Does HP + Palm = Facepalm?

http://www.computerworlduk.com/community/blogs/index.cfm?blogid=14&entryid=2938

by monkeygrinder • 16 years ago

22 9 16 years ago

raganwald• 16 years ago

I am not a financial whiz or even moderately edumicated, so do not buy or sell stock based on what I write here. Clarification sand corrections eagerly solicited!

> I'd be grateful if some financial wizard could explain to me why it has $33 billion of goodwill on its books when Apple, by contrast, has only $480 million

One source of what accountants call goodwill is free spending on companies. When HP buys Palm for $1.2 billion, it will add up all of Palm's cash and assets and put those on its books. If all that adds up to less than B$1.2, the rest is marked as "goodwill."

Later on, HP can decide that they really didn't get B$1.2 out of Palm and adjust the amount of goodwill to reflect overpaying. This is called "writing it down." It's very embarrassing but it's also prudent, as having too much goodwill on your books makes you look like a financial pufferfish. A writedown trades one-time embarrassment for long-term attractiveness.

B$33 is a lot, it probably reflects HP having done a lot of M&A while not writing the goodwill down.

JshWright• 16 years ago

Ordinarily I wouldn't, but since you eagerly solicited...

s/Clarification sand corrections/Clarifications and corrections/

adriand• 16 years ago

Off-topic, but wow, that site is a promo for AdBlock if there ever was one. I wonder how frequently authors of cogent, well-written content (like this article) feel frustrated that they have to

[!!!!!!!ADVERTISEMENT!!!!!!!]

compete for their readers' attention with scads of distracting ads, some of which are placed smack-dab in the middle of their content.

mambodog• 16 years ago

Not often, I'd say, as those ads are where their paycheck comes from.

jimmyrcom• 16 years ago

No facebook + palm = facepalm

C4vem4n• 16 years ago

/facepalm

tkiley• 16 years ago

I stopped reading when I got to the part where the author expressed an apathetic ignorance about the concept of "goodwill". If the author can't be arsed to research an article, I can't be bothered to read it.

That said, the article did motivate me to do 10 minutes of research into United States GAAP and conclude that the $33 billion is probably a result of the Compaq merger.

Edit:

The Inquirer says HP valued the goodwill from the Compaq acquisition at $14.5 billion: http://www.theinquirer.net/inquirer/news/1019181/when-hp-bou...

That leaves another $18.5 billion that is probably explained by this list: http://en.wikipedia.org/wiki/List_of_acquisitions_by_Hewlett...

xtho• 16 years ago

It's somehow interesting that their previous acquisition was 3com. It's as if Palm returned to a previous home but in a different city.

jsz0• 16 years ago

The Android handset market seems to heavily saturated at this point. I think HP was probably wise to go in a different direction and do something unique with potential for a bigger splash in the market than just another Android handset with an HP logo on it would.

Does HP + Palm = Facepalm?

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