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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year
PSFT 0.00010000.0%Oct 29 5:00 PM EST
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To: Rick who wrote (294)3/25/1998 12:08:00 PM
From: Melissa McAuliffe  Read Replies (2) of 4509
 
I have several comments concerning some of the recent posts on this thread so this is not necessarily directed to Rick.

First, with respect to deferred revenue.....My guess is that the majority of this deferred revenue represents maintenance revenues which have been paid but are recognized equally over the life of the maintenance agreement...one year in this case. This is not something that can be manipulated under any circumstances. I have said before that I wish we could get a breakout of what is in this deferred revenue number. But regardless I feel there is still enough revenue in this account for PSFT to manage earnings. As more and more customers are added this deferred revenue should grow proportionally as more customers become paying maintenance customers.

With respect to missing a quarter....Part of managing earnings expectations is the setting of appropriate expectations with the analysts and investment community. I feel that if PSFT has control over their business(which it appears they do) and is conservative in their forward projections that the likelihood of a miss is negligble at this point. e.g. PSFT has set expectations for 1998 at a 50% growth rate which is significantly less than historical growth but still a very reasonable number. As companies grow to the size of PSFT it becomes more and more difficult to continue to grow at 70-80%. And I think most people accept and understand this. Look at SAP for example. You just reach a point where it is not doable and even if it is, it is a difficult number to manage. The bottom line....they set the right expectations, manage to those numbers, exceed those numbers by a respectable amount......we don't see a missed quarter.

I believe you can always find a company that had many quarters of success and point to it as an example. I guess it comes down to the issue of how strongly you believe in the management of the company. ORCL is a good example. Look who's running the place!! Read the book "What's the Difference Between God and Larry Ellison" and you'll know what I mean. Now he's taking over the applications group. Give me a break! Personally I believe that PSFT's management has the ability to continue to pull off these successful quarters...at least into the foreseeable future. They seem to know what it takes.
Melissa
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