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To: Sonki who wrote (141160)	9/1/1999 12:15:00 AM
From: Boplicity	Respond to of 176387

More from Briefing.com on Jackson Hole speech Rethinking Profits Just let it die! No! Try as we might, we can't yet let go of Greenspan's Jackson Hole speech. Not because it has policy implications; it actually has few. But because Greenspan, as he is wont to do, raised some interesting issues in that speech. The one that caught our attention was the notion that corporate profits were becoming increasingly difficult to measure. The point is undeniably true, and it has implications for individual stocks, the overall stock market, and the bond market as well. A Capital Idea One of the difficulties upon which Greenspan focussed the most attention was the issue of expenses versus capital outlays. Accounting trivia? Not if you are interested in valuing a stock correctly. You can't properly value an individual company or the overall market if you can't define what constitutes an expense or a capital outlay. An expense is spending which does not yield an asset. Expenses are counted entirely against current revenues on the corporate income statement. These includes salaries, rent, utilities, paper clips, etc. A capital outlay is spending which does yield an asset. In the old economy, capital outlays were easily defined -- plants, equipment, office buildings. Because the useful life of such items extends far beyond the current quarter, a corporation amortizes the outlay over the expected lifespan of the item, and claims an asset on its balance sheet. If a given purchase can legitimately considered a capital outlay, then earnings in the current quarter will be higher than if the purchase is expensed. And rightly so -- if that purchase creates an asset which will improve that company's earnings power for years to come, then the purchase should be amortized and current earnings should be higher. New Economy Challenges The problem in the new economy is that it has become far more difficult to differentiate between expenses and capital outlays. Greenspan used the example of software to make the point, and it's an excellent example. If a company spends $1 mln on supply chain software that is expected to increase its manufacturing efficiency for five years, that $1 mln should be classified as a capital outlay and amortized over the five year useful life of the software. But because software doesn't fit the old economy model of a tangible asset such as plants and equipment, most companies expense software purchases. The result is that current earnings are understated. Given the huge size of the software industry, this factor likely produces a substantial understatement of corporate earnings. The Amazon Question Though software is a good example, the problem is certainly not limited to software. To take the point to an extreme, let's consider whether a marketing budget could be considered a capital outlay. In the past, this would have been considered to be an absurd contortion of accounting rules, but in the Internet realm, there is arguably some merit to capitalizing a marketing budget. My colleague Robert V. Green wrote recently that Amazon.com (AMZN) CFO Joy Covey pushed the boundaries of accounting by introducing EBITMA to the market -- earnings before interest, taxes, depreciation, amortization, and marketing. And while such creative accounting should always be viewed with skepticism, Joy Covey might have a point. The market currently places great value on Internet companies that achieve first mover advantage. And first mover advantage is really nothing more than the building of a brand name. In the Internet land grab, it is clear that the market believes that companies create long term shareholder value by staking a claim. If achieving first mover advantage creates long term value, then shouldn't the marketing budget that leads to that advantage be considered a capital outlay? Amazon.com is in fact a case study in this regard. Without touching the question of whether or not the company will ever justify its current valuation, we can safely say that Amazon's willingness to spend on brand-building early in the Internet game created enormous long term value for its shareholders. Yes, Amazon will always have a marketing budget and at some point its spending on marketing will become just another expense. But the marketing that made Amazon the name in ecommerce could be argued to be a capital outlay, in which case Amazon's earnings picture would have been far brighter. A New Profit View We mention this extreme case to point out just how complicated the expenses vs capital outlays issue can be. But as Greenspan noted, there is no question that as the economy becomes more idea-based, an accounting system which is accustomed to treating everything but plant and equipment as expenses is almost certainly understating corporate profits. It is critical to understand this issue regardless of the market that you follow. For individual stocks, it is obviously imperative to determine whether expenses and capital outlays are reported correctly. And certainly for the overall stock market, this issue is key to determining value. Greenspan doubts that the understatement of earnings explains all off the increase in equity valuations, but it is possible; even he allows for that. If that's the case, then there isn't asset price inflation, there isn't an impending stock crash, and the Fed need not attempt to rein in a stock market that is in actuality fairly valued. It is possible. And that of course has implications for the bond market. Greg Jones - gjones@briefing.com

To: Sonki who wrote (141160)	9/1/1999 1:47:00 AM
From: Alohal	Read Replies (1) \| Respond to of 176387

Sonki: OTOT I don't have ant experience with dual display on two monitors from a single computer, I'm sure there must be someone on this thread (or perhaps at Dell) who could enlighten us both! The Dimensions I bought were XPS T450's PIII 450MHz, 128MB SDRAM, 13.6GB (7200RPM) HD, 17" Monitor, 16MB 3DFX Voodoo 3000D AGP Graphics card, 6X DVD ROM w/software decoding, 3COM V.90 PCI telephony modem & Harmon Kardon speakers, all for the incredibly low price of $1506 & includes 3 year warranty, 1st year one-site, next business day! I've been very pleased with my Inspiron 3200, which I've had for a little over a year and am looking forward to playing with the 7000 (I went the whole way, with PII 400MHz, 384MB SDRAM, 25GB HD (!) & 6X DVD (all thanks to my Dell investments, so I figured I better give a little back!! <VBG> I will let you know about installing and working with the Diamond set-up. The piece I referred to in my previous post pointed to ease of installation as a big factor in the high rating. Should be here in the next day or two and I'll keep you posted. Aloha Alohal

To: Sonki who wrote (141160)	9/1/1999 11:17:00 AM
From: stock bull	Read Replies (1) \| Respond to of 176387

Sonki, re:<<aloha, i alrady have the 7000, getting ready to order a desktop, but dont know which one to order. i have a quote for dell dimension xps 500MHz pentium III for $2390.>> I suggest that you check with Dell to see if they have any special offers for shareholders. Two months ago I purchased a Dimension XPS T550 with all the bells and whistles for $2221. This included shipping, but I didn't buy the extended service plan. As a shareholder I was given a free modem and DVD-Rom. (If I recall, the DVD was being offered at no charge to all customers that purchased their systems prior to a given cut-off date.) Stock Bull

To: Sonki who wrote (141160)	9/1/1999 11:24:00 AM
From: John Koligman	Read Replies (4) \| Respond to of 176387

Hey Sonki - You are really stuck on the two monitor bit - I remember you were trying to buy a laptop with this feature some months ago <ggg>. Anyway, you can't get a prebuilt dual monitor capable Dimension system from Dell as of today. You would have to buy the system and then add a second PCI video card to drive monitor number 2. A more elegant solution would be to order a system with the new Matrox Millenium G400 AGP video card, which supports two monitors from one slot. Problem is, Dell does not offer the card, and I don't see how you can order a Dimension without a video card. Gateway however, will allow you to order a system without video. You could then buy the Matrox card, install it, and have the two monitor support off one card. The other solution is to order an NT workstation from any vendor, they can be ordered with Appian Jeronimo cards that support 2-4 monitors right out of the box. John PS - You can check out the Matrox card at www.matrox.com. It is a new card just being made available. You can even use a TV instead of a monitor for the second port, and run both at different resolutions...