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Technology Stocks : Wind River going up, up, up! -- Ignore unavailable to you. Want to Upgrade?

To: carolyn walder who wrote (2737)	2/5/1998 12:59:00 AM
From: Michael Real	Read Replies (1) \| Respond to of 10309

Carolyn, I'd like to take a stab at your questions. Although I am not verse on the latest FASB/SEC opinions on amortization of acquisitions of technology or technology companies, I believe WIND has the option to amortize the entire purchase immediately versus over a period of quarters or years. According to GAAP, acquisitions are usually amortized over its useful life not to exceed 40 years. The term "useful" life is a gray area. It could be argued that the useful life of a technology is nil--especially when it has not been proven when combined with WIND's technology. The two previously announced acquisitions will be non-cash charges to earnings. In other words, they represent an immediate write-off of the goodwill (~technology) acquired. Therefore, the cash earnings of the business for Q4 will remain unchanged except for merger related cash expenses. I believe the analysts and the street will focus on the operating earnings growth instead of the bottom line. However, it should be noted that there may not be a tax break from this charge, as some goodwill is not tax deductible. Further analysis will eliminate this "noise" from the reported EPS. As far as the reasoning behind the statements made by Ableman when the convertible bond was issued, I believe the company wanted to leave options open to them as to end use of these funds. Further, the company issued the debentures when they felt the market would bear it. Given recent changes in the market, I would imagine that a debt issue at this time would not be as well received. I hope this does not leave you with more questions. Mike