Cash Flow

Value Destruction

or

Startup

Turnarounds

or

Emerging CapitalEfficient Company

Source: Company data, CSFB estimates.

Cash Economics: Physical versus the KnowledgeBusinessesOne useful way of summarizing trends in cash earnings and investmentsand shifts inbusiness modelsis to plot these figures as a time series in a scatterplot. Thisdiagramwhich we have dubbed the Cash Economics Matrixalso shows acompanys ability to generate free cash flow, as all points on a 45-degree diagonal willhave the same free cash flow. Significantly, the diagonal running through the center ofthe chart distinguishes whether a company is generating positive or negative free cashflow.

Case Study Number One: Barnes and Noble versus Amazon.comTo illustrate this approach, we calculated generated cash economics matrices forBarnes and Noble and Amazon.coma pair of companies that initially competed solelyin the book retailing industry. (See Exhibit 3 & 4 on the next page.):Barnes and Noble shows it has consistently been in the Profitable Buildout quadrantthe company has generated a cash earnings inflow and a cash investment outflow forevery quarter since its January 1995 fiscal year. Most striking is the magnitude of thecompanys cash investments. For example, for the year ended January 30, 2001, thecompany invested $212 million to stock the shelves with books and extend credit tocustomers. Partially offsetting this investment was $17 million in cash the companygenerated from increased accounts payable. Combined with $252 million invested in


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new stores, Barnes and Nobles total cash investment in fiscal 2001 exceeded $450million.

So even though Barnes and Noble generated $225 million in cash earnings over thesame period, its investments more than consumed this amount, translating into $228 ofnegative free cash flow.

Amazons cash economics matrix tells a completely different story. As skeptics havecorrectly emphasized, the companys sales remain insufficient to offset the costs of theits high marketing expenses, fulfillment costs, and the burden of its fixed infrastructure.The result has been steady, albeit narrowing, losses. However, during two of its mostrecent four quarters, Amazon generated considerable cash from its balance sheet.Arguably, this places Amazon on the path to the Emerging Capital Efficient Companyquadrant.

By reducing its net working capital investment to negative $187 million over the courseof 2000, Amazon offset its fixed asset investment of around $300 million (includingcapitalized leases) and cut its negative free cash flow in half. With a decline in fixedasset investment Amazon may fulfill the true promise of its operating model byultimately creating cash from its investments. In the fourth quarter of 2000 Amazongenerated an enormous $249 million in cash from its balance sheet (aided materially bythe seasonality of the business). Despite a cash earnings loss of $61 million for thequarter, AMZN generated $188 in positive free cash flow.Amazons potential combination of earnings outflows and investment inflows is the exactopposite of Barnes and Nobles more traditional combination of earnings inflows andinvestment outflows. Investors anxious to own companies that just drown you in cashhave naturally focused on the income statement. However, looking at the balance sheetof a knowledge company can unveil an important source of cash. Investors must look atboth financial statements, as it is free cash flowthe sum of a firms cash earnings andinvestmentsthat drives shareholder value creation.


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Exhibit 3: Rolling 4Q Normalized Free Cash FlowBarnes and Noble 1995-2001

Investment Outflow Investment Intflow

EarningsOutflow

EarningsInflow

ProfitableBuildout

Quadrant

SuperCash Flow

NegativeFree Cash Flow

Pos itiveFree Cash Flow

Cash Investm ent

Cash

Ear

nin

gs

(600.0)

(400.0)

(200.0)

-

200.0

400.0

600.0

(600.0) (300.0) - 300.0 600.0

1 /0 1

4 /9 4

Source: Company SEC filings and CSFB estimates.

Exhibit 4: Rolling 4Q Normalized Free Cash FlowAmazon.com 1999 - 2000


EarningsOutflow

EarningsInflow

ProfitableBuildoutQuadrant

SuperCash FlowQuadrant


PositiveFree Cash Flow

Cash Investment

Cas

h Ea

rnin

gs

(500.0)

(250.0)

-

250.0

500.0

(500.0) (250.0) - 250.0 500.03 /9 9

1 2 /0 0



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Case Study Number Two: New York Times versus Yahoo!Our second case study compares the New York Timesa print media companywithYahoo!a company in the New Media industry. As with our previous case study, aside-by-side comparison of the cash economics matrices for these two companiesreveals dramatically different business models. (See Exhibit 5 & 6.)Along with most successful traditional companies, the New York Times generates acash inflow from earnings and a cash outflow from investmentsplacing it in theProfitable Buildout quadrant. In 2000, the companys media portfolio generated cashearnings $416 million. At the same time, its investments to support its future earningsgrowth resulted in a $744 million cash investment during this same period. The NewYork Times is a successful and well-run company that in a normal operatingenvironment generates positive free cash flow. However, the very nature of its capital-intensive business means that cash earnings growth is inevitably accompanied by cashinvestments.

In contrast, Yahoo!s on-line publishing model can reach new customers and grow saleswithout spending lots of cash. This has several benefits. First, because consumers canaccess web sites from any Internet connection, Yahoo! can grow its revenues rapidlywithout having to endure long delays as it scales its physical infrastructure. Thisincreases sales, and allows the company to lock in customers before othercompetitors acquire them.6 Second, because Yahoo! does not have to spend muchmoney to serve an incremental customer, revenue growth rapidly translates into highermargins. This helped Yahoo! achieve sales of $1.1 billion and cash earnings of $172million in 2000. This growth is even more impressive when compared to the companyssales of $67 million and breakeven cash earnings in 1997. Further, the on-line businessmodel allows the company to grow without cash-consuming investments. For example,the company only spent $141 million to grow its fixed asset base in 2000, despitealmost doubling its sales from $589 million to $1.1 billion.All together, an increase in Yahoo!s non-interest bearing current liabilities generated$92 million in cash. At the same time, the companys current assets used $74 million incash. The companys working capital generated a net of $18 million in 2000. Howeverthe company saw a fixed investment outflow of $141 million for the year, whichgenerated a total investment outflow for the year of $123 million. Since Yahoo!produced $172 million in cash earnings, it posted positive free cash flow of roughly $50million for the year.

In the third quarter of 2000 Yahoo! generated close to $47 million from working capital,which was offset by fixed investment of $42 million. This $5 million generated frominvestment was added to quarterly cash earnings of $86 million, placing Yahoo! in theSuper Cash Flow quadrant for that quarter. As Yahoo!s fixed investment flows stabilizegoing forward, the company may return to this quadrant on a regular basis.


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Exhibit 5: Rolling 4Q Normalized Free Cash FlowNew York Times 1996 - 2000


EarningsOutflow

EarningsInflow





Cash Investment

Cash

Ea

rnin

gs

(800.0)

(400.0)

-

400.0

800.0

(800.0) (400.0) - 400.0 800.0

9 /9 6

1 2 /0 0


Exhibit 6: Rolling 4Q Normalized Free Cash FlowYahoo! 1996 - 2001

Investm ent Outflow Investm ent Intflow

EarningsOutflow

EarningsInflow





Cash Investment

Cas

h Ea

rnin

gs

(350.0)

(175.0)

-

175.0

350.0

(350.0) (175.0) - 175.0 350.01 2 /9 6

1 2 /0 1



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This case study provides further insight into the possibilities surrounding these newbusiness models:

The scalability of a knowledge companys business model means that cashearnings can quickly reverse from losses to profitsand then grow at a much fasterrate than sales. For example, in a 12-month trailing period in the middle of 1999Yahoo!s sales grew at a 32% rate for three of those quarters, while its trailing cashearnings grew at 127%about four times that rate. Further, since Yahoo!s cashinflow from investments also grew at a similar rate, the companys overall free cashflow grew at 128% during this period. Assuming Yahoo! can generate cash inflowsfrom investment on a regular basis going forward, it may well return to a positivedifferential between sales growth and growth in cash flow.

Cash earnings for a physical company will typically overstate a companys free cashflow. For example, in 1999-2000, the New York Times generated free cash flow of$131 milliononly 17% of its cash earnings of $774 million.


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Cash Economics LifecycleAOL] indicated they expect to be self-funding within 12 months. The core of the bearishargument on AOL is that it is cash negative and requires infusions of cash to keepoperating. The earnings they report are not real earnings because AOL is not reallymaking any money, when money is defined as having free cash flow after tax ...Consequently, the fact that this company expects to get cash neutral or cash positive intwelve months is extremely bullish.

