Well, I would categorize all of your questions as purely rhetorical, because you know the answers as well as I do
that is not the case. e.g., it is unknown whether the 2.5 billion of "worthless" parts will be used. and if used, it is unknown how and even if such will be expensed. e.g., even if they take a charge against pro forma for such use, it may be the case that they elect to expense a depreciated amount as opposed to charging full book (i.e., book prior to the writeoff). one can imagine some degree of leeway.
imagine this scenario. i have a computer company. i have 1 million in inventory of computer parts. i write them off. i then decide i can use them, 3 months later. at this time, the market value of the parts is, say 900K. but, i decide to book expenses of only 500K, under the rationale that the parts are already "semi-used" (i.e., contaminated by delivery to a customer such as myself), and therefore do not deserve full market expense. this provides an extra 400K of gross margin, vs. my buying new parts at market for 900K. Nifty!
one can extrapolate from the above example that the depreciation factor i apply to goods which have a market will have a significant impact on my "profitability".
What we all really want to know is how will this affect earnings going forward? The answer to that is it can only be beneficial
i must disagree. i would say that properly, it should only be neutral--not beneficial or adverse. it may be appropriate to use some parts, and if they are properly expensed, i have no problem with this, but i still consider it worse than a hypothetical scenario where they did not overpurchase by 2.5 billion (said monies being a real cash expense, not to mention said expenditures being indicative of not having a proper, er, grasp of market conditions which is somewhat out of keeping with the Masters of the Universe portrayal sometimes bandied about)...
The move was legal and brilliant
Legal? OK. But Brilliant? They admit they paid 2.5 billion dollars for that which is "worthless" and you call said admission brilliant???
So here's another question for you? Do you want to profit from that knowledge or not?
What knowledge??? what is there that every tom, dick and harry does not know? i don't see any edge here. |
