The value of intangible assets LO23700

Brian Gordon (briangordon@livetolearn.com)
Fri, 24 Dec 1999 09:22:05 -0700

This quote is from an interview with Baruch Lev in the Jan/Feb 2000 issue
of Fast Company magazine. Lev believes that the way accounting measures
the value of businesses is badly outmoded, and that we need a new way that
places a much higher value on the intangibles. He says that this explains
why Cisco was willing to pay $6.9 billion for Cerent Corp, a company with
sales in the first 6 months of 1999 of $10 million - Cisco was buying a
knowledge asset, not a tangible asset.

I think this has enormous implications for the way workers are treated, as
they are the ones possessing or developing the knowledge, and the way
organizations are organized, as this has an effect on knowledge
production.

Lev's attempts to define intangible assets as falling into four
categories:

"First are assets that are associated with product innovation...R&D
efforts. Second are assets that are associated with a company's brand,
which let it sell its products or services at a higher price than its
competitors. Third are structural assets - ...better, smarter ways of
doing business that can set a company apart from its competitors. And
fourth are monopolies: companies that enjoy a franchise, or have
substantial sunk costs that a competitor would have to match, or have a
barrier to entry that it can use to its advantage."

Brian

briangordon@livetolearn.com
Live to Learn
www.livetolearn.com

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