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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 236.73-6.1%Jan 30 9:30 AM EST
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To: TGPTNDR who wrote (59686)10/23/2001 12:25:51 AM
From: ptannerRead Replies (1) of 275872
 
PT, One more beat on the dead horse, AKA Intel's Goodwill

I decided to try to find some real information on how Intel has handled its goodwill. I downloaded Intel's 2000 Annual Report from here:
intel.com (online version)
intel.com (.pdf files)

The notes on page 23 provide some discussion as well as the "life in years" over which these assets are written off. Previously I was quite wrong in thinking that goodwill was written off slowly (as the IRS would like) but Intel listed three type of "goodwill and other acquisition-related intangibles" with life in years ranging from 2 to 6 -- so last quarter's drop of nearly 11% might not have reflected much of an impairment mark-down (2 years = 12.5%/quarter) but likely reflected some.

Quoting the most relevant paragraph to the discussion here:

"Goodwill is recorded when the consideration paid for acquisitions exceeds the fair value of identifiable net tangible and intangible assets acquired. Goodwill and other acquisition-releated intangibles are amortized on a straight-line basis over the periods indicated below. Goodwill and other acquisition-related intangibles are reviewed for recoverability periodically or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying amount is compared to the undiscounted cash flows of the businesses acquired. Should the review indicate that these intangibles are not recoverable, their carrying amount would be reduced by the estimated shortfall of those cash flows. No impairment has been indicated to date. [NOTE: This has probably changed since 2000.]

Net goodwill and other acquisition-related intangibles at fiscal year-ends were as follows:

(in millions)             Life in years      2000       1999
Goodwill                       2-6          $ 4,977    $ 4,124
Developed Technology   3-6               799          612
Other Intangibles           2-6               185          198
                                     [Total]    $ 5,941     $4,934


My frustration with this subject was that it seemed to be recurring sour grapes rather than a new development. Intel's goodwill assets have been declining and are relatively minor in scale. I am sorry if I jumped a little hard on Niceguy's post from my "high horse."

-PT

ps: TGPTNDR - I agree that Inte's acquisitions were the same type as Nortel but I feel they were probably more substantial (ie. P/E rather than P/S type). Also, Intel will get the "government's 30%" whether they write them off now or over 2-6 years. Certainly sooner is better than later from a cash flow perspective and also allows a company to shift its "pro forma" results much closer to operating results.
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