<Thanks to Jim Krammer, who appeared on CNBC the next morning after the news was released, (he is very long AOL), he put on a "spin" that this news was no big deal. The stock actually closed up 2 3/4 points for the day. "Yeah", he boasted, "I knew about AOL's accounting methods for days before the news came out, So what if AOL was using a less than conservative accounting technique, I would try it too, if I could". But he entirely sidestepped the main point. The analysts had made their earlier earnings estimates without having the benefit of knowing that $.05 from this sale would be used to help boost AOL's quarterly earnings. (in fact, if allowed to hold up, this accounting gimmick will help AOL's Quarterly earnings for the next 20 quarters to come)>
Well put, Jules. You are an asset to this thread. Coincidentally, I just received a call from Mr. Kramer's partner on that vvery subject. He seemed to be curious about my views on earnings and EBTIDA, stating that it appears that I have "strong feelings" on the subject. Well, he's right. I am going to wage a war on "bogus" numbers. I still owe you a more detailed opinion on IBM but as you pointed out, to do a good job would entail a LOT of research (I don't follow IBM regularly).
One very simple method of avoiding the share buyback game, is to report actual earnings in lieu of earnings per share. I always wondered why anyone bothered to express in earnings per share. For purposes of comparison, it would be much more accurate and efficient to express earning on a standardized basis off of an index year, thereby allowing one to compare one company to another. I am also careful to account properly for share buybacks, when counting for excess to add to marketable securities and cash for the following time period. When I do comparisons, I never bother to break the results down to a per share basis.
On the subject of share buybacks, NOVL IMAO is guitly of explicit destruction of shareholder value. Considering the precarious position they are in regarding MSFT eating thier lunch, the last thing they need to be doing is buying back thier shares. They are a software company, not a registered investment company. That money is much better spent in marketing to potetial MSFT customers, recapturing thier customers lost to MSFT, and R&D for new products and innovations. |
