Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Z Best Place to Talk Stocks -- Ignore unavailable to you. Want to Upgrade?

To: BWAC who wrote (39618)	5/15/2002 7:18:45 PM
From: Kelvin Taylor	Read Replies (2) \| Respond to of 53068

Intuit beats by $0.03; updates guidance (INTU) 43.49 +0.19: -- Update -- Reports Q3 net of $0.75 a share, $0.03 better than the Multex consensus. Revenues rose 28% to $545.2 mln (consensus $540.22 mln). Based on strong Q3 performance, co is raising the low end of its 2002 guidance ranges for EPS and revenues. Sees EPS growth of 27-28% and rev growth of 19-20%. For 2003, sees EPS expanding 25-30% and revs rising 17-22%. see if the momo continues or news already factored in

To: BWAC who wrote (39618)	5/16/2002 2:32:05 AM
From: Larry S.	Read Replies (1) \| Respond to of 53068

Creative accounting - cause or effect of the great late 90's market boom?: SEC Broadens Its Investigation Into Revenue-Boosting Tricks By SUSAN PULLIAM and REBECCA BLUMENSTEIN Staff Reporters of THE WALL STREET JOURNAL Securities and Exchange Commission officials, concerned about an explosion of transactions that falsely created the impression of booming business across a range of industries, are conducting a sweeping investigation into a host of practices that pump up revenue. The inquiry is extending far beyond the disclosures by Dynegy Inc., Reliant Resources Inc. and CMS Energy Corp. that they engaged in illusory "swap" trades that boosted their apparent business. Questions about whether companies' revenues are legitimate are spreading from industry to industry, raising further questions about whether misleading practices contributed to the hyper-growth of the stock market during the late 1990s. In addition to the SEC's inquiry into the telecom companies Global Crossing Ltd. and Qwest Communications International Inc. swapping fiber-optic capacity to increase revenue, people familiar with the matter say the agency's investigation into Lucent Technologies Inc. is now also probing the role vendor financing played in its sales. The agency has won restatements in a look at three Internet firms that booked revenue from wire transfers among themselves that were purportedly payments for services; a lawyer familiar with the transactions says that at least in some instances there were no such services. Those examples come on top of recent acknowledgments by major companies in disparate fields, such as Kmart and Xerox, about revenue they've claimed that has subsequently been questioned by regulators. "I don't want to say it's an epidemic, but we've seen enough problems that it concerns us. We need to hit this pretty hard," says Charles Niemeier, head of accounting of the SEC's Enforcement Division. "Some companies were trying to give the appearance of economic activity when there was none." The SEC's crackdown, which began after Enron's collapse, has widened in recent weeks as the agency found more problems. It represents the agency's first comprehensive look at transactions directly affecting revenue, which even more than profits or earnings fueled the stock-market boom. Many investors had come to rely heavily on the revenue figure in recent years as the most reliable measure of a company's health. Questions about revenue -- even more than the earlier investigations of Enron and other companies accused of using accounting tricks to inflate their profits -- could cast the widest pall over the outlook for future stock-market growth. The SEC is also scrambling to respond to criticism that it didn't do enough in the past to prevent such finagling. Many of the practices the SEC is now investigating were fully disclosed in filings with the agency. Its crackdown also comes as Harvey Pitt, its new chairman, faces skepticism over whether he will be able to effectively police the accounting industry after representing auditing firms as clients when he was in private legal practice. The stock market's sharp rise and obsession with revenue growth in the late '90s -- followed by abrupt halts in both -- put more pressure on companies to boost their revenue figures. Sales per share for companies in the Standard & Poor's 500-stock index (excluding financial-services and certain other companies) grew 26.2% cumulatively between 1995 and 2000, nearly double the growth rate for the previous five years, according to Bear Stearns research. By the time the tech boom began to fade in 2000, such revenue-boosting tactics may have become widely used as a survival tool. "Coming out of the bull market, no one wanted to be the first to say they weren't making their numbers," Mr. Niemeier said. Regulators are examining several ways they believe companies misleadingly book revenue. "Round-trip" deals between companies typically involve a swap of assets or services back and forth without any real gains. SEC officials are increasingly concerned that such round trips had no real business purpose other than inflating revenue. SEC officials are investigating L90 Inc., Homestore.com and Hi-Speed Media for wire transfers that moved money among the three companies, in transactions that became increasingly complex and made a paper trail hard to follow. Marketing-services provider L90 engaged in a dozen barter transactions, said a lawyer familiar with them. He added that in many cases the amount of money that was sent via wire transfer to the other parties was identical, with L90 booking the entire amount as revenue. In one transaction the lawyer described, L90, Hi-Speed and Homestore each sent wire transfers for similar amounts the same day, all purportedly for advertising services. L90 booked the difference between its outgoing transfer and its incoming transfer -- $250,000 -- as revenue. Hi-Speed Media confirmed the basic transaction, though it differed about some details; L90 and Homestore declined to comment on the transaction. An internal investigation at L90, based in Santa Monica, Calif., failed to find any advertising services rendered by the company, the lawyer says. As part of a restatement announced earlier this month without disclosing the details, L90 lopped $8.3 million, or just over 10%, off revenue previously reported for 2000 and 2001, while booking the $250,000 as "other income" rather than revenue. Vendor financing, another round-trip tactic under scrutiny, is widely used among technology and telecommunications companies to increase sales of their gear to companies that couldn't afford to buy it otherwise. Use of the practice exploded in the late 1990s as many big companies helped support upstarts by loaning them money to buy their equipment. At Lucent, such financing multiplied from a total commitment of $1.5 billion in June 1998 to a height of $8.4 billion in December 1999, according to figures compiled by Lehman Bros. The financing helped Lucent's sales -- and its stock price -- soar. Lucent officials say they "have no reason to believe" the SEC inquiry now includes vendor financing. Lucent's use of the practice is down to $2.2 billion. Lucent was one of the first companies to become known among investors for its aggressive revenue recognition. The telecommunications-equipment maker has been under investigation for two years after voluntarily bringing a host of questionable sales discounts and one-time credits to the attention of regulators nearly two years ago. Among its biggest vendor-financing deals was a five-year pact signed in October 1998 to loan Winstar Communications Inc. $2 billion so the fledgling company could build its network with Lucent equipment. When Winstar filed for bankruptcy protection in 2001, it accused Lucent of breaching its contract. Lucent officials deny such charges. Lucent ultimately wrote off some of its exposure to vendor financing, including an estimated $700 million loss tied to Winstar. Kmart disclosed last week that it is investigating how it handled vendor allowances and rebates, changes that could result in a restatement. ConAgra Foods Inc. restated its revenue and earnings last year after it discovered that a subsidiary prematurely recognized vendor rebates. Meanwhile, companies that offer bundled sales, service and financing to customers in multiyear contracts, such as Xerox Corp., are being examined by regulators for taking too much revenue up front.