Bill Miller7

President, Legg Mason Fund Advisors

After calculating cash economics matrices for a slew of physical and knowledgecompanies, it has become evident that each category follows a distinct trend. In fact, thepattern is so clear that we can generally say that physical asset oriented companieshave a certain cash economics lifecycle. Further, although the cash economics ofknowledge-based companies differ dramatically from their physical counterparts, theytoo have their own lifecycle.

Cash Economics Lifecycle of the Typical Physical CompanyLike all companies, physical companies tend to start in the Startup quadrant. However,every successful physical company that we studied moved into the Profitable Buildoutquadrant, where it spends the majority of the rest of its life. A prime example of this isWal-Mart. Like most mature and successful companies with a bricks-and-mortarinfrastructure, Wal-Mart has enjoyed an inflow from cash earnings, while incurring anoutflow from its investments for 19 out of its past 20 quarters.8 (See Exhibit 7.) Forexample, Wal-Mart generated $7.6 billion from cash earnings for fiscal year 2001.However, as the company is still opening new stores and expanding internationally, italso invested an unusually high $7.5 billion in fixed assets during this period. Typically,Wal-Mart also invests in working capital to support this growth. Wal-Mart has engagedin a largely successful initiative to push its already healthy working capital managementto new levels of performance. By paying its bills more slowly than it bought newinventory the company pushed itself into negative working capital territory for two of itspast four quarters, generating $1 billion in working capital in the second quarter.Just in case one thinks that Wal-Marts current cash economics are a temporaryphenomenon, we also calculated a similar matrix for the company from 1973 to 1975.9

(See Exhibit 8.) Similarly to its recent history, the Wal-Mart of this period was also in theProfitable Buildout quadrant.

Generalizing from our four matricesincluding Barnes and Noble, the New York Times,and a nascent and mature Wal-Martwe can see a distinct trend. After a stint in theStartup quadrant, most successful physical companies become cash earnings positive.After making increasing cash investments, diminishing marginal returns eventuallyforces a company to lower its investments until its annual investment nears its economicdepreciation, resulting in a net investment of approximately zero and a stable cashearnings base. (Exhibit 9 represents this graphically.)


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Exhibit 7: Rolling 4Q Normalized Free Cash FlowWal-Mart 1994 - 2001

Inves tm ent Outflow Investm ent Intflow

EarningsOutflow

EarningsInflow




Pos itiveFree Cash Flow

Cash Investment

Cas

h Ea

rnin

gs

(20,000)

(10,000)

-

10,000

20,000

(20,000) (10,000) - 10,000 20,000

1 /9 4

1 /0 1


Exhibit 8: Rolling 4Q Normalized Free Cash FlowWal-Mart 1973 - 1975

1974

1975

-40

-20

0

20

40

-40 -20 0 20 40

Cash In v e stm e n t

Cas

h Ea

rnin

gs

F re e Ca sh F low Ne ga tive

Fre e Ca sh Flow P ositive

Inves tm ent O utflow Inves tm ent Intflow

EarningsO utflow

EarningsInflow

P ro fitableB u ildou tQuadran t

1973



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Exhibit 9: Cash Economics Matrix Average Physical Asset Oriented Company

Cash Investment

Cash

Ea

rnin

gsNegative

Free Cash Flow



EarningsOutflow

EarningsInflow



StartupQuadrant


Cash Economics Lifecycle of the Typical Knowledge CompanyThe knowledge-based companies that this report features also start in the Startupquadrant. However, a favorable cash conversion cycle can translate into a cash inflowfrom investment, even in the face of mounting losses. This moves them to the EmergingCapital Efficient Company quadrant. Then, as their business model scales and theystart to report earnings, both cash earnings and investments generate cash inflows. Thisplaces them in the Super Cash Flow quadrant. (This is represented graphically inExhibit 11.)Some of Yahoo!s and Amazons most recent quarters attest to the possibility of thispattern taking root. A successful example of this pattern is Dell Computer, which buildspersonal computers to the custom specifications of customers who order from mail-order catalogs, and from the companys Internet web site. (See Exhibit 10.) Since 1996half of Dells quarters have witnessed a cash inflow from cash earnings andinvestments, as its ability to generate cash from its working capital has more than paidfor its investments in fixed assets.10


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Exhibit 10: Cash Economics Matrix Rolling 4Q Normalized Free Cash FlowDell Comuter 1994-2000


EarningsOutflow

EarningsInflow





Cash Investment

Cash

Ea

rnin

gs

(2,000)

(1,000)

-

1,000

2,000

(2,000) (1,000) - 1,000 2,0007/94

10/00


Exhibit 11: Cash Economics Matrix

Cash Investment

Cash

Ear

nin

gs



Investment Outflow Investment Inflow

EarningsOutflow

EarningsInflow



StartupQuadrant

Emerging CapitalEfficient CompanyQuadrant



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Valuation in the Physical versus KnowledgeEconomyIn the Theory of Investment Value, written over 50 years ago, John Burr Williams setforth the equation for value, which we condense here: The value of any stock, bond orbusiness is determined by the cash inflows and outflowsdiscounted at the appropriateinterest ratethat can be expected to occur during the remaining life of the asset.

Warren Buffett11

Investors care about the cash economics of businesses because they determine themagnitude, timing, and risk of future cash flows. And as Buffett notes, the value of anystock is the present value of these cash flows.

Because knowledge companies have dramatically different cash flows than physicalcompanies, we would expect them to have dramatically different valuations as well. Todemonstrate this, we valued a range of companies with different cash economics.Specifically, we assumed the companies had initial cash earnings of $100, which grewat a constant rate of 15% for 11 years. We also assumed that each company haddifferent initial cash investment requirementsranging from a cash outflow of $200 to acash inflow of $200which also grew at a constant rate of 15% for 10 years.We can sum the cash earnings and investments to obtain a projected stream of freecash flows for each company. Using a cost of capital of 10%, we performed adiscounted cash flow analysis to value each hypothetical company. We then plotted theresulting price-to-earnings ratio versus the initial cash investments for each company.(See Exhibit 12.)

Exhibit 12: Price-to-Earnings Ratio versus Initial Cash Investment

-

10

20

30

40

50

60

-250 -200 -150 -100 -50 0 50 100 150 200 250

Initial Cash Investment

Pric

e to

Ea

rnin

gs R

atio

Increasing Cash Investment InflowIncreasing Cash Investment Outflow



17

As we would expect, all things equal, the larger the cash inflow from cash investments,the more valuable the company. Conversely, a larger cash outflow from cashinvestments translates into a lower valuation. We see this pattern in the real world aswell. The companies we profiled all have significantly less investment needs than theirphysical counterparts. Thus, we believe that there are solid fundamental underpinningsbehind the high valuations in the Internet sector. (See Exhibit 13.)

Exhibit 13: Valuation Metrics for Old and New Economy Companies:

2001E 2002E 2001E 2002E 2001E 2002E

AMZN Amazon 1.8 1.5 1.8 1.5 NMF NMFBKS Barnes and Noble 0.4 0.4 0.6 0.5 20.7 16.0

YHOO Yahoo! 16.4 12.9 15.8 12.4 531.2 158.2 NYT New York Times 2.1 2.0 2.2 2.1 19.9 17.2

DELL Dell Computer 1.9 1.7 1.8 1.6 32.6 28.0 WMT Wal-Mart 1.1 1.0 1.2 1.0 34.3 29.9

TickerPrice to Sales

per sharein millions

Enterprise Value to Sales

in millions

CompanyPrice to Earnings


ConclusionAs people, ideas, and networks continue to become the major sources of competitiveadvantage for companies, we believe that this shift will only become more intractable.Hence, we believe that an understanding of the different cash economics of knowledgecompanies is essentialnot only for the technology investors of today, but for thegeneralist investors of tomorrow.N.B.: CREDIT SUISSE FIRST BOSTON CORPORATION may have, within the last three years, served as a manager or co-managerof a public offering of securities for or makes a primary market in issues of any or all of the companies mentioned.

