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Politics : Formerly About Applied Materials

AMAT 248.51

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1:23 PM EST

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To: Alan Siegal who wrote (20033)	6/10/1998 8:48:00 PM
From: Charles Skeen	Read Replies (1) of 70976

Re: Writeoffs. Alan, you are confused (and perhaps I am too). I think the point of the article is that large write-offs (for R & D or whatever) cause both past and future operating earnings to be overstated, misleading investors and temporarily bloating the stock price. Management profits from their options, but eventually shareholders are left holding the bag. Income taxes have little or nothing to do with this situation. It is driven by shareholder reporting. As far as I know, many of these write-offs may not pass muster with the IRS anyway. You should also know that even if the income taxes were not existent, the accountants would demand that certain expenditures be capitalized and depreciated, as such expenditures benefit the company over many periods in the future. One of the basic principles of accounting is to match expenses to revenues in order not to distort profit reporting. You seem to resent the Times' reporting on this issue. Fine for the management, but what about the shareholders? JMO, Charlie.

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