Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: DiViT who wrote (61737)	10/18/2001 10:35:25 PM
From: Dave	Respond to of 74651

As they did last time, they fully disclosed the losses. Well of course they did. They didn't have any choice. I never said or implied that they didn't. What I object to, as I said, is their inclusion of investment gains as part of their net earnings, but exclusion of investment losses. That is significant because it is the net earnings that are used when computing their P/E. That's why I offered the analogy of a casino gambler who loses a pile of money at the slot machines but reports his winnings as earnings while excluding his losses as one-time events that are somehow not germane to his net worth. Permit me to refine the analogy. The gambler earns $100K per year at his day job, and he loses $50K at the casino by winning $200K but losing $150K. Following the lead of Microsoft's accounting department, he says that his net earnings are $300K, but he reports a one-time $150K loss. And this isn't the first time he's reported like this: he did it last quarter too, so you know that the idea that these losses are one-time is a tad disingenuous. Now, in a stretch of the analogy, suppose this guy has incorporated and is publicly traded. When you're considering this guy's net earnings so that you can assign him a P/E ratio, do you consider his earnings as $50K or $300K? Now do you understand? Dave