Closing prices as of April 30, 2001:Amazon.com (AMZN, $16.89)AOL Time Warner (AOL, $51.96)Barnes and Noble (BKS, $32.90)Borders Book Group (BGP, $19.69)The New York Times (NYT, $41.28)Wal-Mart (WMT, $53.50)Yahoo! (YHOO, $22.31)

Cash Flow.com

2 August

2001

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Exhibit 14: Amazons Accumulated Cash Investments, or Invested Capital (in millions, 1999 to present)

Assets

Cash and ST Investments 1,443.0 1,144.2 905.7 706.2 1,008.9 907.6 900.0 1,100.5 Excess cash 1,430.3 1,113.7 891.0 690.5 926.9 878.9 871.1 1,068.6

Required cash 12.6 30.5 14.7 15.7 82.0 28.7 28.9 31.9 Inventories 45.2 59.4 118.8 220.6 172.3 172.4 163.9 174.6 Prepaid expenses and other 37.1 53.3 55.6 85.3 89.8 86.7 99.2 86.0

Current Assets 95.0 143.2 189.1 321.7 344.1 287.7 292.0 292.5

Accounts payable 133.0 166.0 236.7 463.0 255.8 286.2 304.7 485.4 Accrued advertising 16.2 22.4 24.6 55.9 - - - - Other liabilites and accrued expenses 45.2 79.7 83.6 150.9 160.6 188.1 195.1 341.9

Non-Interest Bearing Current Liabilities 194.4 268.1 344.9 669.8 416.4 474.3 499.8 827.3

Net Working Capital (99.4) (124.9) (155.8) (348.1) (72.4) (186.6) (207.9) (534.8)

Net P,P&E 60.6 156.3 221.2 317.6 334.4 344.0 352.3 366.4 Present Value of Oper Leases 105.6 106.4 107.1 107.9 171.7 235.5 299.4 363.2

87.8 87.8 87.8 87.8 87.8 87.8 87.8 87.8 Goodwill and other purchased intangibles 187.2 741.9 705.9 730.1 647.2 596.8 520.5 255.3Total accumulated amortization 71.2 121.7 221.2 268.6 273.4 333.7 394.1 454.4

Fixed Assets 512.3 1,214.0 1,343.2 1,512.0 1,514.4 1,597.8 1,653.9 1,527.1

Invested capital 412.9 1,089.2 1,187.4 1,163.9 1,442.0 1,411.2 1,446.0 992.3

1999 Q1/00Q1/99 Q3/99 Q2/00 Q3/00 Q4/00

Phantom goodwill

Q2/99

Source: Company SEC filings and CSFB analysis, note: invested capital excludes investments and deferred charges.

Cash Flow.com

2 August

2001

19

Exhibit 15: Amazons Cash Earnings, or Net Operating Profit After Taxes (in millions, 1999 to present)

Net Sales 293.6 314.4 355.8 676.0 573.9 577.9 637.9 972.4

Total COS 228.9 246.8 285.3 588.2 445.8 441.8 470.6 748.1 Gross income 64.8 67.5 70.5 87.8 128.1 136.1 167.3 224.3

Marketing and sales 60.7 85.9 86.6 179.9 140.1 129.8 138.3 186.2 Product development 23.5 34.3 44.6 57.3 61.2 67.1 71.2 69.8 General and administrative 11.2 14.5 18.5 25.9 26.0 28.5 26.2 28.2 M&A related costs 25.3 50.5 99.5 47.4 85.0 82.9 91.0 263.3 Stock-based compensation 4.7 11.8 14.2 13.7 8.2 4.1 (1.1)

Operating Expenses 120.7 190.0 260.9 324.8 326.0 316.4 330.8 546.4

Adjusted EBIT (55.9) (122.5) (190.5) (236.9) (197.9) (180.4) (163.5) (322.1)

+ Goodwill amortization 25.3 50.5 99.5 47.4 85.0 82.9 91.0 263.3 Adjusted EBITA (30.6) (71.9) (91.0) (189.5) (112.9) (97.5) (72.5) (58.8)

+ Interest expense of cap O L 2.5 2.5 2.6 2.6 3.2 5.0 6.9 8.8 Net Adjustment for Capitalized Expenses 2.5 2.5 2.6 2.6 3.2 5.0 6.9 8.8

Adjusted Net Operating Profit (28.1) (69.4) (88.4) (186.9) (109.8) (92.5) (65.6) (50.1)

+ Change in reserves - - - - - - - - Change in deferred revenues 80.0 (19.2) 26.5 (10.9) Income Equivalents - - - - 80.0 (19.2) 26.5 (10.9)

Net Operating Profit Before Taxes (28.1) (69.4) (88.4) (186.9) (29.8) (111.7) (39.1) (61.0) Income Tax Provision - - - - - - - -

Net Operating Profit After Taxes (28.1) (69.4) (88.4) (186.9) (29.8) (111.7) (39.1) (61.0)

Q4/00Q2/00 Q3/00Q1/00Q1/99 Q2/99 Q3/99 Q4/99

Source: Company SEC filings and CSFB analysis.Note: R&D is expensed.

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Exhibit 16: Summary of Amazons Cash Earnings and Investments (in millions, 1999 to present)

Quarterly Cash Earnings (28.1) (69.4) (88.4) (186.9) (29.8) (111.7) (39.1) (61.0)

Quarterly Changes:

Inventory 15.7 14.2 59.4 101.9 (48.4) 0.1 (8.5) 10.7 Prepaid expenses and other 15.8 16.3 2.3 29.8 4.5 (3.2) 12.5 (13.1)

Curent Assets 31.5 30.4 61.7 131.6 (43.9) (3.0) 4.0 (2.5)

Accounts payable 19.7 33.0 70.7 226.3 (207.2) 30.4 18.5 180.7 Accrued advertising 3.1 6.2 2.2 31.3 (55.9) - - - Other liabilites and accrued expenses 10.6 10.6 17.8 52.4 18.8 2.1 13.2 112.6

Current Liabilities 33.5 73.7 76.8 324.9 (253.4) 57.9 25.5 327.4

Investment in net working capital 3.0 (25.4) (31.0) (192.3) 275.8 (114.2) (21.3) (326.9) Investment in fixed assets 30.9 96.5 65.7 97.1 80.6 73.5 72.1 77.9

Total Cash Investment 33.9 71.1 34.7 (95.2) 356.4 (40.8) 50.8 (248.9)

Free cash flow (62.0) (140.5) (123.1) (91.7) (386.1) (70.9) (89.9) 187.9

Normalized Cash Investment Inflow (Outflow) (33.9) (71.1) (34.7) 95.2 (356.4) 40.8 (50.8) 248.9 Cash Earnings Inflow (Outflow) (28.1) (69.4) (88.4) (186.9) (29.8) (111.7) (39.1) (61.0)

Normalized Free Cash Flow (62.0) (140.5) (123.1) (91.7) (386.1) (70.9) (89.9) 187.9

Trailing Twelve Months:

Normalized Cash Investment Inflow (Outflow) (26.5) (89.6) (115.7) (44.5) (367.0) (255.1) (271.2) (117.4) Cash Earnings Inflow (Outflow) (79.6) (138.2) (205.2) (372.8) (374.5) (416.8) (367.5) (241.6)

Normalized Free Cash Flow (106.2) (227.8) (320.9) (417.4) (741.5) (671.9) (638.7) (359.0)

Q4/00Q3/00Q2/00Q1/00Q4/99Q3/99Q1/99 Q2/99

Source: Company SEC filings and CSFB analysis. Note: Normalized Cash Investment does not include stock or cash spent on acquisition of web technology companies with little or no cash earnings.

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21

Exhibit 17: Barnes and Nobles Accumulated Cash Investments, or Invested Capital (in millions, 4Q99 to present)4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01

Assets 1/30/99 5/2/99 7/31/99 10/30/99 1/30/00 5/2/00 7/29/00 10/28/00 1/30/01

Cash 31.1 15.8 9.6 19.2 24.2 18.9 33.3 36.6 26.0 Excess cash 26.1 10.8 4.6 14.2 19.2 13.9 28.3 31.6 21.0 Required cash 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Receivables 57.5 43.2 54.1 76.5 58.2 58.4 69.0 88.3 84.5 Inventory 945.1 940.3 913.6 1,275.2 1,102.5 1,162.1 1,121.1 1,454.9 1,238.6 LIFO reserve 2.9 - - - - - - - - Prepaid expenses 54.6 74.7 76.5 59.1 56.6 49.9 70.0 72.6 106.1 Curent Assets 1,065.1 1,063.3 1,049.2 1,415.8 1,222.3 1,275.4 1,265.1 1,620.8 1,434.3

Accounts payable 498.2 439.5 394.4 756.9 599.4 589.8 578.2 865.2 582.1 Other current liabilities 274.1 225.1 210.4 210.5 323.5 221.1 214.4 196.6 353.0 Current Liabilities 772.3 664.6 604.8 967.5 922.9 811.0 792.6 1,061.8 935.1

Net Working Capital 292.8 398.7 444.5 448.3 299.4 464.4 472.5 559.0 499.2

Net P,P&E 510.3 515.7 529.7 557.2 568.0 553.3 570.5 577.9 566.2 Present value of operating leases 1,811.4 1,829.3 1,847.3 1,865.2 1,883.1 1,937.8 1,992.4 2,047.0 2,101.6 Intangible assets, net 87.0 86.2 85.4 287.4 298.0 299.4 423.8 420.1 359.2 Other noncurrent assets 39.7 50.6 48.8 45.0 65.7 62.4 61.1 63.3 40.2 Fixed Assets 2,448.4 2,481.9 2,511.1 2,754.9 2,814.9 2,852.8 3,047.8 3,108.3 3,067.2

Invested capital 2,741.1 2,880.5 2,955.6 3,203.2 3,114.3 3,317.3 3,520.3 3,667.3 3,566.4

Source: Company SEC filings and CSFB analysis. *note: PV operating lease calculations for 2001 are estimates.

