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To: Road Walker who wrote (17479)	11/2/2000 9:58:46 PM
From: Charles R	Respond to of 275872

John, <I'm not sure which accounting firm audits Intel's books, but if you are right on that, they have a problem.> Accounting rules do not even require that Intel break this down at a divisional level so I am not sure if these guys even care how Intel lumps expenses into different buckets. <Why is it, I own both AMD and Intel, and I take both companies at their word. Each company is just a bunch of folks trying to make a living. You guys want to write a sinister plot into everything that Intel does, even when they LOSE MONEY.> John, this is nothing Intel specific. Almost anyone in Intel's position would probably do the same. One charecteristic of a leader is to not show any signs of weakness. That's how the business works. There is nothing sinister about what Intel is doing. Just that careful investors should watch for these things. And I hope that by saying "you guys" you do not lump everyone into the same bucket. I call it as I see it. When I thought AMD stuffed the channel a little for Q3, I called it. When I thought inventories went up in Q2 and were somewhat hidden I called it. That kind of diligence is to me is what an investors should look at. Investors should never take "companies at their word" as you say you do. In this industry it is not about "nice guys", it is more about "seasoned guys" - these execs are highly competitive and will stretch truth to look more competitive than they are. Anything that is legal is fine. <Give me a break. I'm done trying to have a reasonable discussion on this thread.> We have too few people with alternate view points on this thread. I hope you continue to contribute. Chuck

To: Road Walker who wrote (17479)	11/2/2000 9:59:37 PM
From: THE WATSONYOUTH	Read Replies (1) \| Respond to of 275872

Give me a break. I'm done trying to have a reasonable discussion on this thread. What?? This has been the most reasonable discussion on this subject I've seen to date. It is clear that the non IABG numbers don't add up and something else is involved. If I recall correctly, when this topic was brought up on the Intel thread (where it should be a hotly debated subject) I was told to sell my shares if I didn't like how Intel reported things. I don't see how the discussion over here is anything sinister. It is just reasonable speculation based on the little amount of factual information available. Intel could clear this whole thing up in a minute. But, they refuse to do so........ How does that make you feel about your risk??? THE WATSONYOUTH

To: Road Walker who wrote (17479)	11/3/2000 12:23:12 AM
From: Goutam	Read Replies (3) \| Respond to of 275872

