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Technology Stocks : IBM -- Ignore unavailable to you. Want to Upgrade?

To: Jacques Newey who wrote (7484)	3/6/2002 3:23:49 PM
From: Arrow Hd.	Read Replies (1) \| Respond to of 8218

Jacques, thanks for taking the time to post these links. I would agree that 10% return assumptions are at the upper limit so I would not expect that to increase. As far as some of the other issues, let me take one and offer another side. One of the claims was aggressive booking of revenues and the lack of a meaningful contingency debit for bad business. This would be especially critical at year end when there is no opportunity for damage control or repair of a previous miscalculation. I am sure that most folks here are familiar with the range of practices that companies employ with regards to revenue recognition but at year end IBM uses the absolute most conservative approach. When an IBM hardware product ships title transfers and a UCC1 is filed as a lien. Most companies book revenue, IBM does not. At year end, that product has to arrive at the customer, get installed either by an IBM CE or customer set up, and when turned over to the customer for live operations then revenue is booked. So there are no opportunities for shipped and uninstalled cancellations reversing revenue. Regarding accounts receivable liabilities, a debit balance is maintained based upon historical statistics to cover any bad debts. This is about as conservative as it gets without actually requiring COD and cashing the check and if the customer has a bad credit history COD may be required. Anyway, until there are sequential and YOY revenue gains that meet the stated goals instead of being flat these issues will continue to get headlines. And we can expect more tightening of FASB and SEC rules which will put pressure on all companies. Like FASB 142 for "goodwill". I was on a CC this afternoon and a small company I follow announced that they will take a 10 million dollar goodwill write-off in the first quarter per FASB 142. This company only did 6 million in fourth quarter revenue. For those who report strictly under GAAP this change is going to cause negative surprises. Thanks again Jacques.