Comments on: HP says: It’s the economy, stupid…

By: David Harper

David Harper — Sat, 22 Dec 2007 01:05:50 +0000

Agreed amj, but emphasis on ‘loosely translates’ because it’s the excess not over fair value but over all the assets (tangible and intangible) that can be “identified.”

So, the existence of goodwill by itself does not automatically signify overpayment against fair value - rather, goodwill is the “plug variable” (by definition, residual and therefore impossible to measure directly). Problem is, many of the next era companies ought to have lots of goodwill (i.e, less capital intensive).

But i like Michelle’s “look” at this metric for sure, especially % goodwill (of purchase) versus history. On the theory that the company is mostly buying in the same space.

By: amyj

amyj — Fri, 21 Dec 2007 19:22:29 +0000

“Goodwill” loosely translates into the portion of the purchase price of an acquisition that is over and above the target’s “fair market value”. So by extension if a surprisingly large portion of the purchase price is allocated to goodwill, it suggests that the acquiror has past too much for the target.

By: Michelle Leder

Michelle Leder — Thu, 20 Dec 2007 16:33:36 +0000

Ever since the Time Warner/AOL fiasco where something like $100 billion was accounted for as goodwill (and later charged off), I’ve paid attention to what % of the deal is accounted for as goodwill. Even with new rules, goodwill is one of those things that is open to interpretation, so I think it makes sense to pay attention when it starts to increase. Not a huge red flag, but certainly worth paying attention to.

By: David Harper

David Harper — Wed, 19 Dec 2007 23:40:20 +0000

We read so many headlines about subprime and its (pro-cyclical) economic impacts, but it is interesting to see it playing out, in color, all the way over in trenches of tech.

Also, the goodwill metric is interesting: % of purchase that is goodwill. Interesting way to analyze goodwill…

(though cash-flow hedges. I would argue a big company should always be hedging something, and on average, a hedger should be losing money on those hedges. Ergo, I’d argue, a big company on average should be losing a bit of money on its hedges…)

By: Robert Hackett

Robert Hackett — Wed, 19 Dec 2007 21:48:07 +0000

Could someone elaborate on the “Goodwill” portion of the HP filing? Why does an increase in the value of Goodwill affect the number of acquisitions? Is HP basically saying that its Goodwill has increased substantially over the past despite the current distress it’s experiencing financially?