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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: re3 who wrote (80064)	10/8/1999 11:26:00 AM
From: Bill Harmond	Respond to of 164684

I'm adding. I bought it about the same time time you did.

To: re3 who wrote (80064)	10/10/1999 4:49:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

Internet earnings can be distorted, critics say By Andrea Orr PALO ALTO, Calif., Oct 10 (Reuters) - Internet investors seeking some hard data on the performance of their dot com companies may have a hard time finding it in the earnings reports coming out over the next few weeks. If the current earnings season is anything like recent quarters, most companies will report at least two different earnings figures, along with several measures of traffic to their Web sites. It all amounts to a data overload critics say is at best a lot of material to wade through and at worst a distortion of the bottom line. Internet companies seeking to put their results in the best light will often report a net income or loss, but then put the focus on a different income number, which excludes "unusual charges," and can mean a difference of millions of dollars. Yahoo Inc. <YHOO.O> took this approach last week, when it reported a net third quarter profit of $14.9 million or five cents a share, but highlighted its net income before merger related charges of $40.4 million or 14 cents per share. By all accounts, Yahoo's numbers were stellar no matter how you looked at them, and the practice of separating unusual charges from net income is a standard accounting procedure. Internet companies may be especially justified in isolating unusual items from operating results, because they are young and growing and need to invest aggressively to build a viable business. People often buy Internet stocks on the basis of their future potential rather than current performance. Still, some accounting experts and industry analysts say Internet companies list far to many normal businesses expenses as unusual or extraordinary items. "The word 'extraordinary' gets misused," says Chuck Hill, Director of Research at First Call/Thompson Financial, which tracks company earnings against analyst earnings estimates. "They're throwing everything but the kitchen sink in with the unusual items." adds Hill, who says this liberal accounting often produces an inflated operating income figure. One particular write-off that has been widely criticized is "in-process R&D," a vague term that companies may stretch to include acquisition costs. Already this year the Securities and Exchange Commission has required some big Internet companies like Yahoo and America Online Inc. <AOL.N> to restate earnings because of in-process R&D charges deemed excessive. Companies have always accounted for acquisitions by amortizing the goodwill, or the amount over book value paid. But Internet companies that have high-priced stock to use for currency often make acquisitions at millions over book value, and are left with massive amounts of goodwill to write down, or amortize. Rather than amortizing the amount over 30 or 40 years like it was done in the past, high-tech companies often choose to condense it into a shorter period. This produces a large charge, which they then instruct investors to exclude from operating income. Bob Walberg, an analyst at Briefing.com in Chicago noted in a recent research report for example, that AtHome Corp.'s staggering $7.2 billion acquisition of the Internet portal Excite Inc. earlier this year, means that it will need to deduct $153 million in goodwill every quarter for ten years. To put this in perspective, the combined company ExciteAtHome Corp. <ATHM.O>, had revenues of just over $100 million in the latest quarter. "It is extremely rare for a company to have goodwill deductions in excess of total revenues," wrote Walberg, adding that covering such charges puts exceptional pressure on the company to grow its sales and earnings as fast as it can. Excluding unusual items is not the only way earnings are inflated. Cnet Inc. <CNET.O> was criticized in a recent quarter for failing to exclude a large gain on the sale of securities. The money made in the stock sale took Cnet from a net loss to an operating gain,...