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Technology Stocks : PEGA - Pegasystems

PEGA 59.57

-2.4%

3:59 PM EST

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To: seth thomas who wrote (334)	11/21/1997 6:48:00 PM
From: Clam Clam	Read Replies (1) of 504

re Pegasystems, >>how can Pega know with certainty when the product will be installed at an FDC customer? PEGA has a way that makes it not matter when the product will be installed. They book the minimum amount due evenly, no matter how it is installed. Get this, the revenue and long-term license agreements (which is on the balance sheet) were both lower in Q3 than the revised Q2 but A/R is higher. They took $5mm out of Q2, which lowers restated Q2 A/R but A/R then goes up in Q3 despite recognizing only $1mm of the $5mm. There is no consistent relationship between cash flow and revenue recognition, a basic investor confidence reinforcer lost in the process. PEGA then pays $10mm to FDR and capitalizes it on the balance sheet to be amortized over the course of the contract. PEGA wanted to recognize $11mm in Q3 and then admits that the minimum amount due from FDR could be as low as $18mm over 5 years. It is totally inconsistent to first argue that you will only recognize minimum contract amounts (spread evenly over 5 years) and then to try to recognize $16mm in two quarters ($5 in Q2 and $11 in Q3). Note in the 10-Q (an official SEC document) that the individual components of S/H equity don't even sum to the total... The market just doesn't seem to care about the fact that even if PEGA were allowed to recognize all that revenue, it would be a 1-customer company. This is all just accounting but at some point, you would think that PEGA would have to shut their mouths about the pipeline and start putting up some results.

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