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.

Technology Stocks : IFMX - Investment Discussion -- Ignore unavailable to you. Want to Upgrade?

To: The Gambler who wrote (9952)	3/14/1998 6:22:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 14631

My thought here is that companies like ORCL use book work to control how and when the revenue shows up in terms of earnings. It is much better to give the investor a very consistent earnings growth picture than one that is up and down even though the average growth rate is still good. What motivates this approach to book work is that many market participants react from quarter to quarter with their unrealistic expectations on corporate earnngs growth which effects management's vested interests and the company's ability to utilize equity financing in the future. From what I understand, this accounting approach takes "reserve" type of accounts on the books among other earnings engineering practices such the occasional channel stuffing. This approach of engineering the quarterly earnings report is also popular with many other companies, particularly businesses in the high-tech sector like Microsoft. So when a situation comes up like Asia, this is an opportunity for them to once again "rebalance" the books without it being too obvious to their shareholder. At least this is what I would do if I believed in that practice of the engineering of earnings reports, which certainly I do not agree with. Or if I had a slowing of actual earnings growth that I wanted to mask, last quarter would of been the opportunity to write off as much as I can since I would have the excuse of the Asian economic troubles to point to. If agressively done, this can also boost the reported earnings of future quarters. The games companies play! Apart from what the motivation may be in Orcale's case, I do think something is going on here other than a straightforward reporting of revenue and earnings. But then this is just my opinion. I do not have any specific figures to support my concern. Has enyone else here have seen evidence of this "engineering of earnings" from Oracle now or in the past? I do want to note here that this business practice which I refer to of engineering the earnings picture is operating in the "grey area" of accountability as defined by GAAP. So I am taking about something different from explicit misrepresentation of revenue and costs on the books. Also each type of business has what is considered commonly accepted accounting practices that may not be appropriate to other types of business. The high-tech sector comes with its own unique business environment and operating practices, and formally accepted accounting requirements pertaining to this sector of business are still in the process of being developed. Microsoft is being looked at as a reference example by those who define GAAP accounting rules and advisories. The accounting practices of Microsoft is being closely scrutinized to help determine what is considered appropriate in the accounting practices undertaken by high-tech companies...or so I have read. Any comments or feedback? Bob Graham