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Technology Stocks : LEGATO SYSTEMS LGTO
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To: Zoro who wrote (871)3/21/2000 12:12:00 PM
From: Chuzzlewit  Read Replies (1) of 1138
 
Zorro,

Some additional thoughts on MSTR vs. LGTO:

From what I gather (and I am no expert on MSTR), there is quite a difference between MSTR's problem and LGTO's.

In LGTO's case, all of the usual hurdles for revenue recognition had been met, but since the final purchaser was an ASP, PW raised the question of the probability of payment, and so, decided on a revenue recognition stream analogous to a service contract. This represents a more stringent accounting test than existed in the past.

In MSTR's case, service contracts were booked as revenues rather than deferred revenues as required by GAAP. This has always been an accounting no-no, and they probably got caught because they need to raise additional capital.

I think this is a particularly egregious case of financial engineering.

TTFN,
CTC
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