Red Hat Vs. The Lawyers

ajs writes "On July 13, Red Hat announced that they would be re-stating their revenues for the last 3 years. This sent a shock-wave through their stock price, but early analysis seems to indicate that it's not that big a deal (the end-result is the same for a given contract, but it will be counted toward a different month). But then the really bad news hit. [Opportunistic lawyers] are taking this opportunity to punish Red Hat for reporting the change and the resulting drop in price. Red Hat is doing well, but can they weather major class action law suits without harming the business? How have other technology companies dealt with this sort of suit?"

Comments

Well, posting the contract revenues WAS a scam

[prostoalex]

From reading the submission blurb it seems that those impeccable white knights on horse just made a mathematical error (must've been using an older kernel) and the resulting slump is pure emotion by the investors.

Well, it's not. RedHat's Q4 2003 earnings are now $0.02 instead of $0.03 which is either a 33% or 50% reduction, depending on which way you count, and the stock fall represents just portion of that.

Also, even after fall, Red Hat trades at 133 P/E, which is way overvalued even for this sector (MSFT, for example, is at 40.59).

People don't like to be lied by management when they invest their money into the company, and people will launch lawsuits when they deem something inappropriate had been done.

It's a pretty minor restatement - READ THE ARTICLE

[xmas2003]

We're over 25 posts, and in the rush to be the first poster, it doesn't seem like anyone has actually READ THE ARTICLE (but this is /.) ... so let me repeat the key point from the Press Release linked above:

... the Company determined it would be appropriate to stop recognizing revenue for subscription agreements on a monthly basis - a method it has consistently applied for the last five years Ð and start recognizing revenue on a daily basis over the particular contract term.

This isn't the typical "ooops, we recognized all the revenue of that 5-year contract this quarter" shin-an-igans that you typically read about - this isn't that huge of change - as referenced in the article, take a look at the restatement table and the net income/loss per share hardly changes.