POOLING OF INTEREST IS CRUCIAL FOR HIGH TECH I applaud BUSINESS WEEK for exposing how accounting abuses mislead stockholders (''Earnings hocus-pocus,'' Cover Story, Oct. 5). Certainly, many of the practices cited, such as arbitrarily assigned and accelerated depreciation of R&D expenses, allow artificial short-term increases in earnings. However, ''pooling-of-interest'' accounting practices should not be viewed in the same way. Pooling of interest enables high-tech mergers, especially for software companies. This is because the relative asset value of software companies is small compared with that of industrial manufacturers, which have a large capital base of production facilities. Without pooling of interest, acquiring software companies would incur large ''goodwill'' asset categories. The amortization of this goodwill would artificially reduce earnings for years, causing an unacceptable loss of shareholder value. The key point is that software companies' asset value is primarily determined by the cost of development. Those costs are capitalized and amortized over the anticipated life of the product. This sort of ''replacement cost'' approach does not take into account the expertise of the software development team that makes the products. These ''people assets'' are what count most for a software company's success and are not reflected on the balance sheet. Eliminating pooling-of-interest accounting, therefore, would prohibit many strategically important acquisitions and reduce shareholder return. David M. Burwen Managing Partner Venture Development Group Mountain View, Calif.

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