Hi Peter,
3 or 4 years ago, reaching into the "cookie jar" was referred by the WRS management as it took reserve revenues to meet the expectation. I believe "cookie jar" was the name that the management used in the conference call.
Last quarter, there was that huge jump in royalty. The strange thing is that it was just a one-time event. The management said that royalty will be back to the normal level in future quarters. This sounded to me like that the management did what it used to do, pulling out reserves to make the numbers.
I suspect that WRS builds this reserve by pushing back royalty recognition and licensing sales in the good quarters. Since WRS is doing direct sales most of the time, pushing back licensing sales by one fiscal quarter is easy, but pushing it beyond that is very difficult. Royalty on the other hand has a lot more flexibility, which leads me to believe that the reserve in the cookie jar is mostly royalty.
The bad thing is that bad quarters seem to go together in bunches. Take the Asian Crisis a few years ago, WRS was hit big time, but it got hit later than everyone else. I believe that the cookie effect contributed to some of this.
I understand that this is a public forum, and one needs to be responsible when accusing the management of wrong doing. I don't want to argue with anyone, and I respect everyone's opinion on this topic. I am far from 100% sure in saying that the management is building reserves. What I am sure is that this was an act that the old WRS management used to do. Today, besides Fiddler, both the CEO and CFO are replacements.
Regards,
Khan |
