Interesting post from YHOO...
messages.yahoo.com
should have listened to barrons!!!
by: marketmaker2000xxxxx (39/M/hawii)
*** "Just to refresh your memory," writes Abe Briloff in Barron's, "under the pooling method of accounting for a business
combination, if Company A acquires Company B paying, say, $100 million in stock, it would show as its cost a mere $10
million, assuming that was the amount listed on Company B's books as its shareholders' equity."
*** In 1999, for example, Cisco bought GeoTel for $2 billion in shares. How much did the Cisco Kids report as the
acquisition cost? Just $41 million, reports Briloff.
*** When you print your own money - as Cisco did with its share certificates - you become pretty casual with the way you
spend it. Thus did Cisco pay out $6.9 billion worth of shares for Cerent in June 1999. In the five previous months, Cerent had
revenues of less than $10 million...and lost $2 for every $1 in sales. Hey, but with this kind of funny money, who really cares?
*** A similar acquisition of ArrowPoint cost the company $5.7 billion in shares - and showed up as only $40 million in costs
on Cisco's books.
*** The funny money is also useful for disguising labor costs. Employees get options that are not recognized as current
operating costs. What would the P&L statement look like if they were forced to account for the options correctly? "If Cisco
had treated the exercise of options as they should be treated - that is, as a charge to income," concludes Briloff, "the company
would have reported not the $2.1 billion in earnings it did report, but a loss of $363 million..." I don't mean to be a sourpuss,
but investors should know what they're getting....""""
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now 52 1/8 drop...drop...drop..
TA |
