sure...buy it...LOL!! Good Bye 30's...resating results, I was a few days off :-)
March 20, 2001
Broadcom to Change Method
Of Accounting in Recent Deal
By Molly Williams
Staff Reporter of The Wall Street Journal
Broadcom Corp. said in a federal filing that it is changing the way it is accounting for warrant-related agreements issued to customers in its most recent acquisition, VisionTech Ltd., after concerns were raised about the accounting method it had been using when it purchased companies that issued sales contracts with warrants as incentives.
Broadcom also said in the filing that it is in the process of reviewing accounting for last year's acquisition of Altima Communications Inc. and may revise its pro forma results for the first nine months of last year. A Broadcom spokesman declined to comment.
Broadcom, which has been expanding through acquisitions for the past two years, has said that five companies that it bought in recent months had these warrant agreements with customers.
The communications-chip maker has come under fire because it placed most of the value of these sales contracts, in which customers were given rights to by stock if they bought a certain amount of product, into the goodwill portion of the purchase price rather than reflecting it as a reduction to revenue. Broadcom has maintained that it used the correct accounting method in these transactions.
Still, in a Securities and Exchange Commission filing late Monday, Broadcom said it will account for 5.7 million warrants issued by VisionTech Ltd. as a reduction to revenue as customers fulfill the purchase requirements. The warrants, which have a strike price of about $0.002 a share, will be valued at the time that they vest, according to the filing. The warrants, held by customers of VisionTech and now exercisable as rights to buy Broadcom shares, vest quarterly from January 2001 to December 2004, the filing says. Broadcom closed its acquisition of VisionTech in January.
Broadcom said earlier this month that it was reviewing its accounting policy for these warrant-based contracts because one large customer, 3Com Corp., had recently canceled one such contract, which raised concerns that others would also cancel. 3Com had signed a purchase agreement with Altima in July, just prior to that company's acquisition by Broadcom in September.
Broadcom, based in Irvine, Calif., also said in early March that it was consulting with the SEC about the correct accounting for such agreements. Broadcom also said in early March that, as soon as it has finalized the review of the accounting with the SEC and its auditors, it will disclose any implications of the accounting.
At least eight shareholder lawsuits have been filed against Broadcom because of the way that it accounted for these contracts. Some of the suits allege that not deducting the value of the warrants from sales inflated both sales and gross margin at Broadcom. Broadcom has said the suits are without merit and that it will vigorously defend itself.
Write to Molly Williams at molly.williams@wsj.com |