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Exhibit 18: Barnes and Nobles Cash Earnings, or Net Operating Profit After Taxes (in millions, 4Q99 to present)4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01

1/30/99 5/2/99 7/31/99 10/30/99 1/30/00 5/2/00 7/29/00 10/28/00 1/30/01

Net sales 990.2 718.3 727.2 715.9 1,324.6 894.3 924.3 951.8 1,605.4 Cost of sales, buying and occupancy 670.2 526.0 527.9 515.4 914.5 654.2 676.3 693.0 1,146.3 Gross income 320.0 192.4 199.3 200.5 410.2 240.1 248.1 258.9 459.1

Selling and administrative expenses 106.5 151.9 155.7 150.5 193.0 181.3 190.7 190.9 250.1 Depreciation and amortization 18.9 25.8 26.6 27.8 32.2 33.0 34.6 37.0 40.2

Pre-opening expenses 1.9 0.8 1.5 2.1 2.3 1.5 1.8 2.8 1.6 Total operating expenses 127.3 178.5 183.8 180.4 227.5 215.8 227.1 230.7 291.9

Adjusted EBIT 192.7 13.8 15.5 20.1 182.7 24.3 20.9 28.2 167.2 + Goodwill amortization 0.6 3.8 3.8 3.8 3.8 1.9 1.9 1.9 1.9 Adjusted EBITA 193.3 17.6 19.2 23.8 186.5 26.2 22.8 30.1 169.1

+ Interest expense of capitalized operating leases 35.7 36.2 36.6 36.9 37.3 37.7 38.8 39.8 40.9 Net Adjustment for Capitalized Expenses 35.7 36.2 36.6 36.9 37.3 37.7 38.8 39.8 40.9

Adjusted Net Operating Profit 229.0 53.8 55.8 60.8 223.8 63.9 61.6 69.9 210.0 Change in LIFO reserve - (2.9) - - - - - - - Change in Capitalized Expenses - (2.9) - - - - - - -

Net Operating Profit Before Taxes 229.0 56.7 55.8 60.8 223.8 63.9 61.6 69.9 210.0

+ Income tax provision 73.7 (1.0) 16.4 2.4 71.9 (2.9) (6.1) (3.7) 31.7 + Net tax impact from interest 1.9 1.7 1.8 2.0 2.9 3.4 4.6 5.3 5.4 + Tax benefit from capitalization of operating lea 12.5 12.7 12.8 12.9 13.1 13.2 13.6 13.9 14.3 + Net tax impact of non-operating charges/gains - - - - - - - - 37.4 - Adjusted Increase deferred taxes - - 4.8 (2.3) 7.5 (3.8) 1.0 1.3 (49.2)

Cash operating taxes 88.1 13.3 26.1 19.6 80.5 17.4 11.1 14.3 138.1

Net Operating Profit After Taxes 140.9 43.3 29.7 41.2 143.3 46.5 50.5 55.7 72.0

Source: Company SEC filings and CSFB analysis.

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Exhibit 19: Summary of Barnes and Nobles Cash Earnings and Investments (in millions, 4Q99 to present)4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01

1/30/99 5/2/99 7/31/99 10/30/99 1/30/00 5/2/00 7/29/00 10/28/00 1/30/01

Quarterly Cash Earnings 140.9 43.3 29.7 41.2 143.3 46.5 50.5 55.7 72.0

Quarterly Changes:

Investment in net working capital 104.7 (105.9) (45.8) (3.8) 148.9 (165.0) (8.0) (86.5) 59.8 Investment in fixed plant (8.5) (33.5) (29.2) (243.8) (60.0) (37.9) (195.0) (60.5) 41.1 Quarterly Cash Investment 96.1 (139.4) (75.0) (247.6) 88.9 (203.0) (203.0) (147.0) 100.9 Free Cash Flow 237.1 (96.1) (45.3) (206.5) 232.2 (156.5) (152.5) (91.3) 172.9 Trailing Twelve Months:

Receivables (13.7) (13.2) (14.7) (10.3) (0.7) (15.2) (14.9) (11.8) (26.3) Inventory & LIFO reserve (90.7) (79.4) (88.7) (215.9) (154.5) (221.8) (207.5) (179.8) (136.2)

14.3 24.4 16.2 13.8 (1.9) 24.8 6.5 (13.5) (49.5) Accounts payable 38.4 6.8 2.1 133.0 101.1 150.3 183.8 108.3 (17.3) Other current liabilities 21.0 9.6 9.2 28.5 49.4 (3.9) 4.1 (13.9) 29.5

Investment in net working capital (30.6) (51.8) (75.9) (50.8) (6.7) (65.8) (28.0) (110.7) (199.8) Investment in fixed plant (122.1) (134.5) (117.7) (315.1) (366.5) (371.0) (536.7) (353.4) (252.3)

Cash Investments Inflow (Outflow) (152.8) (186.3) (193.7) (365.9) (373.2) (436.7) (564.7) (464.1) (452.1) Cash Earnings Inflow (Outflow) 206.9 227.7 236.6 255.1 257.5 260.6 281.4 296.0 224.6

Free Cash Flow 54.1 41.4 42.9 (110.8) (115.7) (176.1) (283.3) (168.1) (227.5)

Prepaid expenses and other current assets

Source: Company SEC filings and CSFB analysis..

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Exhibit 20: Yahoo!s Accumulated Cash Investments, or Invested Capital (in millions, 1999 to present)1Q /9 9 2Q /99 3Q /99 4 Q /99 1 Q /00 2 Q /00 3 Q /00 4 Q /0 0

3 /3 1 /9 9 6 /3 0 /9 9 9 /3 1 /9 9 1 2 /31 /9 9 3 /3 1 /0 0 6 /3 0 /0 0 9 /3 0 /0 0 12 /3 1 /0 0

C as h a n d c as h e qu iva le n ts 18 4 .5 18 4 .1 14 1 .5 23 4 .0 3 3 6 .6 4 4 4 .6 5 2 2 .2 4 8 6 .9 S h o rt-te rm in v es tm e n ts 25 1 .9 36 6 .8 53 4 .8 63 8 .5 6 5 5 .3 5 9 9 .6 7 1 5 .3 6 6 3 .4 Lo n g -te rm inv e s tm e n ts 21 8 .5 21 9 .8 17 0 .2 33 9 .6 5 5 1 .9 6 0 3 .7 6 1 3 .1 6 2 6 .0

A c tu a l c a s h an d S T inv e s tm e n ts 65 4 .8 77 0 .8 84 6 .5 1 ,2 1 2 .1 1 ,5 4 3 .8 1 ,6 4 7 .9 1 ,8 5 0 .6 1 ,7 7 6 .2 E x ce s s c a sh 64 9 .8 76 5 .8 84 0 .8 1 ,2 0 4 .3 1 ,5 3 2 .2 1 ,6 3 6 .5 1 ,8 3 7 .1 1 ,7 6 1 .4 R eq u ire d c a sh 5 .0 5 .0 5 .8 7 .8 1 1 .6 1 1 .4 1 3 .5 1 4 .8 A c co u n ts re c e iv ab le 2 6 .9 3 4 .1 4 3 .9 5 4 .4 5 9 .7 6 7 .7 7 4 .5 9 0 .6 P re pa id ex p en s e 9 .1 1 3 .0 1 4 .0 1 9 .0 2 0 .4 2 4 .7 2 7 .0 5 0 .1

