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

To: akidron who wrote (10403)	4/23/1998 11:06:00 PM
From: frank doolittle	Read Replies (1) \| Respond to of 14631

Using the low end of your numbers for each qtr equals .44 for the year, Does this also translate into 1.4 Billion in revenues this year?

To: akidron who wrote (10403)	4/24/1998 11:08:00 AM
From: Mark Finger	Read Replies (2) \| Respond to of 14631

>>I think that there are in fact very few expenses in relation to the >>restatement income and the defferred income from contracts and that >>a great deal will flow through as profit. I think that there is a misunderstanding of how the effects of "defferred income". You seem to think it is all "restatement income" that is just waiting to be recognized (I think). That is not true. First, there are two components to it. The first part is the fact that many companies pay for a year of "maintenance" at a time. This is services income. It probably accounts for $80-90M of the deferred income, or a little more than the amount of "services" income recognized each quarter. If you want to verify this, go back to the pre-restatement reports and look at the size of this number. When they restated the numbers, they also changed the way that income from VAR's and distributers is recognized (about half of total license sales each quarter). Now that portion is not "recognize" or counted as sales until and actual "end user" takes possession, even though IFMX may have gotten cash from the VAR or distributer. That cash is held in the deferred income account until they get a report from the middleman that shows the product has moved out of the warehouse/store/office to a customer. The difference is that IFMX continues to sell to these VAR's and distributers. I would expect this area to reach "steady-state" or even positive growth by later this year (new flows to VAR's and distributers matching the flows to end-uers). I think that the steady state in deferred income account will be in the $150-200M range, and then will grow to match the growth in overall sales in the future. >>it seens to me entirely possible that the co makes 7-10 this Q 10-12 >>next, 12-17 next and 15-20 cents for the fourth Q. First, note that your highest numbers only add up to .59, so I will use these numbers for the following. $.20 means that there would have to be $30M profit in Q4. Assuming that this is fully taxed, (38% rate), the operating profit would have to be just under $50M. Now, the margin in increased sales (cost of each added dollar of sales) is nearly 50%. That means $100M of added "recognized" sales required. Since only a portion of sales to VAR's and distributers (nearly 50% of license sales) are recognized in the quarter, that means that an additional $30M of deals would have to be closed, bring the total to $130M. This total means around 70% improvement over last year's Q4 activity. This is simply too much to expect. My feeling is that IFMX would be doing well to do double the average industry growth in sales activity. Since current DBMS y/y sales activity is expected to be in the 20-25% this year (at best), IFMX simply cannot be expected to do more than 40-50% (and not all of that will be "recognized" because of the new accounting rules).