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Technology Stocks : PEGA - Pegasystems

PEGA 59.57

-2.4%

Nov 5 3:59 PM EST

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To: Geof Hollingsworth who wrote (256)	11/10/1997 9:38:00 PM
From: Clam Clam	Read Replies (1) of 504

A similar situation just happened in the telecomm billing systems industry where a company called CSG Systems was awarded a huge deal from TCI over a competitor because it outbid the competitor (USCS) for TCI's in-house billing system. CSGS paid $106mm for the poorly performing TCI business and TCI got warrants to purchase CSGS stock at $24 per share. The stock then rocketed to nearly $50 as the long-term deal calls for the millions of TCI subscribers to have their bills handled by CSGS. How's that for a deal?... It makes sense in many cases to have some business services outsourced as PEGA is now doing for FDC. However, there must be something in the FDC contract which isn't "guaranteed." It sounds like FDC was in the drivers seat when it came to negotiations just as TCI was in the above "deal." FDC probably refused to sign something that entitled PEGA to annual minimums (or some verbage along those lines) and this technically violated revenue recognition criteria, no matter what the probability of such actually happening. I have seen numerous instances of supposedly "guaranteed" revenues somehow not coming to fruition because of some improbable issue which allows the customer to back out. In fact, it just happened to TeleTech when the UPS teamster strike arose. Teletech had "guaranteed" minimums from UPS, unless there was a strike at UPS (or whatever the legalese was). At least TTEC wasn't recognizing non-current receivables so it truly was just a case of bad luck. PEGA CFO in the press release saying "I don't know what we should be doing." Why don't you account for your damn revenues like everybody else in the first place and it would be a little easier, you idiot? (wow. I'm that emotional about a stock I never even owned... time to mellow out and watch some 49er football).

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