This is an accounting tactic that will benefit the company's tax efficiency in the near term while increasing operating and net income in the future. These usually occur when the acquiring company chooses not to pursue research that was previously started by the acquired company and in cases where there are duplicate research initiatives as a result of the merger. Methods used by these companies potentially create substantial reserves that can be used in the future to smooth out and even boost earnings. A lesson to investors that they must not be influenced by the bottom-line numbers alone. The intrinsic value of MSFT and ORCL substantially decreases when taking the exercisable employee stock options into account.
Some acquisitions become accretive right away while others sometimes take years.
Investors should not look too deep into when an acquisition becomes accretive. The most important thing is that the acquiring company paid a financially sensible price for the company it is acquiring. In many cases where an acquisition has been accretive right away, the acquiring company has still overpaid. For example, Amazon has fallen way off its highs and revenues are still skyrocketing. Once you have found a company that you feel comfortable with, you must then determine whether or not the company is fairly priced.