Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Diamond Jim who wrote (90303)	10/14/1999 12:22:00 PM
From: AurumRabosa	Read Replies (1) \| Respond to of 186894

For Shame, Intel Reports Funny Earnings by David Pauly New York, Oct. 13 (Bloomberg) -- Intel Corp., of all people, is fudging its numbers. Apparently unable to bear the public shame of reporting that its profit dropped 6.5% in the third quarter, the world's biggest maker of microprocessors yesterday resorted to the new funny earnings game that inflates profits by trying to ignore the cost of acquisitions. For shame. Intel has been a model corporation whose stock was looked on as a market leader. This has been a company that won the world's admiration by doubling the power of its microprocessors every 18 to 24 months and bringing prices down at the same time. Intel Chairman Andrew Grove has played the role of semiconductor industry statesman. Emphasis on the "has" may be appropriate. Here's the truth about Intel's third quarter, according to generally accepted accounting principles. Profit dropped to $1.5 billion, or 42 cents a share, from $1.6 billion, or 44 cents a share, in the same 1998 period. Computer chip prices fell faster than Intel had figured in the quarter while the cost of new manufacturing facilities was rising. Here's what passes for truth at Intel. The Santa Clara, California, company led off its press release saying that profit, excluding acquisition costs, rose 21% to $1.9 billion, or 55 cents a share. This is the new kind of earnings reporting you expect from fly-by-Net companies. But not Intel. What Costs? To make its earnings look better than they were, Intel ignored $454 million in costs from acquiring Level One Communications Inc., which makes computer network gear, and three other companies. We should have known this was coming: analysts had been estimating Intel profit for the quarter excluding these charges. The costs Intel excluded were a one-time charge of $333 million for research at the acquired companies now considered useless and $121 million for the amortization of goodwill and "other acquisition-related intangibles." Goodwill is the amount paid for a company in excess of its net worth. It represents a true cost, either in cash or in shares issued. Good accounting always has required that goodwill be written off over a period of years by the acquiring company. Unfortunately for companies, these charges can lower earnings -- or even wipe them out -- for years. Worried about anything that would knock down stock prices from their historically high levels, companies have started to report earnings excluding goodwill and other merger charges. Wall Street analysts have gone along and now make earnings estimates for many companies using the funny numbers. Opening the Gates Unfortunately for investors, the folks on guard, the Financial Accounting Standards Board, might at the beginning of 2001 allow companies to emphasize the funny earnings in their reports to the Securities and Exchange Commission, the stock market regulator. Intel has adopted the loose accounting even before it can be sanctioned. It said yesterday that all reports from now on would exclude the research and goodwill writeoffs. It wasn't as though Intel's profit had never declined before. The semiconductor products company reported lower earnings for three straight quarters starting with the fourth quarter of 1997. A truly class company would have fessed up yesterday just as it did after those three quarters. Intel shares fell 4 9/16 to 72 1/8 today. But investors weren't punishing Intel for its inflated numbers. The stock fell because earnings didn't match the funny earnings estimates of analysts. Many investors are accepting the numbers companies and analysts feed them. But who ever expected Intel to go along with the crowd? quote.bloomberg.com