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Technology Stocks : WCOM
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To: Anthony Wong who wrote (3169)8/11/1998 5:08:00 PM
From: P.T.Burnem   of 11568
 
Another telecommunications company, Jackson, Mississippi-
based WorldCom Inc., last week said it may take a charge of as
much as $6 billion to $7 billion to account for the value of in-
process research and development it will acquire with the
purchase of MCI Communications Corp.

By reducing future goodwill write-offs from the acquisition,
the initial research charge could add as much as $150 million to
$175 million a year to earnings, WorldCom said in a filing with
the SEC. WorldCom spokesman Gary Brandt said the annual earnings
boost could wind up being less than those estimates.

Note that it will take some forty years of extra earnings just to repair the damage to the book value caused by the write-off. That is, without taking into account the time value of the $6-7B. Nice racket, huh?

Now, does anyone really believe that the marketing-driven MCI has $6-7B worth of R&D projects underway? I'd be suprised if the real number was over $0.5B.

PTB
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