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Technology Stocks : Siebel Systems (SEBL) - strong buy? -- Ignore unavailable to you. Want to Upgrade?

To: APPTRADER who wrote (1987)	7/26/1998 11:54:00 AM
From: Melissa McAuliffe	Read Replies (1) \| Respond to of 6974

Steve & APPTRADER, How much the customer pays up front with the contract is not the issue with respect to deferred revenue. I know of very few (i.e.none)customers who will pay the entire license fee up front. But they all usually pay something otherwise most vendors wouldn't even take the contract. But just because cash was received doesn't mean that the revenue can be recognized. So separate deferred revenue from cash received for this purpose. Cash received has nothing to do with it. When a customer signs an agreement, the vendor really has three things it can do: 1 book the entire contract to revenue in the current period, 2) book part of the contract as current period revenue and part of it is booked as deferred revenue 3)book all of the contract to deferred revenue. Which of the three depends on how the contract is written. Just because a customers makes quarterly payments over the course of a year doesn't mean that is deferred revenue if these payments aren't contingent payments. Though I believe that if the payments go out longer than a year, those payments have to go to deferrred revenue. The first year's maintenance is typically included in the license fee anyway and always goes into deferred revenue to be recognized monthly over the first year of the agreement. But this is no different from historical quarters. (Obviously if they prepay additional maintenance this goes into deferred revenue also). The primary reason that woud make deferred revenue increase significantly is a higher percentage of contingent contracts. My conjecture in the case of sebl is that there were simply a higher percentage than usual of contingencies in Q2 contracts. If you think about it, any customer who was buying the support sw was doing so knowing that the current release would be obsolete in a few months. And I'm sure the competition did their best to create tremendous FUD (obviously unsuccessfuly). What's good about this is that this didn't stop them from licensing the software. But I think that potentially it might have made for some more difficut contract negotiations. This may have even impacted some of the SFA contracts for all I know. Thus more contingencies than normal. This topic isn't simple. I tried to keep this as short as I could... But this increase in deferred rev. thus increasing DSO's is definitely not a negative and IMHO is most definitely tied to the increase in deferred revenue. As I've said before, I actually see this as very positive.

To: APPTRADER who wrote (1987)	7/27/1998 10:05:00 AM
From: j_b	Read Replies (2) \| Respond to of 6974

Don't make the mistake of equating revenue with receivables (or billing). Many/most times, billing is related to contractual issues, which only coincidentally have the same timing as revenue recognition. For example, your cable company bills you in advance for service, so they set up a receivable, but until they actually provide the service, they can't book the revenue - hence, deferred revenue. If the cable company suddenly doubled their deferred revenue, that would be a good thing, since (assuming they provide the service) it would mean they had doubled the number of subscribers. Of course, since they now have much higher receivables (receivables were created when they sent you the bill), but no corresponding increase in revenue yet (not until next month), the DSO's look terrible. I'm not saying that's what happened with SEBL, but deferred revenue increases or increases in DSO's are not necessarily bad. If you still have concerns, contact SEBL directly for more info. Don't forget to let us know what you find out, of course <g>