Deferred revenue was used last year.
In post 3232 last May, Richard Karpel made the following note after listening to the conference call in a quarter when Wind River dipped into the cookie jar for $1.2m (deferred revenue had decreased from $15.0m to $13.8m):
Ron hemmed and hawed when asked about the decline in deferred revenue, but if I remember correctly, he blamed it on an unnamed Japanese company. I had the impression that the company either cancelled orders, or defaulted on money owed to WIND.
The hemming and hawing makes it clear that he knew he wasn't supposed to say, "well, I dipped into the cookie jar to make the numbers this quarter". Instead, he made the plausible explanation that Frank Foos stated in post 3234:
Either Ron Abelmann and/or Dick Kraber said that the main reason for the decrease in deferred revenue was that their distributor in Japan had not made pre-payments this quarter. This doesn't indicate order cancellations or defaults.
Japanese corporations finish their fiscal year on 31 March. To close out their books for the year, a Japanese company would probably delay making pre-payments until the new year. I would guess that this the reason for the decrease in deferred revenues during the quarter.
At any rate, it didn't matter because the deferred revenue went back up the next quarter and Frank's explanation appears correct. The precise regularity of the earnings numbers suggests fudging, but it's not that important. Or, as Upside noted:
But deferring revenues, as some software companies do, constitutes a different form of revenue management. Microsoft Corp., for example, defers revenue from its Windows and Office suites. As of Sept. 30, 1998, the company had more than $3 billion in deferred revenue from Windows, Office 97 and other software products. Theoretically, that revenue can be booked, as needed, to smooth out financial performance in the future, seemingly undermining the value of quarterly reports. Still, the SEC seems more concerned with companies that are aggressive in booking revenue than with those that defer it. "To tell the truth, it seems that accelerated revenue recognition [is examined more closely] than deferred revenue recognition," says SEC accountant Ron Baer.
The "big bath" that Wind River took last year and the huge stock options are much more important. |
