new economy huh!
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July 13, 2001
Spate of Write-Offs, Charges Calls
Into Question Lofty 1990s Profits
interactive.wsj.com
By STEVE LIESMAN and JONATHAN WEIL
Staff Reporters of THE WALL STREET JOURNAL
Was the corporate-profits miracle of the late 1990s partially a mirage?
Along with tame inflation and low unemployment, outsize corporate-profit growth stood as one of the pillars of the booming economy and underpinned the stock market's historic bull run. From 1995 through 2000, the Standard and Poor's 500-stock index registered compounded annual growth of 23.3% as earnings grew at a 10% annual rate -- far above the 6.6% pace for the S&P from 1948 through 1994.
In recent months, though, many big companies -- including AT&T Corp., Cisco Systems Inc., Lucent Technologies Inc., Nortel Networks Inc., Walt Disney Co. and Wells Fargo Inc. -- have announced whopping write-offs and charges to earnings. They have slashed the value on their books of everything from investment portfolios and customer loans to inventory and the carrying value of acquisitions.
Since the economy began to slide in the fourth quarter, S&P companies have announced write-offs and other "special" charges of about $50 billion, according to data provided by Multex.com Inc., a financial-research company. That total for the six months ended March 31 is the highest dollar amount by far for any recorded six-month period and the second-highest as a percentage of pretax income since 1992. And the trend is expected to continue as companies release their second-quarter earnings in coming days and weeks. |
