The expense increase was driven principally by higher levels of capital spending, particularly in the fourth quarter of 1996 when purchases from Lucent began to be recorded at their full commercial value. Selling, general and administrative expenses were essentially flat with the year-ago quarter. Financial services expenses decreased 17.7 percent compared to the second quarter last year, primarily due to the accounting treatment for securitizations. Without the benefits from the second-quarter 1997 securitization and FAS125, financial services had a slight operating loss in the quarter. This is a substantial improvement over the 1996 second quarter.
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