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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Sr K who wrote (147481)	11/16/1999 11:43:00 AM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Sr K Dell had such a write-off [IPRD] in Q3 for the purchase of ConvergeNet Technologies Inc. Without proper accounting for an acquisition, you can bring in the benefits without the related costs (or otherwise let some of the acquisition costs never hit the reported income statements). Amortizing the $194 million for the purchase of ConvergeNet Technologies Inc. over 10 years would have reduced Dell's reported earnings for Q3 to 17 cents. I agree with your point, but I think your arithmetic is faulty. $179 MM amortized over 10 years results in a charge of $4.85 MM per quarter, or $.0019 per share. I suppose one could defend these write-offs by pointing to the fact that R&D is written off as an expense within a company, so when an outside company buys another for its R&D why not simply be consistent and treat it the same as an internally incurred R&D expense? But the fact remains that it is a terrible distortion of the purpose of GAAP accounting. By sweeping acquisition costs under the rug you get to maintain abnormally high earnings and also get to boost your ROIC since the cost of the acquisition is eliminated from the capital base. Pretty neat trick! On the positive side, the SEC is taking a much firmer stand on these write-offs. The case of NETA is quite illuminating in this regard. TTFN, CTC