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WallStreet Earnings Farce??

The gap between net income computed using generally accepted accounting principles, known as GAAP earnings, and the earnings numbers relayed in company earnings statements, known by a variety of misleading euphemisms, is widening.

In fact, the GAAP gap, after improving for two consecutive years, is now close to 15%, worse than it was during the height of the stock market bubble.

"Although stock valuations are not as stretched as they were in March 2000, the quality of earnings is actually worse," wrote Richard Bernstein, chief U.S. strategist for Merrill Lynch, in a note accompanying the report.

Those bottom-line numbers, which excluded charges for depreciation, amortization and restructuring related to the acquisitions, were used by Wall Street analysts as the basis for their earnings estimates and to calculate price-to-earnings ratios in published reports.

Not surprisingly, a survey of analyst reports by Thomson Financial reveals that Wall Street now expects Oracle this year to earn 65 cents a share -- Katz's "non-GAAP" number -- even though they know Oracle's net income will be significantly less than that, thanks to ongoing charges related to the PeopleSoft transaction.

With tech earnings season kicking off this week, investors who want to know how companies are truly performing may want to keep their eyes on net income figures.

Otherwise, the horror show may be back for a second run.

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