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Microcap & Penny Stocks : Zia Sun(zsun) -- Ignore unavailable to you. Want to Upgrade?

To: who cares? who wrote (9141)	8/3/2000 8:51:03 PM
From: Sir Auric Goldfinger	Read Replies (1) \| Respond to of 10354

Boy, that was the worst of the Bond flicks wasn't it? Guess which one was the best!

To: who cares? who wrote (9141)	8/4/2000 3:01:54 PM
From: Sir Auric Goldfinger	Respond to of 10354

Bull Market Multiplier: A Little Revenue Went a Long Way Bull markets may not cause companies to fiddle with their books, but they certainly increase the rewards to be gained from creative accounting. Consider the case of the Unify Corporation, which this week put its two top officials on leave and said that its revenue for the last fiscal year, and perhaps the one before that, had been overstated. The company's board has begun an investigation, and trading in its shares has been halted. Details are skimpy. Even if you assume that the board's audit committee is right that the company reported revenue that it should not have, there is no way to know how it happened or the amounts involved. One fact is obvious, however: The amounts involved were minuscule compared with the market value the company attained. For the 15 months ending in January, Unify reported revenue of $45 million, of which $20 million came from its Internet-related products, software that helps companies integrate their basic businesses with their Internet sites. It was the Internet business that impressed investors, who saw rapid growth and valued the company on the assumption that it would continue. Unify's market value rose from $25 million at the end of October 1998 to a peak of $750 million last December. Some, probably most, of that Internet-related revenue was real. So, the overstatement, if there was one, is likely to turn out to be a fraction of the $20 million. But the excitement that small amount helped to produce sent the stock soaring. Insiders got $10 million by selling shares that had been worth barely $1 million. All of this illustrates the pressures companies face in a bull market. Numbers that indicated that growth was slowing would have been devastating. It was more than the revenue and the accompanying profits that made Unify a shooting star. The Internet mania helped, as did Unify announcements, just as the Linux mini-boom was starting last year, that it was offering Linux-compatible products. But Unify wouldn't have moved without good numbers, and it delivered them. Unify's stock had already tanked before the bad news came out this week. That reflected both the decline of Internet infatuation and concerns over a heart attack that forced the chief executive, Reza Mikailli, to take a medical leave in June. Whether rumors had spread regarding accounting issues is not clear. The company's announcement that the audit committee believed revenue figures had been inflated in the fiscal year that ended in April, and perhaps in the one before that, came just as the audit was being completed by Deloitte & Touche. It would be nice if it turned out that the auditors had uncovered the problem and taken the matter to the audit committee. Neither Deloitte nor the company would discuss the matter. Mr. Mikailli and Gary Pado, the chief financial officer, have been placed on administrative leave while the investigation proceeds. Both were heavy sellers of stock, a fact that the Securities and Exchange Commission will no doubt wish to discuss with them if the investigation indicates that they knew the accounting was faulty. It is not known if the Unify board suspects fraud or just thinks the company misapplied complicated accounting rules. What is known is that the greatest bull market in American history provided phenomenal rewards to companies that investors believed were growing rapidly. The temptation was there.