C u re n t A s s e ts 4 1 .0 5 2 .0 6 3 .7 8 1 .2 9 1 .7 1 0 3 .8 1 1 5 .0 1 5 5 .4

A c co u n ts p ay a b le 7 .3 8 .3 1 1 .2 1 3 .5 1 4 .5 1 6 .4 1 9 .3 2 6 .0 A c c rue d e x pe n se s a n d o the r cu rre n t l ia b il itie s 3 8 .1 5 4 .9 7 4 .1 8 8 .2 1 0 5 .3 1 2 7 .3 1 8 2 .2 1 6 8 .0

C u rre n t L ia b ilit ie s 4 5 .4 6 3 .2 8 5 .4 10 1 .6 1 1 9 .8 1 4 3 .8 2 0 1 .5 1 9 4 .1

N et W o rk in g C a p ita l (4 .4 ) (1 1 .1 ) (2 1 .7 ) (2 0 .4 ) (2 8 .1 ) (4 0 .0 ) (8 6 .5 ) (3 8 .7 )

N e t P ,P & E 1 9 .9 3 4 .2 4 4 .5 5 8 .1 6 4 .4 7 9 .0 9 8 .1 1 0 9 .8 P re s en t V a lu e o f O p e r L e as e s 2 0 .0 2 7 .7 3 5 .4 4 3 .1 6 5 .5 8 7 .9 1 1 0 .3 1 3 2 .7

O th e r 8 0 .9 9 9 .1 10 6 .1 12 6 .2 2 0 4 .8 2 1 8 .7 2 5 9 .6 2 4 2 .9 A c cu m u la te d g oo d w ill am o rtiz a tio n 3 .9 5 .9 7 .8 9 .7 1 4 .6 1 9 .6 2 4 .5 2 9 .4

2 1 .2 2 1 .2 2 1 .2 2 1 .2 2 1 .2 2 1 .2 2 1 .2 2 1 .2

6 2 .8 6 2 .8 6 2 .8 6 2 .8 6 2 .8 6 2 .8 6 2 .8 6 2 .8

2 0 .1 2 0 .1 2 0 .1 2 0 .1 2 0 .1 2 0 .1 2 0 .1 2 0 .1

2 5 .6 2 5 .6 2 5 .6 2 5 .6 2 5 .6 2 5 .6 2 5 .6 2 5 .6 G eo C itite s 3 ,14 6 .7 3 ,14 6 .7 3 ,1 4 6 .7 3 ,1 4 6 .7 3 ,1 4 6 .7 3 ,1 4 6 .7 3 ,1 4 6 .7 O n lin e A n y w h ere 5 3 .6 5 3 .6 5 3 .6 5 3 .6 5 3 .6 5 3 .6 5 3 .6 b ro a dc a s t.c o m 4 ,03 1 .9 4 ,0 3 1 .9 4 ,0 3 1 .9 4 ,0 3 1 .9 4 ,0 3 1 .9 4 ,0 3 1 .9 A rth a s .c om 7 5 .8 7 5 .8 7 5 .8 7 5 .8 e G ro u p s 3 7 0 .2 3 7 0 .2 3 7 0 .2

F ixe d A s se ts 29 8 .6 3 ,5 40 .9 6 7 ,5 99 .7 9 7 ,64 3 .0 5 7 ,83 1 .0 6 8 ,25 7 .1 4 8 ,34 4 .5 2 8 ,36 6 .8 4

In v e s ted c a p ita l 29 4 .1 3 ,52 9 .8 7 ,57 8 .1 7 ,6 2 2 .7 7 ,8 0 3 .0 8 ,2 1 7 .1 8 ,2 5 8 .0 8 ,3 2 8 .2

P h an to m g o od w ill from bu y ou t o f V is a s in te res t in Y a ho o ! M a rk e tp la c e P h an to m g o od w ill from po o ling a c qu is ition o f F o u r11P h an to m g o od w ill from po o ling a c qu is ition o f W e b C a lP h an to m g o od w ill from po o ling a c qu is ition o f Y o yo d y ne

Source: Company SEC filings and CSFB analysis

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Exhibit 21: Yahoo!s Cash Earnings, or Net Operating Profit After Taxes (in millions, 1999 to present)1Q/99 2Q/99 3Q/99 4Q/99 1Q/00 2Q/00 3Q/00 4Q/00

3/31/99 6/30/99 9/31/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00

Net revenue 86.1 115.2 155.1 232.2 228.4 270.1 295.5 316.1 Cost of revenue 9.7 18.5 26.2 47.4 34.5 39.3 40.9 43.8

Gross income 76.4 96.8 128.9 184.8 193.9 230.8 254.7 272.4

Sales and marketing 32.3 42.7 53.3 86.7 78.5 94.7 109.2 137.4 Product development 9.0 12.9 16.2 29.4 23.2 24.2 30.1 39.8 General and administrative 3.5 6.9 8.2 17.8 12.9 14.2 19.9 27.5 Acquisition costs 1.2 3.5 3.5 5.7 4.1 4.8 5.4 5.4

Total operating expenses 45.9 65.9 81.2 139.5 118.6 137.9 164.6 210.1

Adjusted EBIT 30.4 30.9 47.7 45.3 75.3 92.9 90.1 62.3

Goodwill amortization 1.6 3.8 3.8 6.0 4.4 5.1 5.8 5.8 Adjusted EBITA 32.0 34.7 51.5 51.3 79.7 98.0 95.9 68.1

+ Interest expense of capitalized operating leases 0.4 0.6 0.7 0.9 1.3 1.8 2.2 2.7 Net Adjustment for Capitalized Expenses 0.4 0.6 0.7 0.9 1.3 1.8 2.2 2.7

Change in Deferred Revenues 7.2 18.4 8.4 18.3 24.2 10.6 26.9 (35.2)

Net Operating Profit Before Taxes 39.6 53.7 60.7 70.5 105.2 110.4 125.0 35.5

Income tax provision 10.5 (3.0) 20.2 13.1 51.9 43.6 47.7 44.8 + Net tax impact from interest (2.3) (2.8) (3.5) (4.6) (19.9) (6.4) (10.1) 48.2 + Tax benefit from capitalization of operating leases 0.1 0.2 0.2 0.3 0.5 0.6 0.8 0.9 + Tax benefit from minority interest 0.1 0.3 0.2 0.3 0.6 0.8 0.5 (0.0) - Increase deferred taxes - - - - - - - - Cash Operating Taxes 8.4 (5.3) 17.1 9.1 33.1 38.6 38.8 94.0

Net Operating Profit After Taxes 31.2 59.0 43.6 61.4 72.0 71.8 86.2 (58.5)

Source: Company SEC filings and CSFB analysis. Note: R&D is expensed.

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Exhibit 22: Summary of Yahoo!s Cash Earnings and Investments (in millions, 1999 to present)1Q/99 2Q/99 3Q/99 4Q/99 1Q/00 2Q/00 3Q/00 4Q/00

3/31/99 6/30/99 9/31/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00

Quarterly Cash Earnings 31.2 59.0 43.6 61.4 72.0 71.8 86.2 (58.5)

Quarterly Changes:

Investment in net working capital (2.4) (6.7) (10.5) 1.3 (7.7) (11.9) (46.5) 47.9 Investment in fixed assets 12.4 22.0 18.0 21.3 28.7 37.0 41.5 34.1

Total Cash Investment 10.0 15.3 7.5 22.6 21.0 25.1 (5.0) 82.0

Quarterly NOPAT 31.2 59.0 43.6 61.4 72.0 71.8 86.2 (58.5) Normalized Cash Investment Inflow (Outflow) 10.0 15.3 7.5 22.6 21.0 25.1 (5.0) 82.0

Normalized Free Cash Flow 21.2 43.7 36.1 38.8 51.1 46.7 91.2 (140.4)


Cash Earnings Inflow (Outflow) 106.4 149.9 169.6 195.1 236.0 248.8 291.4 171.6 Normalized Cash Investment Inflow (Outflow) (16.5) (28.7) (35.7) (55.3) (66.3) (76.1) (63.7) (123.1)

Normalized Free Cash Flow 89.9 121.1 133.9 139.8 169.7 172.7 227.8 48.5

Source: Company SEC filings and CSFB analysis. Note: Normalized Cash Investment does not include stock or cash spent on acquisition of web technology companies with little or no cash earnings.

