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Strategies & Market Trends : The New Economy and its Winners

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To: Mark Fowler who wrote (7634)	6/18/2001 12:01:44 PM
From: Harvey Allen	of 57684

Nortel write-down is tip of iceberg for tech groups Many of the companies involved and some analysts argue that these are simply book-keeping adjustments that have little significance. A big accounting charge would have no impact on real-world issues like cashflow or the company's bank covenants, said Tony Muller, chief financial officer at JDS. According to this view, it makes no difference if JDS and SDL agreed an all-stock deal at inflated prices: since they were simply swapping paper, the deal was worth as much at $14bn as it was at $40bn. However, that argument ignores one uncomfortable fact from the tech stock bubble: JDS, Nortel and others could have used their own, highly-valued stocks during the bubble to buy assets that would have a lasting value, rather than other over-heated shares. news.ft.com

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