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

To: Trader Dave who wrote (255)	11/10/1997 7:34:00 PM
From: Geof Hollingsworth	Read Replies (1) \| Respond to of 504

Given the state of competition among the big 6 accounting firms, no-one throws in the towel (and walks away from the fees) on a publically-traded client out of frustration. There's definitely more to it, and the company is doing itself no favors by delaying the release of details on what went on. Payments of the sort discussed are not unheard of in this industry. We were invested years ago in a company which we wound up selling to FFMC, which I think is one of the companies which merged to form FDC. They had software for community bank operations, which they ran on an outsourced basis, and a regular deal would be something like "we'll contract on an exclusive, non-cancellable basis to do all of your processing for the next 7 years for $X million/year, and also agree on day one to buy an exclusive license to your home-grown software for $Y (one-time)". The up-front payment was clearly (but not explicitly) factored into the annual payments. Why? At the time, the community banks were in trouble with the Feds, had bad loans they needed to write off, and didn't have enough book equity to do so and continue operating. The above transaction let them book the $Y million as a capital gain and enhancement to equity, helping get the regulators off their backs on capital adequacy. People who exploit that part of the universe where financial reality and accounting reality don't meet can make a lot of money-you just need to be out of the way when the two suddenly collide!