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Exhibit 23: New York Times Accumulated Cash Investments, or Invested Capital (in millions, 4Q98 to present)1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

3/31/99 6/30/99 9/30/99 12/30/99 3/31/00 6/30/00 9/30/00 12/30/00

Cash 39.8 31.9 43.6 63.9 36.1 37.5 42.9 69.0 Excess cash 34.8 26.9 38.6 58.9 31.1 32.5 37.9 64.0 Required cash 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0

Accounts receivable, net 321.4 342.5 324.2 366.8 363.5 370.6 347.7 341.9 Inventories 36.8 28.0 33.9 28.7 31.2 32.3 41.3 35.1 Other current assets 119.1 118.0 127.5 155.6 159.2 157.0 169.2 164.8

Curent Assets 482.4 493.5 490.7 556.0 559.0 564.9 563.1 546.7

Accounts payable 169.5 153.4 177.8 191.7 200.4 195.0 193.0 178.3 Payrolls 74.9 83.0 85.1 105.3 81.9 93.3 105.4 114.2 Accrued expenses 192.1 170.5 183.4 193.6 223.7 203.0 190.0 203.9

Current Liabilities 436.4 406.9 446.4 490.5 505.9 491.3 488.4 496.4

Net Working Capital 46.0 86.6 44.3 65.5 53.1 73.6 74.7 50.3

Net PP&E 1,305.9 1,283.1 1,267.7 1,218.4 1,236.2 1,216.5 1,199.5 1,207.2 Intangible assets acquired 955.9 948.4 969.7 961.8 1,096.4 1,090.6 1,083.2 1,060.8 Accumulated goodwill amortization 248.1 255.6 260.4 262.1 279.7 292.9 300.8 302.6 Other intangible assets acquired 359.0 353.7 348.6 343.2 455.4 441.0 432.9 419.3 Present value of operating leases 26.1 28.5 30.8 33.2 184.0 334.9 485.7 636.6

Fixed Assets 2,895.0 2,869.3 2,877.2 2,818.7 3,251.7 3,375.9 3,502.1 3,626.4

Miscellaneous assets 200.0 223.6 223.9 235.5 241.6 240.9 222.0 201.3 Investment in joint venture 126.1 128.4 126.2 121.9 123.0 121.2 118.4 107.3

Invested capital 3,267.1 3,307.8 3,271.6 3,241.7 3,669.3 3,811.6 3,917.2 3,985.4


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Exhibit 24: New York Times Cash Earnings, or Net Operating Profit After Taxes (in millions, 4Q98 to present)1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

3/31/99 6/30/99 9/30/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00

Total revenues 739.1 779.4 729.7 882.5 843.2 885.6 787.3 973.4

Cost of sales 329.8 337.2 313.0 398.8 359.3 365.0 353.3 380.5

Gross income 409.3 442.2 416.7 483.7 483.9 520.6 434.0 592.8

Selling, general and administrative expenses 294.0 287.3 303.9 295.3 329.0 334.7 317.9 413.9

Adjusted EBIT 115.2 154.9 112.8 188.4 154.9 185.9 116.2 178.9

+ Goodwill amortization 12.7 12.8 9.9 14.8 16.8 16.7 16.0 7.7 Adjusted EBITA 127.9 167.6 122.7 203.2 171.7 202.5 132.2 186.6

+ Interest expense of capitalized operating leases 0.5 0.5 0.6 0.6 0.7 3.7 6.7 9.7 Net Adjustment for Capitalized Expenses 0.5 0.5 0.6 0.6 0.7 3.7 6.7 9.7

Adjusted Net Operating Profit 128.4 168.2 123.3 203.8 172.4 206.2 138.9 196.3

Change in deferred revenues 4.7 (4.9) 2.5 (3.3) 7.8 (6.6) 5.9 (0.1) Income Equivalents 4.7 (4.9) 2.5 (3.3) 7.8 (6.6) 5.9 (0.1)


Income tax provision 46.1 61.8 44.7 75.6 60.2 72.6 49.8 93.0 + Net tax impact from interest 4.2 4.5 4.5 4.6 5.4 5.3 6.1 5.6 + Tax benefit from capitalization of operating leases 0.2 0.2 0.2 0.2 0.2 1.3 2.3 3.4 + Net tax impact of non-operating charges/gains (1.5) (1.1) (1.7) (1.9) (1.3) (1.3) (9.1) (23.8) - Increase deferred taxes 0.1 11.8 (34.0) (2.1) (8.8) (6.3) (21.3) 1.6 Cash operating taxes 48.9 53.6 81.7 80.5 73.3 84.2 70.5 76.6

Net Operating Profit After Taxes 84.2 109.7 44.0 120.1 106.9 115.4 74.3 119.6


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Exhibit 25: Summary of New York Times Cash Earnings and Investments (in millions, 4Q98 to present)1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

3/31/99 6/30/99 9/30/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00

Quarterly Cash Earnings 84.2 109.7 44.0 120.1 106.9 115.4 74.3 119.6

Quarterly Changes:

Investment in net working capital 24.3 (40.6) 42.3 (21.3) 12.4 (20.6) (1.0) 24.4 Investment in fixed assets 87.9 25.7 (7.9) 58.5 (433.0) (124.2) (126.2) (124.3)

Total Cash Investment 112.2 (14.9) 34.4 37.2 (420.5) (144.8) (127.2) (99.9)

Free Cash Flow 196.4 94.8 78.4 157.3 (313.6) (29.4) (53.0) 19.6


Investment in net working capital 1.8 (19.1) 9.8 4.7 (7.1) 12.9 (30.4) 15.2 Iinvestment in fixed assets 77.9 72.6 68.1 164.2 (356.7) (506.6) (624.9) (807.7)

Total Cash Investment Inflow (Outflow) 44.4 (15.2) 9.7 100.8 (402.2) (503.8) (645.6) (743.7) Cash Earnings Inflow (Outflow) 322.4 347.2 313.0 358.0 380.6 386.4 416.7 416.2

Free Cash Flow 366.8 332.0 322.6 458.8 (21.5) (117.4) (228.9) (327.5) Source: Company SEC filings and CSFB analysis.

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Exhibit 26: Wal-Marts Accumulated Cash Investments, or Invested Capital (in millions, 4Q99 to present)4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01

Assets 1/31/99 4/30/99 7/31/99 10/31/99 1/31/00 4/30/00 7/31/00 10/31/00 1/31/01

Cash 1,879 1,967 1,508 1,435 1,856 1,360 1,310 1,311 2,054 Excess cash - - - - - - - - - Required cash 1,879 1,967 1,508 1,435 1,856 1,360 1,310 1,311 2,054 Receivables 1,118 1,154 1,276 1,630 1,341 1,265 1,249 1,468 1,768 Inventory 17,076 18,149 18,793 22,373 19,793 20,971 21,093 24,975 21,442 LIFO reserve 473 449 426 402 378 334 290 246 202 Prepaid expenses and other 1,059 1,076 1,256 1,517 1,366 1,505 1,593 1,675 1,291 Curent Assets 21,605 22,795 23,259 27,357 24,734 25,435 25,535 29,675 26,757

Accounts payable 10,257 11,235 12,326 14,081 13,105 13,160 12,634 15,872 15,092 Accrued expenses & other 5,499 6,510 7,220 8,452 7,290 9,705 8,162 9,843 7,196 Current Liabilities 15,756 17,745 19,546 22,533 20,395 22,865 20,796 25,715 22,288

Net Working Capital 5,849 5,050 3,713 4,824 4,339 2,570 4,739 3,960 4,469

Net P,P&E 23,674 24,310 30,933 31,541 32,839 33,901 34,889 36,214 37,617 Net capitalized leases 2,299 2,440 2,381 3,216 3,130 3,093 3,115 3,112 3,317 Present value of operating leases 2,777 2,838 2,899 2,960 3,021 3,388 3,754 4,121 4,488 Other fixed assets 2,891 2,927 801 820 632 664 893 1,302 1,582 Net Goodwill and other acquired intangibles 9,317 9,837 9,392 9,604 9,265 8,994 9,059 Accumulated goodwill amortization 269 328 387 470 553 636 720 Fixed Assets 31,641 32,515 46,600 48,702 49,401 51,120 52,470 54,380 56,782

