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Technology Stocks : WCOM -- Ignore unavailable to you. Want to Upgrade?

To: Rob S. who wrote (9027)	2/4/2002 3:06:38 PM
From: Oeconomicus	Read Replies (2) \| Respond to of 11568

Of course bailing Bernie out is an accounting and management issue... I didn't say it wasn't an issue. In fact, I said it was the only issue. But it is NOT an accounting issue. As for acquisitions, intangibles, etc., of course they grew through acquisitions. That was part of the plan all along - create a communications giant, building or buying the pieces depending on the opportunities that arise. They spent billions building, partly funded with debt, and they spent billions in WCOM stock buying. First, I have no issue with the use of debt to fund expansion, as long as the expansion makes business sense and the debt can be serviced from operations. With around $24-25 billion of debt and around $8 billion of EBITDA in a weak business environment, for a 3:1 debt/EBITDA ratio, the level of debt at WCOM is quite manageable. Second, the amount of intangibles on their books, about $41 billion at 9/30, is a creature of SEC and FASB accounting rules that, IMO, never made sense when they required the use of purchase accounting in stock-for-stock acquisitions. But regardless of whether the rules make sense, they are the rules and WCOM followed them. And regardless of how inflated an acquisitive company's balance sheet may become, smart investors know to look beyond those creatures of accounting rules into the underlying economics of the business - cash generating capacity and capital requirements. Whether the intangibles sit there forever or get written off tomorrow, nothing will change about the underlying economics of the business as a result.