John, re: < I'm not sure which accounting firm audits Intel's books, but if you are right on that, they have a problem. > Petz was referring to Intel's reporting of its operating segments' revenues. It doesn't have to go through same auditing as the quarterly earnings reports. Intel can control/report the operating segments information in any way it deems appropriate. In Q4 annual report, Intel applied new accounting rules related to certain item to inflate IAG growth. IMHO, this was done to hide AMD competition factor. I posted on this board some numbers compiled from Intel's Q3 & Q2 earnings reports. Here is the same info, which I have modified to make it more easier to understand - _______________________________________________________________ Did Intel create a perception of higher IAG revenues, and profits using new accounting rules? - Q3'00 - Q2'00 In Q3, Intel changed Operating Segment revenues & profits accounting rules. - They applied changes in profits, and revenues from the "Distributor charges" to the "IAG" operating segment. - Prior to Q3, they added these changes to the "All other" operating segment. Net effect of the Operating Segments new accounting rules: - Considerable amount of IAG revenues shifted from Q2'00 to Q3'00. - Allowed Intel to use the same revenues twice, to bolster Q2 & Q3 IAG numbers in its Q2 & Q3 individual earnings reports. How much of IAG revenues & profits shifted from Q2 to Q3? - $183 Millions in Revenues. - $373 Millions in operating profits. - Q2 IAG sequential profit growth turns negative if one adjusts Q2 IAG numbers to reflect this shift of revenues from Q2 to Q3 !!!! What if Intel had restated its Q2 IAG numbers with new accounting rules? o investor community would have seen that - 5.63% IAG sequential growth shown in Q2 earnings report gone down to about a measly 1.64%. - 6.21% IAG sequential profits growth shown in Q2 earnings report gone down to -2.5% (negative 2.5% !!!.) Did Intel disclose the effect of this shift of Q2 revenues & profits to Q3 on Q2 IAG sequential growth & profit numbers? - In Q3 earnings report - no, if I'm not mistaken, the company didn't make any direct attempt to inform the investment community that a considerable portion (about 50%) of the good IAG numbers shown in Q3 earnings report were due to the cannibalization of IAG numbers it showed in Q2 earnings report. - In Q2 earnings report, they did provide information about the impending change in the operating segment reporting change in text. To see the effect of Intel's new accounting on IAG numbers, we have to look at IAG growth during the previous two quarters - Q2 & Q3 (or Q3 <-- Q1). This eliminate double use of same revenues as Intel did in its Q2 & Q3 individual earnings reports. What I observed was that the actual IAG revenues & profits growth during the previous two quarters (Q3 <-- Q1) by doing apples to apples comparison were only 40% - 50% of the cumulative growth that can be perceived from the Intel's Q2 & Q3 individual earnings reports. Some thing doesn't seem right here. Hope I didn't make any mistakes compiling all this stuff from different earnings reports. Check out the table provided below to understand what I'm trying to explain here: - Numbers shown in columns 1 & 2 are operating segments' numbers directly taken from the Intel's Q2, and Q3 individual earnings reports. - Column 3 contains Q2 & Q1 numbers taken from column 2, but were adjusted to reflect Intel's new accounting rules for operating segments' revenues & profits. If you check the "perception", and the "Actual (all adjstd to new actng)" rows, you will notice the net impact of the new accounting was to create a better perception of IAG revenues, and profit growth than actually were. Please note Q1 adjusted numbers shown are very close approximations based on the information provided by Intel in its Q2 & Q3 earnings reports. Intel Operating Segment Information =================================== (Numbers shown in Millions of Dollars) See Note1 \| See Note2 \| See Note3 \| \| \| \|o Q1 numbers -Derived from \| \| the info contained in the Numbers from \| Numbers from \| Q2'00 Earnings Report Q3'00 Earnings \| Q2'00 Earnings \| Report (New actng) \| Report (old actng)\|o Q2 numbers from the Q3'00 \| \| Erngs Report (new actng) ------------------------------\|-------------------\|------------------------ Q3'00 Q2'00 \| Q2'00 Q1'00 \| Q2'00 Q1'00 IAG: \| \| === \| \| Revenues $7,038 $6,759 \| $6,952 $6,581 \| $6,759 $6,650 \| \| Growth % Q3<--- 4.13% <--Q2 \| Q2<-- 5.63% <--Q1 \| Q2<--- 1.64% <---Q1 \| \| Perception (see Note4) Q3<---- 9.99% <-------Q1 \| \| Actual (mixed actng) Q3<---- 6.94% <-------Q1 \| \| Actual (all adjstd to) Q3<---- 5.83% <-----------------------------Q1 (new accounting) \| \| \| \| Op Profit $3,457 $3,084 \| $3,257 $3,010 \| $3,084 $3,131 \| \| Growth % Q3<-- 12.09% <--Q2 \| Q2<-- 6.21% <--Q1 \| Q2<--- (2.5%)<---Q1 \| \| Perception (see Note4) Q3<--- 19.05% <-------Q1 \| \| Actual (mixed actng) Q3<--- 14.85% <-------Q1 \| \| Actual (all adjstd to) Q3<--- 10.41% <-----------------------------Q1 (new acntg ) \| \| ------------------------------\|-------------------\|-------------------- All Other: \| \| ========= \| \| Revenues $1,693 $1,541 \| $1,348 $1,412 \| $1,541 $1,340 Op Profit ($600) ($676) \| ($849) ($456) \| ($676) ($384) Note: ER -> Earnings Report Note1: As of Q3'00, Intel changed its accounting rules in reporting the profits, and revenues related to changes in the "Distributor reserves:. This was what stated in the Intel's Q3'00 earnings report - o__ As of the third quarter of 2000, the revenue and operating profit related to changes in the distributor reserves have been allocated to the operating segments .... Information for prior periods has been restated to conform to the new presentation. __o Numbers shown in this column are directly taken from the Intel's Q3'00 ER. Note2: Numbers taken from the Intel's Q2'00 ER. These were based on Intel's old accounting rules, where the profits, and revenues related to changes in the "Distributor reserves" were applied to the "All Others". Note3: Q2'00 numbers were the Intel restated Q2 numbers from the Q3'00 ER. Q1'00 numbers were adjusted to new accounting rules by applying the textual information provided in the Q2 ER. Note4: Cumulative growth was calculated based on Q3, and Q2 individual growths shown by Intel in the Q3, and Q2 ERs ( cumulative growth = ((1+Q2 seq Growth) * Q3 seq growth ) + Q2 seq growth.) This number represents the growth that one would perceive that had occurred just by looking at the Q3, and Q2 individual ERs, without going through the mumbo jumbo of changes in Intel's reporting. _____________________________________________________________________ goutama

To: Road Walker who wrote (17479)	11/3/2000 4:14:06 AM
From: Petz	Read Replies (1) \| Respond to of 275872

John, re:<You guys want to write a sinister plot into everything that Intel does> Each earnings release contains the following phrase, "In addition, "all other" includes certain corporate-level operating expenses (primarily the amount by which profit-dependent bonus expenses differ from a targeted level recorded by the segments) not allocated to operating segments." The part non-bolded in the parenteses seems to have something to do with Intel's profit-sharing program. Now if 75-80% of the corporation is the IAG group, why do they assign these "corporate expenses" to the small "other" group when 75-80% of the corporate expenses belong in IAG? I have no clue, I merely pointed out in my first post that 1)You should not worry that the "other" groups are really losing money as much as they seem to be AND 2)The above accounting practice will make profit margins in the IAG group go UP and profit margins in the "other" group go DOWN. The above two points are indisputable. My own guess as to why Intel does this is that they want to be able to smooth out variations in the profit margin of the IAG group because that is what the street wants to hear. The phrase in parentheses makes it appear that the amount of the transfered expenses has something to do with "profit targets" in each of the divisions. It seems to me that Intel can change the profit targets whenever they please, so that, effectively, they can shift an arbitrary amount of expenses each quarter from the IAG group into the "all other" category. Since 50% of the "other" group is flash and networking products, and these are both highly profitable, the accounting transfer of some "corporate" expenses to "other" must be very substantial. As I said, I am not picking a fight with you or Intel, I really started this to ease your mind that Intel is wasting money in the "other" division. If I were an Intel shareholder, I would want to know if "all other" is really unprofitable, or it just appears to be because of the transfer of some corporate expenses to it. Petz