Pancho--
Pretty good analysis. A couple of things I wanted to say though:
1. It's tough to analyze A/R vs. deferred revenue because we don't know how long the advertising contracts last and, even if we did assume 1 year, we don't know what the payment terms are. I'm assuming that since AOL receives a percentage of revenue from their contract based on the level of sales a customer makes from AOL, that not all of the revenue would be deferred anyway. Plus, note that they lumped advertising and other revenue together so there's probably some other stuff in there as well.
2. I too believe that "product development" cost capitalization is shaky. But the auditors bought off on it in their quarterly reviews (and the subject must have come up given the materiality of the balance), and, as long as they are being consistent, it should be OK. I don't think given that this is the end of the fiscal year (audit time) that they would risk any accounting tricks that may force a ugly one-time charge or, worse, a restatement.
3. Marketing costs -- I'm not as worried about the decreased marketing costs. I believe that, for the reason you mention, installed software on new computers, and CD format vs disk may be cheaper.
4. G&A exp -- You would expect an increase in G&A with the growth they've had over the year. Although, it is interesting that, as a percentage of revenues, it has also increased.
Just my 2 cents. And that's what my Mar 90 puts are going to be worth if today's price trend continues. I still believe that this stock is way overvalued, but usually I am wrong anyway. We need some bad news...now!
--Ryan |
