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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (70445)	11/12/1999 4:28:00 PM
From: Earlie	Read Replies (1) \| Respond to of 132070

MB: A topic close to my heart. Just to add to the explanation; Darling Co. Ltd. has been growing for quarters and the market loves it. But now the growth is slowing,...what to do? No matter what, make sure you give Wall St some form of growth, so go out there and "buy revenues", i.e., buy some other company. Additional benefit,... Darling Co's. stock price is in the stratosphere, and is an acceptable deal-making currency. Now for the fun. Not only will next quarter's revenue line be enhanced ("revs up 22% year-over-year"), but the bottom line will be enhanced even more, because of the writedowns that are taken. Example: inventory items that cost the purchased company say $100 to manufacture, and that are saleable at say $105, enter Darling Co's books at a VERY reduced value, consequently when these items are sold, the margins are massive. The same thing holds true with respect to the writing down of plant, R&D, etc, as then the cost of amortization is dramatically reduced, hence profits are falsely enhanced. It's a wonderful scam which reflects the wisdom of a quote of a good friend, to wit: "If the market wants to buy blue suits, turn on a blue light". (g) Best, Earlie

To: Knighty Tin who wrote (70445)	11/13/1999 8:34:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Mike, >>So, my point is, there must be some way to record these costs without either over penalizing or over boosting eps. The cos. have chosen the latter, but they are not indicative of what is happening at these firms.<< I'm still not clear on what I think is appropriate when it comes to R&D and software expenditures. I'm not sure I even understand all the rules completely. Right now companies expense R&D, so if you buy R&D in progress, why not expense that too to be consistent? On the other hand, a lot of R&D and software expenditures really are a form of investment (albeit one with a less certain outcome than most tangible investments) so shouldn't they be capitalized, recorded as assets, and depreciated. By the way, I think it's possible that software assets may explain at least a small part of why stocks in general are trading so far above book value. Every large corporation has in house programmers like myself that are building business specific tools that contribute to profits (cost savings). I believe all of it is expensed because these assets are not for sale and probably couldn't be sold even if you tried. In the grand scheme of things I'm not sure how much that accounts for though. Wayne