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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: pass pass who wrote (20208)	4/30/2001 2:55:05 AM
From: ELH1006	Respond to of 24042

PP, goodwill is no more than an accounting procedure. Anyone who understands the mechanics, looks at cash flow per share and imputes the relative value after considering growth, product viability and the overall balance sheet. Don't get lost or fooled by the non-cash charges.

To: pass pass who wrote (20208)	4/30/2001 9:38:50 AM
From: Hawk	Respond to of 24042

Monday, April 30A billion here, a billion there...By MATHEW INGRAM Globe and Mail Update You might think that misplacing $40-billion (U.S.) or so would be a difficult thing to do, no matter how big your company is — that's more than the market capitalization of BCE, or the Royal Bank and TD Bank put together, or the national budget of Russia. And yet, fibre-optic equipment maker JDS Uniphase must have managed to lose that much money somehow, right? That's why they're talking about a $40-billion writeoff. It's not quite that simple, unfortunately. Of course it's fortunate for JDS and its shareholders that the company didn't lose $40-billion in actual dollars, but the idea behind the "write off" of $40-billion is a complicated one, involving accounting standards and "book value" and so on — and that can make it difficult for investors to figure out what it means when a company like JDS makes a statement like that. Balance-sheet accounting in general, of course, is so dry that it could put an inanimate object to sleep, and the issues surrounding writeoffs of "goodwill" in corporate takeovers are even more arcane. But it's important for investors to understand what these writeoffs mean — and what they don't mean — because there are going to be more of them. Most will be from technology companies, although it's unlikely that any of them will crack the $40-billion level (AOL Time Warner is carrying about $158-billion in goodwill, but it will write that off gradually over the next 20 years). The reason so many tech companies have these kinds of writeoffs is directly related to the spectacular growth the Nasdaq stock market saw over the past two years, with companies like JDS and Cisco Systems and Nortel tripling and quadrupling their market value — and then using their high-flying stock as currency to acquire other companies. Cisco and Nortel have both spent in excess of $30-billion over the past several years in order to buy various companies with promising fibre-optic technology. Most of the writeoffs that JDS is looking at are related to a few major deals: the $4-billion merger of Canadian-born JDS Fitel with U.S. competitor Uniphase Corp. in 1999 was one; another was the $17.5-billion purchase of E-Tek Dynamics last year; the third was the recent takeover of fibre-optic firm SDL Inc., which was valued at $41-billion when first announced. As the share price of both companies plummeted, so did the value of the deal, and by the time it was concluded it was worth $13.5-billion. At the moment, JDS says that it has $56-billion in "goodwill" on its books as a result of those deals. The reason analysts are talking about $40-billion as a "writeoff" is that the amount of goodwill exceeds JDS Uniphase's current market value by about $40-billion. That means in order to bring its market value into line with the actual "book" value of its assets, the company will have to write off $40-billion or so in goodwill. But despite the huge dollar figure involved, it isn't quite as bad as it sounds. That's because goodwill is a purely theoretical thing, almost an accounting abstraction. JDS never had that $56-billion to begin with, and never really spent it — that figure simply represents the difference between what JDS paid to acquire those assets, and what they are recorded as being worth on the company's balance sheet.