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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 75.19

-0.1%

Jan 16 9:30 AM EST

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To: M. Charles Swope who wrote (37929)	6/25/2000 1:22:00 PM
From: The Phoenix	Read Replies (2) of 77400

Well it seems to me that the purchase method does not count intellectual property into the cost basis. If it did it would not amoritize it out as goodwill in future years (now compressed to 20 years thus compounding the problem). The issue stems from expectation of growth - this is not goodwill. Accountants orginally used the term goodwill as a method for accounting for value paid above book value. This was typically a result of customer/brand awareness and supplier relationships - not intellectual property. Today's start-ups have none of these things - they only have an expectation of future cash flows which results from intellectual property. This is distinctly different from goodwill. I suppose one could call it an engineering expense but it's probably better characterized as an investment. Either way it's certainly not goodwill. OG

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