On inventory, Pro-forma & GAAP.
The puzzle is not so difficult to unravel. The pro-forma results exclude innumerable recurring one-time charges, while the GAAP results include a unique one-time benefit. If we exclude the one time one-time stuff, and include the recurring one-time stuff to create a pro-forma pro-forma income statement, we have an picture of the expectedly recurring business.
But this has clearly frazzled the neurons of many people.
On stock options.
Pure guesswork here. No visibility. As of last 10K, there were 214 excerciseable stock options at an exercise price of $0.01 to $8.57, none of which were underwater. At $20 share price, represents an estimated cash-flow benefit of 2.3 B$. Previous option exercise rate has been between 40 and 50 M shares/quarter. Payroll tax on option exercise is about 3/18 of what it was this time last year... so we are both agreed it's small and getting smaller. But a mere 7 million shares at $10 cash contribution is more than the business earned.
The "more" I'm talking about is small compared to past billions. And my point about 'unsustainable' was exactly the same as yours. So here we agree, but seem to be butting heads anyway. Old habits are hard to break.
Amortization of goodwill - You wrote Easily explainable. In the days when Cisco was acquiring like mad, they used the pooling method, which as you know means no goodwill was recorded.
Nice easy explanation, which would also be true if they didn't do any purchase acquisitions. But they did.
In fact, I know for certain that about three billions in goodwill were recorded. You seem to have misplaced Monterey, Pirelli, Aironet, JetCell, Pentacom, Qeyton, Suma Four, Clarity, Selsius, Pipelinks... and so on. All 2000/1999 purchase acquisitions.
If you look into the financial statements and read the notes (let alone footnotes... did anyone learn anything from Enron?) you will note quite a substantial accumulation of goodwill in FY 1999, 2000 and 2001 (bubble years). Also you will note the disclosure of 2,937 M$ Goodwill on the books at YE FY 2000, of which a mere 289 was declared impaired in FY 2001. The rest is most assuredly still sitting there. From your days dulling pencils as a CPA-in-training, how likely is it a mere coincidence that the past rate of depreciation (150 M$/Quarter) for 4.895 years is 2,937? Given the allowable range set for themselves of 3-5 years. The new SFAS 142 permits them to carry goodwill indefinitely, except to require testing for impairment under certain conditions. And so they will. And thus the goodwill fairy delivers an extra 150 M$ of earnings that wouldn't have been there if this was 1995.
On the rest, I am grudgingly satisfied that we agree ;)
John |
