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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (7990)	2/19/2002 8:27:54 AM
From: Frank Pembleton	Read Replies (1) \| Respond to of 36161

Bargain binge Wall Street analysts are rushing to the defense of stocks accused of accounting shenanigans -- and some of you are actually listening. NEW YORK (CNN/Money) - Accounting problems? No problem! That was the widespread attitude last week as analysts rushed to defend stocks hit by accounting worries. And investors were listening, jumping in to snatch up shares at what they saw as bargain prices. As I wrote last week, Verisign and Qualcomm both staged impressive comebacks after being flagged for questionable accounting (see more). But the strangest story had to be the recovery of Take-Two Interactive, which opened for trading Friday for the first time since late January when the company announced it was delaying fourth-quarter results while it went over its books again. Stock in the video game maker, best known for the game "Grand Theft Auto 3" (ponder the irony), plunged nearly 20 percent in early trading Friday, but finished the day down only 2 percent. Pretty good, considering that while the stock was halted the company announced that the SEC was conducting a formal investigation of its books, that its CFO had left the company -- and that it was restating the past seven -- SEVEN! -- quarters' worth of results. On Friday, the company said it wanted to "extend our most sincere apologies to our shareholders for any inconvenience they have been caused due to the halt in trading of our common stock." That and a clean bill of health from PricewaterhouseCoopers was apparently enough for analyst Michael Pachter of Wedbush Morgan Securities, who assured investors the stock was a steal. "It's an awesome stock," Reuters quoted him as saying. "Buy it." We're not out of the woods yet Perky analysts weren't quite as successful in allaying concerns raised about Nvidia and IBM. Nvidia slid some 8 percent after it announced the SEC was investigating its accounting. (See more on Nvidia.) IBM, meanwhile, dropped nearly 5 percent after a New York Times article reported that the company had pumped up its fourth-quarter earnings with a one-time gain from the sale of a unit to JDS Uniphase. (See more on IBM.) Analysts rushed to defend both stocks. Morgan Stanley analyst Mark Edelstone declared that "the accounting questions facing NVDA are relatively benign;" analysts at Thomas Weisel and Credit Suisse First Boston opined that the drop in the stock's price gave true believers a wonderful buying opportunity. Steven Milunovich of Merrill Lynch, meanwhile, suggested that IBM's accounting for the transaction was reasonable, since much of the unit's value could be considered intellectual property. He may have a point, but it's a judgement call, and even Milunovich notes that IBM could have been better in its disclosure. IBM has long faced questions about the quality of its earnings -- and its seemingly miraculous ability to make earnings grow several times faster than revenue. As Bethany McLean notes in an excellent dissection of the issue in Fortune, IBM's revenues have grown only about 5 percent annually since 1994 -- while earnings per share have grown nearly 20 percent a year, pumped up by stock buybacks (which reduce the numbers of shares, thus increasing earnings per share) and by returns from the company's over-funded pension plan. Much about IBM's accounting remains murky. But that has hardly dimmed the ardor of its fans. All proof that, as the band Half Japanese once put it: "Miracles happen, every day." money.cnn.com