From Briefing:
CNET, Inc. (CNWK) 71 +6 7/8. Wall Street is falling down on the job while C/Net, Amazon.com, and Excite pull fast ones with their earnings reports. CNWK reported earnings after the close yesterday and it was widely reported that they had "blowout" numbers, reporting a profit of $0.02 per share compared to an expected loss of $0.21. We fell for it too. But wait, in the 19th paragraph of the press release, CNET notes that they had a one-time gain from a sale in a stake in another company. That came to $0.26 per share, but you have to figure that out yourself. There was no breakdown in the financial table. Hey, aren't one-time gains supposed to be excluded from earnings comparisons? Perhaps not when it helps the stock. Exclude the one-time gain and CNWK missed the earnings estimates. Reuters wrote a story to this effect but we have only seen a couple of Wall Street firms mention it. Wall Street is absent on the analysis of AMZN as well. After the close yesterday, AMZN reported a loss of $0.33 per share on a "pro-forma" basis, but $0.44 using GAAP. GAAP stands for generally accepted accounting principles, which tells us exactly what AMZN earned. Apparently, "accepted" means only when they help the stock price. Pro-forma means that AMZN wants to exclude amortization of assets that weren't on the books last year. In essence, this means that even though these are GAAP costs, and are included in every Fortune 500 companies books, AMZN wants to exclude them because they weren't there last year! Hey, why not exclude the salaries of all employees that are new since last year? Why not exclude all new marketing costs? Wall Street should recognize that the current quarter numbers are best reflected by the GAAP numbers that AMZN reported, not the $0.33 per share "pro-forma" loss. Perhaps these companies are just following the lead of Excite (XCIT), which last week excluded from "pro-forma" earnings a marketing expense, simply because it is one-time. Only because of that did they beat their numbers, and we saw only one Wall Street firm complain. Accounting 101 says the costs of that marketing deal with Netscape should be amortized over the period in which the benefits accrue. XCIT says otherwise, and Wall Street meekly concurs. CNWK gets to include a one-time gain, but XCIT excludes marketing costs, and AMZN excludes amortization costs simply because they weren't there last year. Frankly, Wall Street needs to step up and restore credibility to the way in which companies report "earnings." |
