WLD:
From the 2000 FY 10K:
REVENUE RECOGNITION
Revenue is recognized when earned in accordance with applicable accounting
standards, including AICPA SOP No. 97-2, Software Revenue Recognition, as
amended. Revenue from sales of handheld device products is recognized when a
purchase order has been received, the product has been shipped, the sales price
is fixed and determinable and collection of the resulting receivable is
probable. Provisions are made at the time the related revenue is recognized for
estimated product returns, price protection, warranty, royalties and post-sale
telephone support.
Essentially, once the product is shipped to a (hopefully) credit worthy customer, the revenue gets booked. If the sceptics dig up the data Tom has been reporting, they'll likely make a big thing out of the fact that Palm generated over 50% of its Q3 revenues from the shipments of 500,000 each of the Palm VII's and V's in the last few weeks of the Q. As long as Q4 shipments and revenue stay strong for Palm with new models etc., and assuming the "glut" of V's and VII's can be moved out quickly by the rebate programs (particularly the VII's which will generate significant additional Palm.net revenues), then this shouldn't be a problem for Q4's results.
OTOH, if retail/online sales are slow over the next few months and Palm's distributors cut back orders in Q4 to move all the inventory, watch out. I recall back in early 1998 when CPQ got stuck "borrowing" revenues from future Q's by "channel stuffing" to make a December Q (and get their DEC acquisition done), they eventually had to "fess up", and the stock paid the price by getting chopped in half. The same thing repeated by CPQ in early 1999 led to CEO Pfeiffer and the CFO getting the axe. I think Carl Y is a cut from a different mold and knows how to manage these product transitions well, but he's probably feeling the pressure to produce some upside surprise in Q3.
We'll see. If Tom is right in his channel shipping data, Q3 could be a nice surprise, but even if it is, Q4 will bear watching to avoid a potentially nasty surprise. A lot depends on how well the III/V/VII promotions go and certainly on how well the new models ship/sell.
David T. |
