Herb Greenberg's

on a tear about the quality of earnings, or QoE, at companies which are beginning to report substantial returns from their investment of excess cash in other companies. Especially


(INTC) - Get Report

. Herb's discussed in

columns and on our television

show, "" on

Fox News Channel

, QoE questions which arise -- at least, for him -- about what Intel's up to.

This morning I

outlined some of the issues in QoE, and I asked just what companies are supposed to do with that glorious product of the lush tech-boom: excess cash.

One idea: Once a company has met its operating-cash needs, how about


the dough it doesn't need to grow the business?

Companies can do that two ways: They can invest in companies with product lines, or R&D initiatives -- or at least new ideas -- that seem likely to help them grow the business. In the case of an Intel, that means funneling that cash -- on very advantageous terms, mind you -- to new companies which are working on projects (think video conferencing, or video-on-demand, or voice recognition) which seem likely to sop up CPU cycles in all those Intel microprocessors installed in the world's millions of Wintel PCs -- thus hastening the obsolescence of those machines, leading their owners to replace them with new PCs, containing newer Intel CPUs ... and increasing future sales for Intel.

Or you could invest in companies that are getting into areas you ought to know something about, areas where you're not yet as strong as you want to be, in companies where you're willing to pay for a seat at the table early on, with an eye towards maybe acquiring them at some future point.

In other words, investments as a form of R&D. (Just ask


(CSCO) - Get Report

about that strategy.)

Second way: Invest in hot tech companies which may not directly increase your own future sales, or lead you to acquisition opportunities, but which just look like big winners, opportunities to multiply your spare cash far faster than you ever could by investing them in your own business.

Turns out, that's exactly what Intel's been doing -- with a success rate even the most aggressive hedge-fund manager can only envy.

Les Vadasz, one of Intel's longtime managers and an extremely smart guy, has been running Intel's outside-investments effort -- increasingly, a de facto venture-capital fund -- for a decade now.

Under Vadasz's leadership, Intel Capital has bought into more than 350 companies; the 1999 year-end value of its investments was $8.2 billion. That's up from investments in just 50 companies, with its stakes valued at about $500 million, two years ago.

Even setting aside the huge if indirect returns from growing Intel's own future revenue, and from getting an early look at the internals of technologies and companies Intel may want to buy at some future date, Intel's done extremely well with its portfolio.

Some of its big hits, already public:















So what is Intel to do when it cashes out of the companies in which it invests? Return part of those profits to the fund for future investments? Sure, in part.

With the rest? Report it -- properly broken out -- as part of its quarterly results.

And then Herb cries foul over the quality-of-earnings issues involved in making money on investments outside your own factories.

No way, Herb. As an investor, I look to companies for one big thing: earnings. Money. Profits. I'm avaricious, greedy even. I want to make money. Lots of money. I want to see growing earnings, quarter-to-quarter. I want companies I own to make "outside investments" that will pay off big for them. And thus, for me.

I don't want 'em parking that moolah in bonds, giving it back to me and causing me tax problems, or buying corporate jets and corporate retreat centers in Bora Bora.

I love the idea of an investment-earnings stream in addition to products-and-services revenue. And I think other investors do, too. After all, those rising earnings are what drive the stock price up, and that kind of capital appreciation that I'm



Who else is doing this? Well, another good example is


(DELL) - Get Report

. (I probably shouldn't mention this, lest Herb sit watching for Dell's next quarterly earnings report, so he can whack 'em on QoE. Sorry, Dell holders.)

Dell's been investing widely and wisely, and less in companies that look like ways to grow Dell's markets and sales than in companies which just look like good deals.

And it's paying off.

Just two quick examples: One nice Friday a couple of weeks ago, two of Dell's portfolio companies went out in IPOs on the same day.



closed at 212.63 on its opening day, up 508% from an opening price of 35. Dell owned 2.45 million shares, bought earlier -- cheaply, of course. Since then, WebMethods has moved up to around 240. On the same day,



went out at 20, closed at almost 55. In December, Dell had bought 2 million shares ... at 11. Today, Lante's trading in the high 70s.

Nice returns, huh? Do you think


boxmaker, no matter how well-run, is likely to get returns like that by selling beige boxes with TV sets stuck on top?

Indeed, I expect to see Dell sell and starting to fold the results of its investment successes into its earnings reports this year, juicing up reported earnings ... to the substantial advantage of Dell's stock prices.

Will investors hate Dell for that? Will they wish Dell had instead built a few more factories, bought a few more ads, raised management salaries?

Or will they be damned glad that the assets they put in Dell's hands have been managed so well?

I'm betting on the latter.

So please, Herb, puh-leeze, don't flog 'em when that happens. Or when Intel reports nice outside-investment returns. Or when any other company reports that it has successfully diverted excess cash into investments which pay off big-time.

If they invest badly and waste shareholders' money, bash 'em.



Or if they conceal the source of these profits, if they make it look like the dough is coming out of operations, then sure -- flog the quality-of-earnings idea for all it's worth. Turn 'em into the


, roast 'em in print. Companies that do that are deceiving us, committing fraud and deserve an especially hot, sulfurous corner of Wall Street Hell.

But not the companies that are just making money for us.

I love Herb. He's one of my heroes. He's made me a lot of money and his prudent bearishness has saved me even more. But this QoE thing? Let it go, Herb, until you turn up more

sinners like


(CVS) - Get Report

not companies which are just doing a good job for their owners.

Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are, or have been recently, consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites your feedback at