<<one "GAAP" and the other "FRAUD>>
Where you see fraud, I see "pro forma" pre- tax, interest, depreciation, and amortization of goodwill. And companies now put this pro-forma number in their news release headline, and the on-line press (pr newswire, businesswire, etc.) run with it. Sometimes, the numbers are bent a little, accounting as if a transaction occurred prior to the quarter, or if that makes things worse, then only from the date the transaction closed. You need to read and think about the fine print. The one-time write-off related to an acquisition, IMO, is a large amount of smoke, and distorts the earnings picture. A fair amount of amortization is proper, and to ignore the acquisition completely, is a distortion. Dell had such a write-off in Q3 for the purchase of ConvergeNet Technologies Inc. Without proper accounting for an acquisition, you can bring in the benefits without the related costs (or otherwise let some of the acquisition costs never hit the reported income statements). Amortizing the $194 million for the purchase of ConvergeNet Technologies Inc. over 10 years would have reduced Dell's reported earnings for Q3 to 17 cents. The "market" knows this, but the pr department put the report out with spin, IMO. |
