Kind of OT - in defense of accountants.
Thanks for the article Marc - you're right, the story keeps getting bigger and bigger. Unfortunately, I think it has went from being constructive to deconstructive.
I don't have a big problem with what Microsoft was alleged to have done, i.e. smoothing profits. Personally, I think there is a big difference between
1) reserving some of your profits under the flag of conservatism (ala Microsoft and THQ),
versus
2)taking a huge restructuring charge and later reversing back into profits some of the write-downs.
The difference IMO: The first, although it could be considered manipulative, is simply shifting profits from quarter to quarter, but all the profits are earned. The second, is to take losses in one quarter so you can report gains in another. If you net these restructuring charges with profits, many times the company has not made any money for the several year period.
However, I do think the simple "smoothing of profits" raises a significant point. THQ, and other game and media companies, often are justifiably given lower PE's due to the inconsistency of profits due to the individual "hit" nature of their products. While there is obvious truth to this, many so-called "stable" companies have fairly erratic profits as well.
Looking forward to seeing what THQ does this quarter with the reserve for returns and accommodations. Hopefully the current environment does not force THQ into changing its conservative ways.
Kory |
