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Strategies & Market Trends : Pancho Villa's Short Analysis File -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (143)	11/25/1998 9:09:00 AM
From: Bob Trocchi	Read Replies (1) \| Respond to of 287

Pancho Today on Briefing.com I found the write up shown below and while I am not interested in Intuit, (maybe I should be after reading this) I thought the analysis they made about how they do their accounting is very interesting. It sure caught my eye. I do not understand the details of financial reporting however, this seems like if it is not “cooking” the books, then it is at least “warming” them up. I would be interested in your comments. Bob T. INTUIT (INTU) 59 7/8 -4 1/4. After the close Tuesday, software and Internet information company Intuit (INTU) reported a fiscal first quarter loss of $0.45 per share on a pro-forma basis. That compares to analyst estimates of a loss of $0.46 to $0.47 per share, so for argument's sake, let's call it "better than expected." Using Generally Accepted Accounting Principles (GAAP), however, which is the way normal companies report profits, INTU lost $0.83 per share. The difference between pro-forma and GAAP is that the amortization of goodwill and purchased intangibles is excluded in calculating the pro-forma numbers, simply because these charges did not exist last year. INTU has apparently caught on to the Internet reporting game. Internet companies have started emphasizing pro-forma numbers because their amortization costs are so high. This results from buying companies that have little book value, leading to goodwill that is then amortized as a cost over a period of time. Whenever a company such as Merck, McGraw-Hill, GE, or just about anyone else buys a company, the amortization shows up in operating earnings just as GAAP says it should. INTU and other Internet companies prefer to separate them out. OK, enough on that, INTU beat estimates by 1 or 2 cents. But operating profits were -$0.83 a share. Not a pretty sight. Revenues rose 16.7%. Not bad, but if they want Internet-type multiples, they have to do better than that. INTU has lost money each of the four prior fiscal years, and is now in a deep hole to start off this year. Granted, they usually lose money this quarter, but last year they lost only $0.26 per share. The revenue gain is actually better than in recent quarters, and revenue was flat in fiscal 1998 (ended July) compared to fiscal 1997. The stock market has pushed INTU stock up from 40 the past couple of months, in part because of a belief that INTU will benefit from an increased Internet presence. However, the press release downplays the importance of that side of the business and says "While the Internet presents many opportunities, Internet commerce revenue for fiscal 1998 was less than 10% of overall revenue. We remind investors that potential Internet-related revenue and profits may be difficult to predict or achieve and may be impacted by many factors including seasonal trends." Intuit's base business is not that exciting right now, and the stock has improved on Internet prospects which are hard to define. INTU is not a direct Internet play and traders looking for that opportunity might want to look elsewhere.