What comes around goes around.
Sequent stock drops after report questions accounts
BEAVERTON, Ore., Aug 18 (Reuters) - Shares of Sequent Computer Systems Inc. <SQNT.O>, which has agreed to be bought by IBM <IBM.N>, fell 14 percent on Wednesday after a report in a local Oregon paper questioned the company's accounting.
In response, the company issued a strongly worded statement calling the story "patently false."
The article, which appeared in a Web edition of Willamette Week, a Portland-area paper, said the financially strapped Beaverton, Ore.-based company may have shipped computers worth millions of dollars in a bid to inflate its results.
It cited an unnamed Sequent employee as a source who said this was a regular practice.
The story described a first-quarter shipment worth $15 million to $20 million to a government contractor that failed to materialize. It said the Securities and Exchange Commission was looking into the matter, but had launched no formal probe.
The report quoted Sequent spokesman Mike Fay as saying nothing improper had happened. He acknowledged that Sequent may have pre-built some orders but denied that the shipment to the government contractor had been booked as revenue.
Responding to the article, Sequent Chief Financial Officer Bob Gregg said, "The shipments referred to in the story were in connection with a complex distribution agreement the company was negotiating at the end of the first quarter.
"The agreement never materialized and the systems were returned to Sequent. Throughout the process, they remained in Sequent's inventory and no revenue was ever booked for the transaction. There was, in fact, no sale," Gregg said.
"We have never engaged in any revenue recognition practice that was not absolutely in line with (strict revenue recognition) policies and in full compliance with all applicable laws and generally accepted accounting practices," he said.
A spokeswoman for the U.S. Securities and Exchange Commission office in Los Angeles, which the article had pointed to as inquiring about the order, would neither confirm nor deny the existence of an investigation, citing agency policy.
Sequent denied the SEC had contacted the company regarding any investigation into the issues raised in the Willamette Week story. "As far as the company is aware, no such investigation is ongoing," Gregg said.
Sequent stock closed down $2.375 at $15 in heavy Nasdaq trading of more than 10 million shares, where it was the 12th most active issue.
Over the past year, Sequent had suffered through several disappointing quarterly earnings reports and speculation it was about to be acquired. Last month, International Business Machines Corp. agreed to buy Sequent for about $810 million.
19:25 08-18-99 |
