The latest financial report looks very good, but I wonder whether the success in turning around the company's fortunes is due to proprietary software more than to capable and available software consultants. Put another way, what worries me about SPYG is that it is too oriented to consulting services, which can easily dry up once the essential services have been provided. Consultants basically work themselves out of a job. Whereas companies with proprietary products continue to draw revenues from licensing, royalties, copyright fees, etc. It seems to me that SPYGLASS, in order to deal with a precarious financial situation, has chosen to take one-time fees for licensing and/or sale of proprietary products (like the filter for school access to the Internet), in favor of a continuing stream of fees that other software providers generally get.
There is also another area that perhaps someone would comment on - the use of accrual accounting methods to record consulting fees. SPYG uses the accrual system, but what that really means is that consulting fees may show up on the financial statements BEFORE the money is actually received. This, if my analysis is correct, tends to front load the financial statement and make it look better in the short run than in the long run. Any comments? |
