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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 226.19-1.8%Dec 12 9:30 AM EST
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To: KeepItSimple who wrote (137195)1/17/2002 8:53:37 PM
From: Oeconomicus  Read Replies (1) of 164684
 
Even if a company decides they won't mislead investors, CNBC and first call will refuse to use the GAAP numbers and instead figure out what the pro-forma numbers "should" be?

First call and CNBC didn't have to figure a thing out - MSFT gave them the adjustment. Read from the first paragraph of MSFT's PR:

"Operating income for the quarter was $2.84 billion, including a $660 million charge for estimated expenses in connection with consumer class action lawsuits. Including this charge, net income was $2.28 billion. Diluted earnings per share for the quarter were $0.41, including $0.08 for the estimated charge."

In other words, excluding the charge, EPS would be 49 cents. Call it "proforma", call it operating earnings, or call it "normalized" earnings - it's still the meaningful number if you are trying to gauge the strength of MSFT's business. Focusing exclusively on GAAP earnings when a company is subject to large, unusual and non-recurring costs is a mistake.

First call is correct in pointing out this adjustment and MSFT would be doing its shareholders a disservice had they not prominently noted the effect the charge had on EPS.

Anyone who can't understand the difference between adjustments for these kinds of charges and the "proforma" games played by AMZN and the like should not be investing in stocks - at least not without adult supervision.
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