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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: StockHawk who wrote (24882)	5/17/2000 4:19:00 AM
From: Seeker of Truth	Read Replies (1) \| Respond to of 54805

Except for the fact that Barron's wants to sell their magazine it's difficult for me to understand what all the excitement is about. Say a company buys another one for 100 million in stock or cash or a mixture. The acquired company has hard assets, i.e. equipment and hard cash worth ten million. So under one accounting rule the acquiring company just "lost" 90 million, even though it acquired knowhow, people, patents etc which are all assets of invisible value. Under another accounting rule they didn't lose anything. In any case the company will always give you two figures for the earnings, one in which the good will is a loss and the other in which it isn't. Look at a stock like Veritas. In the paper world you'll see horrendous "losses". In the real world the company is making money as well as big acquisitions. Stock analysts who are not insane will never consider that the company just "lost" 90 million. Whether they got 100 million in value for the 100 million expense is a different question. They may have received 200 million in value, or 50 million. Also about the stock options matter. If a tech company had to pay its employees the value of their stock options in hard cash instead of giving them the options they would be losing money. That's true of almost all of them. But fast growth gets a reward from the marketplace. Anytime the stock market temporarily stops rewarding fast growth (such as lately) it affects essentially all of the fast growth companies. The people at CSCO will be making less real income at the same time as the people at ORCL or QCOM are experiencing the same. None of these companies will start handing out more cash to their employees just because the stock options are not increasing in value. The companies are accused of being profitless by various jealous or simply confused bystanders who are holding onto stocks of companies which are not growing rapidly.