Red Hat restatement triggers legal attacks

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And take two years to bail out?

Why is it that none of the financial sheets or scandal mongers are following your line? Is it just possible that the public information is the truth? The accounting change was suggested by the company's internal auditors and adopted by Red Hat. Or to go further...

The Linux vendor's shift is to a "more conservative accounting method. We know of only one other company in the industry that's doing this," said Dion Cornett, managing director of Decatur Jones Equity Partners LLC.

The shift from monthly to daily revenue accounting for subscriptions has the effect of moving revenue that was previously recognized in the first quarter of a subscription into the final quarter of the agreement, Red Hat officials said Tuesday.

Red Hat's stock has been roiled by the resignation of its CFO on June 14, followed by a projection of revenue June 17 for upcoming quarters that disappointed investors. At the same time as its quarterly earnings were announced, Red Hat disclosed that it was answering a Securities and Exchange Commission inquiry concerning its revenue. "Investors have beaten up the stock. It's been hammered," says Cornett, who now considers Red Hat a good value for long-term investors. The stock's price has fallen from more than $28 per share to about $16.

There's no scandal behind either the CFO's resignation or the SEC inquiry, Cornett says. Red Hat's own auditors, PricewaterhouseCoopers, suggested the accounting change and the company announced that it would adopt it in the June 17 quarterly earnings briefing, Cornett says, adding that "it was an unfortunate confluence of events."

Now if you want to go beating up on this board because you invested without due diligence - I'm not talking about the accounting change, because it will wash, but overpriced stock is overpriced stock - go right ahead. But if you want to convince somebody, come in with some facts.

BTW, Cornett is porbably right in that the current price is okay for lnog term investors, but I would be willing to bet it will drop further before resuming a climb and there are better places for your money in the meantime.

Posted by: IT_User   Posted on: 07/16/04 You are currently: a Guest | Members login | Terms of Use

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