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Technology Stocks : Hyperion Solutions (HYSL) - An Analytical Gorilla? -- Ignore unavailable to you. Want to Upgrade?

To: Reginald Middleton who wrote (94)	8/25/1998 4:32:00 PM
From: Turs	Read Replies (2) \| Respond to of 471

Reg- I will have to take exception with several of your assumptions. It's one thing if HYSL spends R&D in 1998 on the next version of Essbase, expenses it in '98, then reports the revenue in '99 and beyond without any further R&D being spent at all. That would make R&D look almost like a one-time expense to be ignored in '98 and expensed artificially to inflate future earnings. However, EVERY SINGLE YEAR AFTER, Hyperion subsequently spends more R&D dollars for the development of other products, as well as the NEXT version of Essbase, expensing all of it. Essentially, whatever R&D from Essabase that would have been carried into '99 (through capitalizing it) but is not, it is replaced by the full expensing of the current year's R&D. On an ONGOING basis, expensing ends up having the same effect as capitalization. The problems with capitalizing are twofold: 1) when a firm that fully expenses begins to capitalize, which artificially inflates the bottom line and 2) when any company capitalizes, because there is so much leeway involved in determining how much to capitalize, when a product is feasible, etc. With expensing, there are no questions and no ability to manipulate. As far as deferred revenue goes, while you can make a similar argument to the R&D capitalization as far as manipulation goes (drawing from it when needed), it's hard to argue against the "strength" of earnings from a company pushing its revenue into future quarters and years (which of course has to be justified by needing to meet some future obligation). Re: Goldman: while all sell siders are probably conflicted, what's your point? Are you saying that Goldman isn't going to downgrade any stocks until their offering? That's soooooo realistic. And just because they have a banking interest does not mean that 1) they are incapable of making the right call on the stock and 2) their recommendations do not carry weight with those who buy the stocks. If people feel comfortable owning HYSL because Sophie and Chuck like it, that's gonna be a major factor behind the stock's strength. After all, the inefficiency in the market is not caused by the information that is out there as much as it is by people's perception OF that information. Look Reg, I don't think everyone wants to read your generic interpretations of the accounting issues of investing. If you want to cite something specific, cool. But lets try to keep these posts from getting too academic.

To: Reginald Middleton who wrote (94)	8/25/1998 5:49:00 PM
From: Bush Hogger	Read Replies (1) \| Respond to of 471

What are you trying to say? HYSL should capitalize software? The fact that Arbor didn't have any capitalized software on the balance sheet and Hyperion didn't have very much is a positive for investors. I would guess that when Hyperion Solutions takes a merger charge in the upcoming quarter they will write off all of Hyperion's capitalized software, in order to clean up the balance sheet, although it is already pretty good. I personally would rather short stocks with a lot of capitalized software and buy stocks with very little -- for obvious reasons. Reg, good luck buying stocks with a lot of capitalized software, I don't recommend this strategy, but if it works for you go for it. Secondly, Goldman Sachs IPO has absolutely nothing to do with what their research analysts are going to say about the individual companies that they cover. This is a very respected firm, they are not going to soil their reputation because they are doing an IPO that will "sell itself."