All-
This is from this morning's Wall Street Journal:
Mr. Schilit, a former accounting professor whose firm specializes in
uncovering accounting policies that may cause a company's financial
statements to be misleading, is recommending a short sale of Pegasystems
Inc., a Cambridge, Mass., company that develops customer-service
software. In a short sale, an investor sells borrowed stock, betting that the
price will fall before the loan has to be repaid.
Mr. Schilit says Pegasystems has typically used "aggressive" accounting
methods to record most of the revenue from three-year to five-year
licenses at the start of the contract, although cash payments will be
received over a period of years. As a result, its accounts receivable are
"humongous," he says.
In November, Pegasystems announced the resignation of its auditors
following what the company said was a change in accounting advice.
Pegasystems subsequently restated its second-quarter earnings and
released third-quarter earnings that it said reflected accounting revisions. It
hasn't yet released fourth-quarter results. New auditors will be reviewing
the company's books, and "my hunch is that this company may not come
out of the audit with a clean bill of health," Mr. Schilit says. "When you're
talking about a company's revenue line, you're going to the core of the
business."
Pegasystems stock fell 78.125 cents to $21.0938 on Nasdaq
Wednesday. |
