From: Harvey Newstrom (mail@HarveyNewstrom.com)
Date: Sat Jun 29 2002 - 13:44:29 MDT
On Saturday, June 29, 2002, at 01:43 pm, Max More wrote:
>> Apparently, they reserved profits in good years off the books to add
>> in later during lean years to make themselves always look profitable.
>
> If Microsoft were in trouble for this, many other companies will be. It
> seems to have been a very common practice.
That's what makes me question the Internet boom now. IBM likewise used
accounting changes to increase profits in the early 1990's. Whatever
they did is now over, and their profits are back to normal. With no
change in their revenue stream, they appeared to recover, get a lot more
business, and then bust about 10 years later. It was all an accounting
trick, with no real change in business levels. I wonder if a lot of
Internet boom was like this, where the numbers inflated, and the
accounting looked good, but nothing really changed in the real world.
The other thing that bothers me about the telecomm accounting scandals,
such as WorldCom, is that we have been using these numbers to estimate
the growth of the Internet. If a lot of their customers, revenue, and
capital investments in the Internet were overstated, our estimates of
how fast the Internet has grown might be similarly overstated.
-- Harvey Newstrom, CISSP <www.HarveyNewstrom.com> Principal Security Consultant <www.Newstaff.com>
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