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Technology Stocks : S3 (A LONGER TERM PERSPECTIVE) -- Ignore unavailable to you. Want to Upgrade?

To: Ken Muller who wrote (7602)	11/8/1997 1:31:00 PM
From: Jan A. Van Hummel	Read Replies (1) \| Respond to of 14577

Ken, Thank you but NO thank you. To answer your questions: 1. We don't know what was done in the past and for what length of time. When there is a growth in sales it is a lot easier to "hide" erroneous practices; when there is a decline in sales, they will surface. Does not mean this happened in past years, and that it was done intentionally, but growth generally allows you to sweep a lot of problems under the carpet. Let's wait till they come with the results of the current independent audit and then pass judgment. 2. There are two sets of figures involved. One set is sales to distributors, which is readily internally available; the other is sales by distributors to consumers, which needs to be gathered from the distributors. What is on the distributors shelves is essentially inventory. The error is that it was accounted for as a sale, not as inventory. This may have led to excess production to replenish inventories that in actuality were higher than "known." If they kept two sets of inventory figures there would be intent and I would consider that fraud. Complicating factors are e.g., how do the distributors earn their keep, or how are the sales people rewarded? Commission-based? Fixed salary? Combination of the two? How are bonuses/stock options determined? We are dealing with numerous levels and departments of the organization. Most people will do what they get rewarded for. If you are a salesman on commission you like those sales to be accounted for today, because that means money in your pocket today. Again, that is not to say this played a role, but it could. I just want to illustrate there is a little more to it than meets the eye. 3. Management has no choice but to comply with the proper procedures, especially after this event. Regardless of what is found, I am still of the opinion that since this happened on their watch there needs to be a change. This is the obligation of the Board of Directors and if they don't live up to that obligation they should be voted out. IMO future statements will be more accurate than they have ever been before. If there was criminal intent and action those held responsible will be out. Period! If not, replacement of personnel would be up to the Board. 4. I concur. 5. Unfortunately, professional investors/analysts have a leg up on us. This is a full-time job for them. They communicate with many companies and get a lot of feedback straight from the horses' mouths AND in a most timely manner. We generally get the news well after the fact and then not all of it. These professionals also know how to read management statements and responses to questions asked. Often they read much better (than you or me) into what is said, and more often what is left out. When there is good news to spread, it is there now, when it is bad it always takes time, but they are always first. I don't like this disadvantage but that is the reality. Another reason to take a longer term approach. Anyhow, Leo II, the job is still yours. Jan

To: Ken Muller who wrote (7602)	11/9/1997 1:52:00 PM
From: Michael	Respond to of 14577

<3. Should you reach the conclusion (as I have) that S3 management directed this accounting change, how can you (or anyone) believe future statements by the company? > It is simple Ken, new management. If this doesn't spark a change in management, then this company is a total loss. If you look at the Oxford Healthcare problem, which they blamed ona computer problem, the CFO resigned. In this situation the new CFO wasn't even there when a lot of this took place. I think logically, if a head is going to roll, it must be GJ's.