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Technology Stocks : PEGA - Pegasystems
PEGA 59.57-2.4%Nov 5 3:59 PM EST
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To: Shege Dambanza who wrote (228)10/31/1997 12:18:00 PM
From: seth thomas  Read Replies (1) of 504
 
I got e-mail from that guy during the IFMX fiasco. He works for one of the lawsuit law firms back East.

One of the concerns over the $50 MM is whether or not they will really pay. Although First Data is a HUGE corporation, what if they flat out refuse to pay? Five years is a long time; anything can happen. One of the keys to revenue recognition is collectability. Without seeing the contract, we are all in the dark, but it is certainly possible that there are some weasel words in there the might cause some or all of the revenue to be uncollectable.

For example, what if there is a clause buried in the agreement that says if First Data is acquired, the contract is negated? Maybe there are some performance criteria that cause the contract to change over time.

In any event, PEGA should only be recognizing revenue that can be collected within 12 months. Payment terms over a longer period of time cause the affected revenue to be recognized when it is within 12 months, guaranteed.

Finally, there have been some changes latly to FASB which affect the recognition of indirect sales.

To some extent, this is different ffrom IFMX. It appears PEGA/E&Y/GSCO made legitimate honest mistakes; At IFMX, intentional fraud seems to be involved.
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