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

To: Trader Dave who wrote (217)	10/30/1997 12:51:00 PM
From: Clam Clam	Read Replies (1) \| Respond to of 504

Cash flow IS the issue. My problem with the original accounting is that it wasn't based on basic accounting concepts. PEGA instituted a policy that was good for predictability even though the underlying business wasn't predictable. This caused a disconnect as the accounting no longer pertained to reality. They booked revenue despite the receivable not being current - note the DSO's.... They argued that it was guaranteed in a non-cancelable contract and everyone signed off on this as fine. Well, with DSO's no longer relevant, you just had to trust the company was not being aggressive. As we have since learned, the revenues are guaranteed but this didn't lead to predictable revenues. Accounting is not a science as it is subject to interpretation and arguing with auditors is a regular event with small, rapidly-growing companies. PEGA argues that since FDC was using the software in-house, it should be recognized. E&Y says now it shouldn't. Who knows the details of this contract?? Certainly not us. I have to think E&Y came up with a decent reason why it shouldn't be recognized. After all, PEGA is E&Y's customer and it isn't great for customer relations to be the cause of a 33% drop in the stock price. My problem with Goldman is they should have known this was going to be an issue amongst the buy-side and should have advised the company to change policies a year or two before going public. They relied on E&Y as the experts but Goldman really should have known better. Do you disagree with this?