Tuesday, 26 February 2008

When will they ever learn?

Last week Netstore announced that it was undertaking a review into possible past accounting discrepancies. It also put a ‘For Sale’ notice up. See Netstore invites bidders for March slowdown CRN 25th Feb 08.

As ever the ‘discrepancies’ relate to revenue recognisition and the associated cost allocation. I really don’t know how many times this lesson has to be learned in our industry. It almost put Oracle out of business in the early 1990s and there have been countless examples since. Having sat on many boards in the last 20 years I am still amazed at how much ‘discretion’ there is on the subject. Also how complicit auditors can be when faced with a CEO who wants to treat it in a particular way. (I commisioned the cartoon below for an article I wrote in early 1999 - see nothing changes!) It has certainly made my life as an analyst, comparing Company A with Company B, difficult. The problem survives in a big way even today with, for example, different companies treating their ‘investment’ in the NHS IT project in different ways and some software companies expensing software development and others capitalising it.

Anyway, much to the chagrin of Netstore shareholders, it looks like one obvious buyer – Computacenter – has ruled itself out of the running. In his typical blunt style CRN reports “Mike Norris, chief executive of Computacenter, one of several firms linked with Netstore in the national press, said: “I can categorically say we are not interested in Netstore and never will be.””

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