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

To: Bill Harmond who wrote (213)	10/30/1997 11:56:00 AM
From: Trader Dave	Read Replies (1) \| Respond to of 504

yes, they are consistent with goldman and montgomery. It sounds like the $50 million/5.5 year deal with FDC was to be recognized with $10 to $15 million short term (because that chunk was for fdc's internal use) with the balance to be recognized ratably over the contract life. Supposedly, the auditors at E+Y have reversed themselves and are now asking the company to recognize all revenues ratably over the contract life. this will crush 2q and 3q results and push revs into 4q 1997 and beyond. if this is the truth, it's not too terrible, but we won't get confirmation until company reports its results in early october. it's probably a buyimng opportunity for the courageous. TD

To: Bill Harmond who wrote (213)	10/30/1997 12:06:00 PM
From: Clam Clam	Read Replies (1) \| Respond to of 504

Cowen says Q2 will need to be restated and Q3 will be substantially different than previous expectations. No value added from Cowen. Maintained their Strong Buy. This is a push out as $50mm from First Data is still guaranteed in the contract over 5 years. But PEGA's valuation was clearly built on upside to the numbers (push-ins), not push-outs. This was just atrocious work by E&Y. PEGA consulted with E&Y on the recognition when negotiating the deal and now E&Y is changing their minds. Then again, PEGA management should have known better than to keep its creative accounting policy when it was going public. I guess that was probably Goldman Sach's fault but Goldman relies regularly on the accounting firms so I guess it comes back to E&Y. Ironic that this stock carried a big premium b/c of its 'visibility.'