NASDAQ 100 Companies Report Combined Losses Of Over $82 Billion To The SEC While Reporting Profits Of $19 Billion To Shareholders

Compares the GAAP losses of the NASDAQ 100 companies with pro forma profits.

Press Release -- January 30, 2002

Top Four NASDAQ Companies Report Pro Forma Earnings That Equal Five Times GAAP Earnings

For the first three quarters of 2001, four of the of the five largest (by market capitalization) companies on the NASDAQ reported combined headline pro forma earnings of $11.5 billion while reporting real GAAP earnings to the SEC of $2.4 billion.

The four companies, Cisco Systems (CSCO), Dell Computer (DELL), Intel (INTC), and Microsoft (MSFT) had a combined market capitalization on January 5, 2002 of $841 billion. Thus, extrapolating for a full years GAAP earnings, they were selling at an average of 260 times real GAAP earnings (not a typo-two hundred and sixty).

Of course, on a pro forma basis (What outgoing SEC economist Lynne Turner calls EBS earnings or Earnings before the Bad Stuff") their group PE appears as less (55 times earnings).

The other company of the big five, Oracle has reported headline earnings essentially in line with GAAP earnings. Its interesting that Oracle, which has chosen not to embellish real earnings with a series of positive pro forma adjustments, sells for a mere 33 times real earnings (compared to a 260 PE for the other four).

260 Price Earnings vs. 33 Price Earnings. Apparently, pro forma reporting has a significant beneficial effect on PEs on real earnings.

These findings of a recent research study were released today by SmartStockInvestor.com, LLC. The complete report of the study is available at http://www.smartstockinvestor.com/commentary.html

In his State of the Union address, President Bush has promised to hold corporations to the highest of accounting standards. It will be interesting to see what kind of effect this has on pro forma earnings reporting, and whether companies will still be allowed to send out headline results from the fiction section of the earnings library.

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