Invested capital 37,490 37,565 50,313 53,526 53,740 53,690 57,209 58,340 61,251


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Exhibit 27: Wal-Marts Cash Earnings, or Net Operating Profit After Taxes (in millions, 4Q99 to present)4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01

1/31/99 4/30/99 7/31/99 10/31/99 1/31/00 4/30/00 7/31/00 10/31/00 1/31/01

Net sales 40,785 34,717 38,470 40,432 51,394 42,985 46,112 45,676 56,556 Other income, net 462 406 440 475 475 462 476 505 523 Total revenues 41,247 35,123 38,910 40,907 51,869 43,447 46,588 46,181 57,079

Cost of sales 32,397 27,241 30,123 31,606 40,694 33,665 36,044 35,694 44,852 Gross income 8,850 7,882 8,787 9,301 11,175 9,782 10,544 10,487 12,227

6,022 5,888 6,573 6,907 7,672 7,318 7,625 7,918 8,689

Adjusted EBIT 2,828 1,994 2,214 2,394 3,503 2,464 2,919 2,569 3,538

+ Goodwill amortization 10 59 59 59 59 83 83 83 83 Adjusted EBITA 2,838 2,053 2,273 2,453 3,562 2,547 3,002 2,652 3,621

+ Interest expense of capitalized operating leases 55 56 57 58 59 60 68 75 82 Net Adjustment for Capitalized Expenses 55 56 57 58 59 60 68 75 82

Adjusted Net Operating Profit 2,892 2,108 2,329 2,511 3,621 2,608 3,070 2,727 3,704

Change in LIFO reserve 31 (24) (24) (24) (24) (44) (44) (44) (44) Change in other reserves - - - - - - - - - Income Equivalents 31 (24) (24) (24) (24) (44) (44) (44) (44)

Net Operating Profit Before Taxes 2,861 2,132 2,353 2,534 3,645 2,652 3,114 2,771 3,748

Income tax provision 997 660 740 760 1,178 785 948 807 1,152 + Net tax impact from interest 76 67 67 111 113 116 120 131 114 + Tax benefit from capitalization of operating leases 19 19 20 20 21 21 24 26 29 + Tax benefit from minority interest 12 6 30 8 11 6 20 - - - Increase deferred taxes - - - - - - - - - Cash operating taxes 1,104 753 856 899 1,323 928 1,112 965 1,295

Net Operating After Taxes 1,757 1,379 1,497 1,635 2,322 1,724 2,002 1,807 2,453

Operating, selling and general and administrative expenses


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Exhibit 28: Summary of Wal-Marts Cash Earnings and Investments (in millions, 4Q99 to present)4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01

1/31/99 4/30/99 7/31/99 10/31/99 1/31/00 4/30/00 7/31/00 10/31/00 1/31/01

Quarterly Cash Earnings 1,820 1,332 1,449 1,588 2,240 1,636 1,914 1,719 2,365

Quarterly Changes:

Investment in net working capital 734 799 1,338 (1,111) 485 1,769 (2,169) 779 (509) Investment in fixed assets (1,172) (874) (14,085) (2,102) (699) (1,719) (1,350) (1,910) (2,403)

Total Cash Investment (438) (75) (12,747) (3,213) (214) 50 (3,519) (1,131) (2,912)

Free Cash Flow 2,258 1,407 14,197 4,801 2,454 1,586 5,433 2,850 5,277


Investment inflow (outflow) in:Receivables (142) (145) (268) (229) (223) (111) 27 162 (427) Inventory + LIFO reserve (704) (707) (1,191) (1,713) (2,622) (2,707) (2,165) (2,446) (1,473) Prepaid expenses and other (627) (678) (828) (1,029) (307) (429) (337) (158) 75

Investment inflow (outflow) in:Accounts payable (1,131) (1,470) (2,482) (2,657) (2,848) (1,925) (308) (1,791) (1,987) Other current liabilities (1,306) (2,250) (2,993) (2,499) (1,791) (3,195) (942) (1,391) 94

Investment in net working capital 532 994 2,564 1,759 1,510 2,480 (1,027) 864 (130)

Iinvestment in fixed assets (2,948) (3,471) (16,944) (18,233) (17,759) (18,604) (5,869) (5,677) (7,382)

Total Cash Investment Inflow (Outflow) (2,416) (2,477) (14,380) (16,474) (16,249) (16,124) (6,896) (4,814) (7,512) Cash Earnings Inflow (Outflow) 5,351 5,633 5,837 6,189 6,608 6,912 7,377 7,508 7,634

Free Cash Flow 2,934 3,156 (8,543) (10,285) (9,641) (9,212) 481 2,694 122


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Exhibit 29: Wal-Marts Accumulated Cash Investments, or Invested Capital (in millions, 197275)

Cash 2.0 2.2 2.2 3.2 Excess cash - 0.2 0.2 1.2 Required cash 2.0 2.0 2.0 2.0 Accounts receivable 0.4 1.1 1.2 1.4 Inventory 18.5 29.4 41.5 50.6 LIFO Reserve - - - 4.7 Prepaid Expenses 0.2 0.1 0.3 0.7 Curent Assets 21.1 32.6 45.0 59.4

Accounts payable 6.8 8.0 13.3 14.1 Accrued liabilities 1.5 2.4 3.0 4.2 Income taxes payable 1.1 1.8 1.3 1.4 Current Liabilities 9.5 12.1 17.7 19.7

Net Working Capital 11.6 20.5 27.4 39.7

Net P,P&E 7.1 13.2 14.7 19.2 Present Value of Oper Leases 10.6 13.4 16.3 29.1 Other fixed assets 0.3 0.2 0.2 0.2 Fixed Assets 18.0 26.8 31.1 48.4

Invested capital 29.6 47.3 58.5 88.1

1972 1973 1974 1975


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Exhibit 30: Wal-Marts Cash Earnings, or Net Operating Profit After Taxes (in millions, 197275)

Net sales 78.0$ 124.9$ 167.6$ 236.2$ Rentals from leased departments 0.7 1.1 1.4 1.8 Other income, net 0.2 0.5 0.4 0.7 Total Revenues 78.9 126.4 169.4 238.7

Total COS 58.6 93.1 123.3 176.6 Gross income 20.3 33.4 46.0 62.1

-S, G & A 14.3 23.8 33.0 48.1 Operating Expenses 14.3 23.8 33.0 48.1

Adjusted EBIT 6.0 9.5 13.0 14.0 + Goodwill Amortization - - - - Adjusted EBITA 6.0 9.5 13.0 14.0

+ Interest expense of capitalized operating leases 0.9 1.1 1.3 2.4 Net Adjustment for Capitalized Expenses 0.9 1.1 1.3 2.4

Adjusted Net Operating Profit 6.9 10.6 14.3 16.4

Change in LIFO Reserve - - - 4.7 Change in Other Reserves - - - -

Income Equivalents - - - 4.7


Income Tax Provision 2.7 4.3 5.7 5.9 + Net Tax Impact From Interest 0.2 0.3 0.5 0.8 + Tax Benefit from Capitalization of Op Leases 0.4 0.5 0.6 1.1 - Increase Deferred Taxes - 0.2 0.2 0.3 Cash Operating Taxes 3.3 4.9 6.6 7.5

Net Operating Profit After Taxes 3.6 5.7 7.7 13.6

1972 1973 1974 1975


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Exhibit 31: Summary of Wal-Marts Cash Earnings and Investments (in millions, 197375)

Investment inflow (outflow) in:Receivables (0.7) (0.1) (0.2) Inventory + LIFO reserve (11.0) (12.0) (13.8) Prepaid expenses and other 0.1 (0.3) (0.4)

Investment inflow (outflow) in:Accounts payable 1.2 5.3 0.8

Accrued liabilities 0.8 0.7 1.1 Income taxes payable 0.6 (0.4) 0.1

Investment in net working capital (8.9) (6.9) (12.3)

Iinvestment in fixed assets (8.8) (4.3) (17.3)

Total Cash Investment Inflow (Outflow) (17.7) (11.2) (29.6) Cash Earnings Inflow (Outflow) 5.7 7.7 13.6

Free Cash Flow (11.9) (3.5) (16.0)

1973 1974 1975


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Exhibit 32: Dells Accumulated Cash Investments, or Invested Capital (in millions, 1999 to present)Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/01

