Semi-off topic: Wow, it's a good thing they still have Bugs and Daffy

[J Lee]

From the wonderful world of business: This report (http://dailynews.yahoo.com/h/nm/20020107/wr/media_aol_charge_dc_1.html) was posted today that AOL Time Warner will take a $40 to $60 billion writeoff on goodwill because the value of its stock was severely overvalued when the two companies merged at the height of the dot-com boom two years ago.

"Goodwill" is one of those insubstantial things that companies are able to add to their books as assets, based on the assumed love of a specific product the company owns or makes by the general public. In this case, AOL is taking an incredibly large writeoff because it turns out people don't "love" the Internet the way stock prices at the start of 2000 indicated they do. In contrast (and getting back to topic), Warner Bros has earned an incredible amount of brand-name goodwill over the past 60 years due to the success of Bugs, Daffy and the other WB cartoon characters -- no major writeoff likely here, despite Cartoon Network's increasing love of their "Cartoon Cartoon" programs (which I personally hope is their own version of the overinflated dot-com boom and will come crashing down to Earth when the next cable ratings book comes out).

[Matthew Hunter]

I...don't understand eexactly. If you write something off for "goodwill", what happens to it?
-Matthew

[J Lee]

Basically, by writing off "goodwill" you decrease the perceived net value of your company, which carried an inflated value in the first place because the estimation of "goodwill" was inaccurate, which is why the idea of "goodwill" itself can be dangerous if it's used unwisely.

In terms of Bugs and Daffy, would someone chose to go see Warner's "Harry Potter" over "Lord of the Rings" because of the studio's array of cartoon characters? Unlikely, but does the general public feel a little more warmly towards Warner Bros. itself because of the characters, compaired to, say, Columbia Pictures or Universal? Probably, which is where you can have you accountants increase your corporate value due to "goodwill" because somewhere down the line you may buy a Warner Bros. product because of that.

But did people who use the internet get all warm and fuzzy about America Online to the tune of $40 to $60 billion over the past decade? Considering all the negative comments I hear about AOL, I wouldn't have allowed 40-60 dollars into goodwill if I were the company's auditors (though I use it because their access numbers around the country make it far easier to connect via local numbers from out-of-town locations and avoid those sky-high long distance phone call fees from hotels), and from a reality standpoint, knocking $40-$60 billion off the books could make AOL Time-Warner a possible future takeover target, while also possibly putting a bit of a bite into Ted Turner, Steve Case and Gerald Levin's net worth depending on what Wall Street thinks about the move.

[Sogturtle]

John~

In theory it could even signal the beginning of Warners becoming the dominant part of the company (bad news for Steve Case). COULD be very similar to what happened after Kinney took over years ago, ended up getting rid of the traditional Kinney assets!!

There are VERY few other companies alive(?) that could swallow "the conglomerate" though... (This said as Microsoft is heard slithering, clawing and drooling outside... ;))