PEGA - Pegasystems Message Board

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Technology Stocks : PEGA - Pegasystems

PEGA 58.97

-1.0%

2:57 PM EST

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To: Trader Dave who wrote (219)	10/30/1997 2:38:00 PM
From: Clam Clam	Read Replies (1) of 504

I like the non-perpetual license part in theory but is this really sustainable over the long-run? I really don't know. I am not condemning the business. PEGA has a great product. I always wondered how this company got a $900mm market cap on $9mm in quarterly license revenues. Just as I was starting to understand it, we find out what the real problem is... The issue is really about the timing of when product should be recognizeable from an auditor's standpoint, not just when it is a written financial obligation by your customer. By recognizing the minimum revenues upon execution of a non-cancelable contract, you are at that point still making an assumption on how the seats are going to roll-out. If you have a five-year deal for $10mm in a formal signed contract, IMO, that doesn't entitle you to recognize squat in years 1-4 despite the fact that you are going to get that money. In my opinion, I think accounting should relate to what is actually going on in the roll-out of seats, not what the financing terms are and not what the contract life is. However, I can see why the auditor's are allowing recognition of the contract in a linear fashion. FDC should have been a linear contract and E&Y just didn't do its work when PEGA consulted them. PEGA's CFO should have taken a stand and realized this wasn't right but how do you tell your CEO and board that your auditors are being too generous....

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