Ken,
I don't think it is as ominous as it may sound.
The original statement never said or implied that only the 2nd and 3rd
qtrs were involved. It said previous (or prior) quarters.
The underlying issue at what point in time to recognize the revenue. Corporate
policy is when the distributor sells the product to the enduser. If this policy
was not followed over an extended period of time, in this case since the
beginning of 1996, then you cna have the restatement as we have seen.
E.g., what wa sin actuality inventory during the 1st qtr of 1996 and thus should
not have been recognized as a sale during that period, may have been sold during
the 2nd qtr (or perhaps the 3rd qtr) of 1996. So a lot of the early problems were
actually already resolve in subsequent quarters.
The only lingering affect is on product that was still on the distributors' shelves
at the end of the last quarter but was recognized as a sale already. This has now
been corrected.
What the statement says is that the product erroneously recognized as sales, and
should have been inventory at the end of the last reporting quarter, will
likely be sold during the fourth quarter and recognized as sales during that reporting
period, together with any new actual sales by distributors during that quarter.
We just lost some $60 million is sales that in reality still have to take place.
I see little problem here, unless there is real old inventory of what may now
have become obsolete products. If that were the case I would hope that management
would have been smart enough to lump that in with the total restatement.
This doesn't mean we will see a quick recovery of S3. We will need to see some
impressive news releases to accomplish that.
External factors can affect S3 value. Right now, given the low volume and
where S3 is priced I would argue that this is an accumulation level. I have seen
some other hi-tech stocks appreciate of late. With the yearend cleanup there are
some bargains out there, and S3 is one of them although certainly not the most
attractive, but if you own S3 already at a higher average cost, as I do, this time is
as good as any other.
JMHO
Jan |
