Tech Stock Valuation

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GOODWILL WRITE-OFF

DECISIONS: DO THEY MATTER?

Many tech stocks possess enormous market capitalizations reflective of their sig-

nificant future earnings power. At the same time, many of these tech stock giants

control relatively little in the way of tangible plant and equipment. Many such

firms count hard-to-measure goodwill assets among their most prized posses-

sions. Tech stock giants Microsoft Corp., Intel Corp., and Cisco Systems, Inc. all

feature balance sheets where goodwill assets play a prominent role.

For example, in mid-2002, accounting goodwill accounted for more than

$4.3 billion or 9.9% of Microsoft’s total assets. At that time, goodwill ...