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Technology Stocks : Cascade Communications (CSCC)
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To: Im-patient who wrote (1999)1/29/1997 11:36:00 PM
From: Gary Walker   of 3743
 
Fred:

CSCC and most other successful high techs have been expensing the cost of acquistions rather than capitalizing the portion of the price over the book value of the company. The is commonly called "good will."

In the past, many acquiring companies would carry the "goodwill" on their books and amortize it over time like depreciation. This had the impact of over reporting earnings in the early years after the acquisition. In many cases companies had goodwill on the books for years. Like any asset when goodwill is written off the cmpany takes a hit on the income side even though cash flow isn't impacted long after the acquisition had taken place.

The neat thing about this is that these companies won't be burdened by unamortized goodwill for a zillion years.

regards,

gw
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