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Technology Stocks : IFMX - Investment Discussion
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To: H. Wai who wrote (9472)2/13/1998 6:27:00 PM
From: MJ  Read Replies (1) of 14631
 
Wai,

Check Mark Finger's response (#9461 I think). His explanation is much better than mine- basically we are talking about deferred revenue that was 'unbooked' by the restatement.

Our argument is that this revenue is in fact 'real revenue' because it is sold by a channel during the quarter, and Informix incurs costs in the quarter assisting the channel sell the licences. A majority of the deferred revenue was with 'bartered' deals-where the reseller is getting a pool of licences to onsell in return for hardware/cash.

Informix unbooked the revenue because it was sitting on shelves at resellers. In other businesses (wholesale) it's not a problem because it costs the wholesaler nothing to then on-sell to the end customer- that's the retailer's job. In the top-end software game, the problem is that IFMX would still have to work very closely with the reseller, in particular large VAR such as SAP, or hardware vendor to make the sale. So it costs $$$ in the qtr, but in the end the sales already been booked, so no new revenue to Informix.

There is also the possibility that the reseller will compete with Informix for the business- often stepping in late in the sales cycle. Imagine working on a million dollar licence for 6 months and then have a hardware vendor steps in and say 'hey, I can sell you that Informix licence cheaper than IFMX can'. IFMX's obligation is to support the hardware vendor, because they did the right thing by buying licences in advance and helping IFMX in a past year.

I can't see why every vendor will not now have this deferred revenue (varying qtr by qtr) given stricter accounting standards- and that we really are 'wholesalers' to channels of one form or another.

Cheers,
Matt.
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