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Technology Stocks : AremisSoft Corporation (AREM) -- Ignore unavailable to you. Want to Upgrade?

To: Jules B. Garfunkel who wrote (579)	7/20/2001 3:46:32 PM
From: Bob Rudd	Read Replies (1) \| Respond to of 683

Jules, Regarding the Bulgarian contract, I'm not persuaded that there was an overstatement. They indicated the contingent nature in the filing. In retrospect, they probably wish they had used more hedged language in referring to it in statements. I see any emerging market 'contract' as being 'at-risk' and considering DD by Jacobs and the Lehman analyst choose to beleive that the expected value of the contract [Considering potential downside and Real Options potentials] is centered around the estimate. Bottom line: I see risk but not fraud. The impact of that risk on my investment thesis is negligible since, at current share prices, the Bulgarian contract could disappear, and AREM would still be undervalued. Regarding the employee with SEC issues, had he been CFO and we were looking at flakey accounting, or had there been a pervasive pattern of association with stock promotion con men, I would be more concerned. Every company makes bad hires and this doesn't imply pervasive fraud. I wasn't aware of the specific 1300 vs 838 discrepancy, only the questions raised and answered by NYT. I agree with your comment that financial reports are complex - this isn't a simple enterprise and describing it is not going to be simple. I've found their presentations useful in putting it in perspective. For me the investment case comes down to this: I like the business model - low cost Indian labor targeting an attractive space with huge margins highly scalable. If it was just promise, I wouldn't be here but the earnings look real to me and no one has seriously impuned thier filings. The risk to my outlook, is that this is a pervasive conspiracy to commit fraud like CUC before Cendant bought them or LHSP. Granted some of the trail sign appear to be there: Complex financials, excessive attention to shorts, questions about the Bulgarian contract, but I don't see this adding up to fraud. To some extent, I'm relying on the odds here. In looking at research on earnings managment, I found the incidence of major fraud to be very low [other than pennystock type microcaps]...so I'm weighting the evidence accordingly. If the story is real and the earnings continue to roll thru, what is 1.87 growing 40+% worth based on comparables. To me the margin of safety looks large, but I've been wrong before, which is why this is a less than 3% position for me. There's risk, but I think it's justified. Thank you for a substantive post - there's way too much nastiness on this thread, and good luck on your other positons ...But not the AREM short;) Bob