Ken,
Am just back from a two-days trip. Will peruse your observations a little
closer.
In the meantime, management did not say 2nd and 3rd qtr. They clearly
stated prior quarters, which is open-ended and evidently, it was a practice
that was in place since early 1996.
Based on the data provided it seems to me that the problem was about equally
spread over the period Jan 1, 1996 - June 30, 1997. If wrong, where is it
stated that it was mostly in the 4th qtr?
Hervey left in March. I am pretty sure he knew, but if he was the only one
who knew, it is not surprising that it continued and that it stopped when
Amaral came on board.
As to insider sales, you may be right. However, options are part of an
employee's renumeration, and you cannot hold it against an employee to
exercise that option when the stock is doing real well. After all that is
what he is working for. I am pretty sure that many of the employees are willing
to accept options as a part of their pay.
When they exercise options there are two aspects. They can sell all and
take the whole profit, or excercise more, sell part to pay for the tax
liability they have incurred when they exercised the option.
If the erroneous revenue recognition was done intentionally to inflate
stock prices so that they could exercise their option that would be fraud.
Essentially, what you are saying that the whole bunch committed fraud,
even though there are still an appreciable amount of unexrecised options
outstanding.
It is here that I beg to differ with you.
Considering the minor adjustments over the time frame involved I think
that there was no grand scheme to commit fraud. How stupid would that be!
S3 is the market leader. The turn down is as much a function of not having
the right products at the right time. Had they had the right product the
stock may be trading in the 30s or higher. Why trying to be cute for a
small return if you can have the whole bag?
Unfortunately, for everyone, they failed to have the next product ready
when they needed it. ANd this brings it back again to the lack of vision and
direction.
JMHO
Jan |