4/30/99 7/30/99 10/29/99 1/28/00 4/28/00 7/28/00 10/27/00

Cash and marketable securities 4004 4715 5857 4132 3728 4316 4614 Excess cash 3745 4438 5550 3793 3388 3952 4231 Required cash 259 277 307 339 340 364 384 Accounts receivable 2151 2424 2827 2608 2708 2965 3086 Inventory 289 336 374 391 441 442 424 Other 561 588 651 550 617 595 737Curent Assets 3260 3625 4159 3888 4106 4366 4631

Accounts payable 2641 3007 3636 3538 3468 3749 3950 Accrued and other 1247 1433 1688 1654 1835 1983 2141 Income taxes 0 0 0 0 0 0 0Current Liabilities 3888 4440 5324 5192 5303 5732 6091

Net Working Capital (628) (815) (1,165) (1,304) (1,197) (1,366) (1,461)

Net P,P&E 536 601 674 765 796 882 955 Present Value of Oper Leases 228 313 398 483 483 483 483 Other 22 44 183 304 428 228 362Fixed Assets 786 958 1255 1552 1707 1593 1800

Invested capital 158 143 90 248 510 227 339

Source: Company SEC filings and CSFB analysis, note: invested capital does not include long term assets

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Exhibit 33: Dells Cash Earnings, or Net Operating Profit After Taxes (in millions, 1999 to present)Q4/99 Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/011/29/99 4/30/99 7/30/99 10/29/99 1/29/00 4/30/00 7/28/00 10/27/00

Net revenue 5,174 5,537 6,142 6,784 6,802 7,280 7,670 8,264 Cost of revenue 4,012 4,347 4,788 5,414 5,498 5,788 6,036 6,506

Gross income 1,162 1,190 1,354 1,370 1,304 1,492 1,634 1,758

Selling, general and administrative 493 508 569 622 688 750 774 814 Research, development and engineering 74 82 91 98 103 117 124 126

Total operating expenses 567 590 660 720 791 867 898 940

Adjusted EBIT 595 600 694 650 513 625 736 818

Goodwill Amortization - - - - - - - - Adjusted EBITA 595 600 694 650 513 625 736 818

Interest Expense of Cap O L 4 6 8 10 12 12 12 12 Net Adjustment for Capitalized Expenses 4 6 8 10 12 12 12 12

Net Operating Profit Before Taxes 599 606 702 660 525 637 748 830

Income Tax Provision 181 186 217 207 175 225 258 289 + Net Tax Impact From Interest (4) (7) (11) (14) (34) (44) (44) (51) + Tax Benefit from Capitalization of Op Leases 1 2 3 3 4 4 4 4 - Increase Deferred Taxes - - - - - - - - Cash Operating Taxes 178 181 209 196 145 185 218 242

Net Operating Profit After Taxes 420 425 493 463 380 452 530 588


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Exhibit 34: Summary of Dells Cash Earnings and Investments (in millions, 1999 to present)Q4/99 Q1/00 Q2/00 Q3/00 Q4/00 Q1/01 Q2/01 Q3/01

1/29/99 4/30/99 7/30/99 10/29/99 1/28/00 4/28/00 7/28/00 10/27/00

Quarterly Cash Earnings 420 425 493 463 380 452 530 588

Quarterly Changes:

Investment in net working capital (27) 332 187 350 139 (107) 169 95 Investment in fixed assets (29) (105) (172) (297) (297) (155) 114 (207)

Total Cash Investment (56) 227 15 53 (158) (262) 283 (113)

Free cash flow 364 197 478 411 538 713 246 700


Investment in net working capital (174) 231 356 841 1,008 569 551 296 Investment in fixed assets (254) (291) (391) (602) (870) (920) (635) (545)

Total Cash Investment (428) (60) (34) 239 137 (352) (84) (249)

NOPAT Inflow (Outflow) 1,443 1,566 1,718 1,801 1,761 1,788 1,825 1,949 Free cash flow 1,015 1,506 1,683 2,040 1,898 1,436 1,741 1,700



39

1 Outstanding Investor Digest. September 24, 1998. Page 41.

2 Outstanding Investor Digest. September 24, 1998. Page 37.

3 Wolf Bytes 20Earnings are an Opinion, Cash is a Fact, Charles R. Wolf and Bob Hiler, Credit Suisse First Boston

equity research, December 20, 1997.4 In accounting terms, we start with a firms earnings before interest, taxes, and amortization (EBITA). We then subtract

cash taxesthe amount the company would have paid if it were entirely equity financed, with no interest payments onits debt to shield the company from taxes. Accordingly, to calculate cash taxes, we first add the tax shield from interestexpense to the income tax provision reported on the income statement. We also have to add back the tax benefit of theimplied interest expense of off-balance sheet debt-equivalents, such as capitalized operating leases. These tax shieldswill be equal to the interest expense multiplied by the marginal tax rate. Next, we do an equivalent calculation to addback the tax impact of non-operating income or expenses to isolate the tax burden of the firms operating income.Finally, we subtract any increase in the deferred tax balance, since we wish to arrive at cash taxes paid; this differencerepresents taxes that have been accrued, but will not be paid until a later period.5 As a technical detail, note that we calculate cash earnings net of depreciation to measure a companys economic

earnings. To make sure that free cash flow is not understated, we also calculate cash investments to be net ofdepreciation. That is, cash investment measures the cash that a company must invest over and above its annualdepreciation. Also, to avoid seasonal fluctuations and quarterly swings, we calculate both figures by summing theappropriate numbers for the past 12 months.6In contrast, the New York Times has to invest in physical printing pressesor partner with other newspapersto

expand distribution of its flagship National Edition to other regions. For example, it just announced the expansion ofdaily delivery to the non-metropolitan areas of Arizona. See The New York Times Begins Printing National Edition atPhoenix Print Site. New York Times Company Press Release. http://biz.yahoo.com/bw/990212/ny_the_new_2.html.(February 12, 1999).7 Bill Miller's Mutual Fund Forum. http://www.leggmason.com/Funds/fundform2.html. August 12, 1996.

8 One point of note is that Wal-Mart did have three quartersthe nine months from November 1996 and until July

1997in the Super Cash Flow quadrant with cash inflows from earnings and investment. This resulted from a secularimprovement in Wal-Marts ability to generate earnings without tying up so much cash in working capital. Specifically,over the 12 months ending on April 30, 1997, Wal-Mart reduced cash tied up in current assetssuch as accountsreceivable, inventory, and prepaid expensesby over $600 million, while increasing cash advances from suppliersinthe form of accounts payable and other current liabilitiesby an impressive $1.9 billion. This generated over $2.5 billionin cash, which more than covered its approximately $1.4 billion investment in new stores, netting an approximately $1.2billion investment inflow.. Wal-Mart has continued to improve its working capital management, although not to theextent of generating a cash investment inflow since then.9 Note that while Amazon is being called the Wal-Mart of the Web, it currently has drastically different cash economics

than Wal-Mart did when its revenues were at a similar run-rate.10

In the two most recent quarters, Dell has continued to have negative working capital, i.e., its working capital is stillfinanced by interest-free cash loans from suppliers, customers, and employees. However, perhaps owing to Dellsincreased sales to large business accounts with longer sales and payment cycles, the company has actually investednet cash in its working capital, at least temporarily moving from the Super Cash Flow to the Profitable Buildoutquadrant. We do not believe that this invalidates our knowledge company lifecycle theory, as it represents a startupcost for Dells new target market, rather than a continuation of growth from its familiar markets.11

Warren Buffetts 1992 letter to shareholders. http://www.berkshirehathaway.com/letters/1992.html.

cashflow_new format.doc

AMSTERDAM ............ 31 20 5754 890ATLANTA................... 1 404 656 9500AUCKLAND ................. 64 9 302 5500BALTIMORE .............. 1 410 223 3000BANGKOK ...................... 62 614 6000BEIJING ................... 86 10 6410 6611BOSTON .................... 1 617 556 5500BUDAPEST .................. 36 1 202 2188BUENOS AIRES ...... 54 11 4394 3100CHICAGO................... 1 312 750 3000FRANKFURT................. 49 69 75 38 0HOUSTON.................. 1 713 220 6700HONG KONG .............. 852 2101 6000JOHANNESBURG ..... 27 11 343 2200

KUALA LUMPUR.........603 2143 0366LONDON...................44 20 7888 8888MADRID .....................34 91 423 16 00MELBOURNE .............61 3 9280 1888MEXICO CITY ..............52 5 283 89 00MILAN .............................39 02 7702 1MOSCOW..

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