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Strategies & Market Trends : Value Investing

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To: Bob Rudd who wrote (11684)	1/3/2001 2:45:27 PM
From: Don Earl	Read Replies (1) of 78572

Bob, If I'm reading SAB 101 correctly, I don't think it would apply to burial contracts. Sort of along the lines that a person doesn't have to live in a house in order to buy or sign a contract to buy real estate. The product has basically been delivered to the end user and isn't available for sale to anyone else. I've been spot checking earnings warnings over the past several months, and most of them seem to be related to channel issues or in some cases where revenue should have been recognized on a percentage of completion basis rather than all at once. I think most companies tend to put product into distribution channels at a rate that matches sell through, but there are also quite a few who abuse the practice. From what I've seen, it looks like it'll be a one quarter event, then revenue numbers will move to something more reliable going forward. I also think it will tend to cure some of the problems similar to what disk drive manufacturers went through a few years ago and what PC manufactures go through about once a year. At least it should take away some of the incentive to over produce to the point that inventory gets too far ahead of sell through.

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