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Oh, No! Not Wasted Space on Another Lernahoulian Alert!

Also, What's the real reason OpTel pulled its IPO? And General Instrument's side of its story.


Lernahoulian alert: So, some joker (in all seriousness, I think it was a long lost cousin) writes the other day and asks, "How long you gonna kill us with boredom writing about Lernout & Hauspie ?" I write back: "The same amount of time I bored you writing about Iomega , Media Vision and California Micro Devices ," in each of their respective (and, in their cases, doomed) heydays. Sure, the finale of the Lernout drama is still unknown. And, sure, with those other stocks, readership plummeted. But in the end, readers who hung around in those instances were rewarded with quite an ending! You call it boredom. I call it a saga, and each new chapter brings a new piece of info, such as this: Here we are five months after the end of the quarter and Lernout's audited financials finally make their way, in paper form, to the Securities and Exchange Commission's public reference room. (As is the case with most foreign companies, Lernout isn't required to file its documents in a timely fashion.) There, buried on page f-24, is a footnote on receivables. As this column has already pointed out, they ballooned last quarter. But here's what you probably didn't know: A big slug of the company's receivables for at least the past two years have included unbilled receivables. And the amount of unbilled receivables actually rose, as a percentage of receivables, last year over the prior year. Like regular receivables, unbilled receivables represent unpaid bills, with one twist: the customer hasn't even been billed. (It's an accounting thing.) They're legal, but they're often a warning sign of possible financial trouble, especially when they represent one-third of a company's receivables -- and especially when they're growing faster than sales. Last year, Lernout's sales rose by 113%; unbilleds zoomed by 172%. Unbilleds also raise red flags because the timing of the actual billing is subjective. And there's no guarantee a bill will ever be sent out or that the money will ever be collected. In the case of Lernout, that leads short-sellers to wonder whether the company has been using unbilleds to make its financials look stronger than they really are. Lernout, in keeping with its news blackout on this column, didn't respond to my written request for a comment. In its SEC filing, the company said the unbilleds are for "nonrefundable minimum royalties" and "engineering contracts." It didn't elaborate.

That's what they always say: Whenever a company pulls an IPO and blames it on market conditions, you can't help but wonder what the real reason was. Late Friday, OpTel, which calls itself a competitive local- exchange carrier, or CLEC, but used to be a cable company, canceled its IPO, citing market conditions. Just one problem: The stocks of other competitive local exchange carriers are trading at or near their highs. An OpTel spokesman says we got it wrong: The market for IPOs is different than the market for existing CLECs. So, how does OpTel, which is already deep in hock with more than $400 million in debt, including publicly issued bonds, plan to raise cash? (This is the question any investor in a junk bond fund that owns OpTel junk ought to be asking.) The spokesman referred my assistant, Mark Martinez, to the prospectus. That wasn't too comforting. It shows that the company believes, based on its current business plan, that its cash on hand, together with the proceeds of the (now-canceled) offering, will provide sufficient financial resources "to fund its capital requirements through the third quarter of fiscal 2000." After that, what? More debt? One other thing: The spokesman asked if he could see this item before it was printed. He wasn't kidding! Neither were we: No.

General Instrument, update: An item Friday mentioned loads of insider selling at General Instrument , which makes cable set-top boxes. In passing, I mentioned that nobody at the company was available to explain why the selling occurred. Turns out, as I learned the following day, the company's chief spokesman was on jury duty. (Which explains why he didn't get back to me.) So, we talked Friday. He says the selling was as bunched as it was because, like all public companies, General Instrument limits when insiders can sell -- and not because insiders had a change of tune about the company's fortunes. When companies are involved in deals or other significant events, those "trading windows" remain closed even if they would normally be open. General Instrument was involved in enough material transactions that its windows were only open in May and November of 1998 and May of 1999. It so happens, he says, that the stock was also flying in May, and insiders, not being dopes (I'm elaborating here) decided to take advantage of their rising good fortune by going out and buying cars, houses and the like. Good for them. Time will tell whether it was also good for shareholders.

Herb Greenberg writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

TheStreet Recommends Greenberg also writes a monthly column for Fortune.