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Technology Stocks : BMC Software -- Ignore unavailable to you. Want to Upgrade?

To: General Crude who wrote (593)	2/25/1999 9:59:00 AM
From: vibaby	Read Replies (1) \| Respond to of 1492

BMC Software Restates Several Quarters of Earnings, but Where's the Press Release? By Herb Greenberg Senior Columnist 2/25/99 6:30 AM ET When does immaterial become material? When the SEC says so, which is why BMC Software (BMCS:Nasdaq), without fanfare or a press release, has quietly restated three quarters of earnings. BMC is a leading vendor of software that companies use to monitor and fix computer problems. Its troubles related to the restatement started last March, when it bought BGS Systems. Because of BGS' relatively small size, equal to only about 10% of BMC's revs, BMC deemed the acquisition immaterial. That's where the controversy comes in: The deal was structured as a pooling of interests, but BMC accounted for it as a purchase. Usually, with a pooling, a company restates prior quarters to show how the company would've performed if it been a single entity for several quarters. "This gives us the proverbial apples-to-apples comparison," says Donaldson Lufkin & Jenrette analyst Joe Farley, who first raised questions about the deal's accounting last December. BMC, however, simply lumped BGS' revs onto each subsequent quarter. The result was to make BMC's revenues look like they were speeding ahead in the mid-40% range. Which brings us to the restatement: Wednesday, three amended quarterly reports and one amended annual 10-K were filed with the SEC. In the filings the company said it was restating prior periods because it decided that what had been immaterial is now material (which goes to show how arbitrary and subjective these judgments are). The restated numbers show just what Farley had been concerned about: Sales growth wasn't nearly as fast as Wall Street had been led to believe; total revenue growth was only in the low to mid-30s, rather the mid-40s. Was BGS really just a smokescreen to cover slowing growth at BMC, or are the products acquired through BGS not meeting expectations? Hard to say. "My feeling is things don't happen for no reason," says Farley. Turns out he's right: Late yesterday a BMC spokesman told me the company was forced by the SEC to make the change in materiality and do the restatement. The SEC, as the company had previously disclosed, was reviewing BMC's treatment of in-process R&D associated with prior acquisitions. At the same time, he said, the SEC decided to also crack down on the willy-nilly use of "immaterial" by companies. "The SEC said there's no such thing as immateriality," the spokesman said. Why didn't BMC issue a press release announcing the restatement? The spokesman said it plans to do so Friday morning, assuming the filing isn't challenged by the SEC. "It's technically filed, but not approved," he said. "It hasn't yet gone effective." In theory, he adds, the SEC could still change its mind "and make us do something else. ... We're in a never-never land." You can say that again.