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Technology Stocks : JDS Uniphase (JDSU)
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To: YlangYlangBreeze who wrote (8962)4/16/2000 4:49:00 AM
From: jack bittner  Read Replies (2) of 24042
 
jdsu has grown by acquisition. trading its stock for the equity of the target firm. when it pays more than book value of the target (inevitable these days), the difference between book and the "price" (market value of the jdsu stock used) is accounted for as "good will" on jdsu's books.
each year a portion of the good will is written off against operating earnings. so large are jdsu's acquisitions, they wipe out even the great, growing jdsu earnings. they also eliminate income taxes. looks like a win/win. new-age investors urge you to look through net earnings (as reduced
by good will) to operating earnings to determine growth. one big downer: every acquisition dilutes the stock, because now there are more stockholders in the newly merged
firms by the number that had held the shares of the target. if the earnings of the target were less per share (rarely are there any earnings) than those of jdsu before the merger, jdsu's earnings have been diluted. hopefully the newly merged company will have synergy (you're bringing together several engineering geniuses and many skilled technicians plus much knowledge that had never been together before. accountants haven't figured out where to put brains on the books. this is especially true at jdsu's level. also, hopefully the merged firms will increase their market dominance and be able to raise margins. give me your address, and i'll send you my bill.
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