I cannot imagine this stock closing any lower than $40. This has been a support level on three separate occasions dating back to '96. On an intraday basis, violation of 37 would be a serious, serious source of concern for those who are long with a short term view. It would suggest that previous support is not going to hold and that the next area of support of mention is in the mid 20's.
The manner in which BSX handled the NIR on Sox situation does not give one confidence that they will handle "accounting irregularities" any better. However, if they have watched the market lately and learned anything from the CD situation they will take their time, do a total assessment and then dump all the garbage out at one time. As a previous poster implied, accounting problems are like cockroaches. The presence of one implies there are more. Rightly or wrongly this is how the Street seems to view these things.
BSX is a very aggressive company that has done very well. I have a question for the board. In the past many analyst have stated that the accounting cards at this firm have been very aggressive and could indicate potential problems. The analyst were in no way indicating what has just happened in Japan. But they stated that the use of writeoffs for R&D and goodwill from companies they have aquired has been very aggressive. It is in no way illegal but pushes the envelope.
I am not trying to jump on BSX's back when things are down but trying to evaluate possible puchases of the stock. Can anyone who maybe aquainted with this company comment?
I am not as familiar with BSX as I should be (I hold a small investment) but I am familiar with accounting issues.
Many high tech and high growth firms have been questioned for "aggressive" accounting issues. The issues you raise are NOT specific to BSX. The SEC is currently looking at changing guideliness (possibly/probably in 1999) relative to goodwill and R&D. This affects many companies including Cisco, etc., not just BSX
Some of the issues...R&D internally generated is required to be expensed as incurred (SFAS #2). When a high tech company is purchased, the purchase price includes the value of the intangible asset generated by R&D at the acquired company. That intangible, as well as other intangibles such as reputation, location, brand recognition, etc. are all included in goodwill, which is operationally defined as the excess of purchase price over the fair market value of the IDENTIFIABLE net assets (goodwill is not separately identifiable, so once everything possible has been identified, goodwill is what is left).
So, companies buy Goodwill, which includes the future benefit of R&D, which if internally generated would have been written off. They come up with a valuation for future R&D benefits (Arthur Andersen/Andersen Consulting has a group that specializes in this, for instance) and write it off to maintain comparability with fimrs that have generated internal goodwill. This is also more consistent with international practice on goodwill (for example, in Britain, Goodwill is immediately written off against stockholders' equity and never hits the income statment at all. Some countries leave goodwill on the balance sheet indefinitely and never amortize it to expense, again keeping it off the income statement).
There are some that feel the current practice (again, practiced by most,not just BSX) is too aggressive. Others feel that to be comparable with other companies it is very appropriate, and if you are going to be competitive in the global economy, even more important. There is some feeling that US firms have been at a competitive disadvantage with British firms in the merger and acquisitions arena because of the differences in rules. And if affects not just the current year..it affects as many future years as it takes to write off Goodwill...up to 40 in the US, although most would write it off in 5. It distorts return on assets as well. I personally strongly disagree with the SEC on this one (I am an accounting professor at a major state university, and I specialize in financial accounting and international accounting). Accounting for intangibles is the most important (IMHO) issue facing the accounting profession today, and there are no really good answers that give us a "fair presentation" of the financial statements of ABC Company as long as we use historical cost and require some firms to write off intangibles as teh expenses are incurred and require others, who have been involved in merger and acquisition activity, to value those same assets as fair market value as defined by the merger price.