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Technology Stocks : Compaq
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To: John Koligman who wrote (27516)6/12/1998 12:41:00 AM
From: Brett Trueman  Read Replies (1) of 97611
 
John, companies often allocate as much of the purchase price as they can to purchased R&D. This leaves less for them to allocate to goodwill. The reason managers like this is that the purchased R&D is, in general, expensed immediately. The managers then get to take a big earnings hit all at once and wipe the slate clean. With goodwill, there is a charge to earnings each year until the goodwill is fully amortized, which can be as long as 40 years for some firms (although it's generally a lot less for hi-tech companies). So, I'm not surprised to see such a huge writeoff for purchased R&D.

Brett
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