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Technology Stocks : Red Brick Systems

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To: J L Segal who wrote (202)	3/26/1998 7:29:00 PM
From: Smilodon	Read Replies (1) of 304

Good observation. I think the CEO, Chris Erickson, may give too optimistic an impression to investors. At the time of the blow up, they had another CFO who was fairly young and inexperienced. He had never been CFO of a public company, and probably was not fully versed on how you should deal with Wall Street. I doubt there is anything to this suit. Most of these little companies think they will make their quarter. They all do a little creative order booking to try to smooth out a naturally bumpy business. If they need to shift sales forward, they will do it and think they can make it up in the next quarter. REDB's big problem was to blow up without an adequate preannouncement. Part of this was shifting revenues out of Q1 since it was going to be bad anyway. A cute trick, but I think it really damaged their relationship with the analysts. In January, they again hurt their analyst relationship (with Pain Webber) by having the CEO give him optimistic view of the business, and then the new CFO gave lower guidance. The CFO did the right thing, and the CEO just doesn't understand the investment game.

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