Ref- <Has anyone here actually looked at the financial statements? Three Months Ended Dec. 25, Dec. 26, 1999 1998 ----------------------------------------------- OPERATING INCOME 2,754 2,836 Interest and other 508 244 -------- -------- INCOME BEFORE TAXES 3,262 3,080 NET INCOME $ 2,108 $ 2,064 =============================================== I don't understand how people see this as a good thing. INTC's operating income has declined year-over-year. Any growth that INTC has seems to be coming only from investments. Furthermore, the investments don't show up as one time gains, so it seems like Intel is saying "One time charges are one time charges, but one time gains are regular income." Can someone explain to me what's good about the numbers in this report? >
The difference is the acquissition related write offs.
Let me explain how it works. Suppose you acquire a company for $100 million. The book value of that company is only $40million. [ All companies have a market value far in excess of book value]. This difference is called "good will", and this difference will be amortized over 30 years. What this means that $60 million good will will be written off at $2million every year. So every quarter the acquiring company will have to reduce its income by $0.5million. In addition the acquiring companies write-off any R&D of the acquired company which may have been capitalized.
Intel has just begin its acquisition binge, and you are seeing the acquistion write-off which did not exist a year ago. I see $300 million for acquisition charges in Q4 99 vs $16 million a year ago.
So the "operating income" is $284million more than you think. This difference accounts for 69cents vs 61 cents earning confusion. The 69 cents is the earnings before acquision charges, 63 cents after acquisition charges, and 61 cents to account for dilution in shares caused by the acquisitions. |
