Re:can you translate the above in english?
Accounting is much more difficult than most people realize. Figuring out exactly how much you made requires exact knowledge of the value of what you have left after producing and selling for a quarter.
NT basically woke up one morning to find that it had cost them $19 Billion more to produce products during the past few years than they had thought. Mainly because their facilities and intellectual property weren't nearly as valuable as they had supposed - they had "used up" the value of things they thought they still had.
One of the reasons Intel has been continuing to post profits is that they have been continuing to increase their assessment of the value of "what's left." The sum of their plant, equipment, and goodwill has been increasing each quarter by a fair amount. They've certainly spent plenty in those areas, but, especially considering that the revenues they are able to generate with that plant, equipment, and goodwill have been decreasing, not increasing, are they correct in posting the valuations they have been posting?
The tricky thing about accounting is that if capital spending is misallocated, either through unfortunate timing or bad plant or equipment acquisitions, it shows up on the earnings and income statements as though it were still cash in the bank. Whereas sometimes, as NT found, the money is just gone.
Here's how Intel valued "what's left" over the past 3 quarters:
Q4 00 Q1 01 Q2 02
Net Value of Prop, Plant, & Equip 15,013 16,774 17,828
Goodwill 5,941 6,071 6,277
Other Assets not listed as financial 2,129 2,365 2,471
Total 23,083 25,210 26,576
You can decide if you think revenues have been / will be increasing proportionately. Part of the situation is clouded by seasonality (decreasing revenues). But capital costs aren't seasonal, and it is possible that markets going forward are going to be more competitive than they have been in the past, possibly reducing what can be gained from that plant, equipment and goodwill. |
