Further reflection on the earnings report:
I just listened to the question and answer part of the earnings report conference call and believe that Jain's own words indicate that the 2002 forecast really isn't to be taken very seriously at this point. He says "given how difficult it is to forecast into 2002, given the economy, we are taking a very conservative approach and saying, 'Look we are going to grow sequentially into all of our recurring revenue streams.' We really don't know where the economy is going so we say let's just assume that it is going to get no worse than what it is today and, based on that, you take a minimal growth of say 2%, 3%, 5% and we just say let's put some number out and we will get a much better idea where 2002 is towards the end of this year."
My interpretation of what Jain said about the nature of the 2002 numbers is that management really prefers not to make a 2002 forecast this early, which is common these days, and perhaps doesn't believe that it can do so with a reasonable degree or precision given how fast the company is changing/growing and given current economic uncertainty. However, and for some reason, they decided to do throw out some numbers anyway with the disclaimer that "we will get a much better idea of where 2002 is towards the end of this year." Why did they bother to throw out numbers now instead of waiting until "the end of this year"? Perhaps because analysts are now focusing on 2002 earnings and giving them something to chew on now is better than not doing so. Of course I don't know the answer to this question. The methodology for coming up with numbers to present is to assume exceedingly slow growth--hardly any at all--just to be safe and to present numbers that will obviously be met and probably even exceeded by a substantial margin. This presumed growth of 2%-5% doesn't seem realistic to me because recent quarterly sequential growth for both Authorize.Net and the wireless subscriber business has been in solid double digits, and both businesses are entering far and away their strongest quarter of the year for business. Nobody, and no shareholder class action lawyers, will be able to accuse management of giving investors unrealistically optimistic expectations; although I speculate that in hindsight they might prove to have been unrealistically pessimistic. In conclusion, I suggest that the 2002 numbers not be taken as etched in stone and with a grain of salt. I expect that the 2002 numbers will be raised by the time of the next quarterly report. Jain did say that all three of the recurring revenue business will be experiencing quarterly sequential revenue growth and that's a fact, Jack. |
