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Technology Stocks : All About Sun Microsystems

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To: JDN who wrote (48402)	4/19/2002 1:16:49 PM
From: QwikSand	Read Replies (1) of 64865

JDN: I join with Charles in thanking you for that explanation, but I want to ask one follow-up question along the same lines Charles asked. I haven't gone and looked up the details of the acquisitions that created that sizable goodwill item on SUNW's balance sheet. But what does it mean to shareholders if goodwill is acquired during a bubble, when by definition companies have unrealistic valuations? I would guess that during such a time, that goodwill premimum over the carrying value of the acquired company's net assets is going to be at its highest point. A comparable acquisition today would be at a much lower price, even though the value of most of the underlying assets might be the same or nearly so. If the goodwill line on the balance sheet (which represents a big cut of shareholder's equity) was entered during a period of extreme asset inflation that is now over, does that mean current book value is inflated by today's standards? I guess if those acquisitions were made with SUNW stock, which was itself an inflated asset at the time it was used, it might be a wash. --QS

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