Forum Archive Index - November 2000

["Warner Lamb" <cloud9@i4free.co.nz>]

Hi guys, well my point of view didn't really just concern RMG, but was
Brians example, more to do with the idea of value in intangibles. After the
recent posts, I see this could go on for awhile, (its harder to explain
ideas in type dont you think) firstly because I just cant get my thoughts
around the logic on goodwill, sorry Brian. I have to totally disagree with
the NTA idea. eg. BCH put up for sale a Database that produces $10 million
in earnings (an asset on goodwill side) and say CAH put up for sale a piece
of machinery that produces $10 million in earnings...from what you are
saying, BCH database has no value because it is intangable (and if
liquidated, buyers would place no value on it) and not a "hard" asset like
machinery/ buildings that become part of NTA. All of the parts of a business
purchase go into the value, its not really important what the assets are
(tangible or intangible), its just how they are placed in the books and as
Peter says are either amortised or depreciated. This idea that goodwill must
be gotten rid of is no different from saying depreciation must be. The most
important thing is what are the returns like. Buffetts idea is that if the
two are producing the same returns but one with less capital employed, then
this is the more valuable company long term because of its ability to grow
value without spending large amounts of capital for replacement or
maintenance. (see previous example) Of course we know, information systems/
software and databases cost money to run too and develop but less when
compared to huge plants, factories etc. I think the lastest word is
"scalable" ;)
NTA is just not relevant to some businesses.

R
Warner

PS Brian, NTA at FFS didnt help us! $1.67 was'nt it






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