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Red Hat in trouble over accounting practices

RedHat is restating 3 years of earning.

The amount- 1.5 $ Million is quite paltry by the standards of Enron and Worldcom. Hope they dont get into any more trouble.

http://cbs.marketwatch.com/news/story.asp?guid=%7BAFC8D2BB-CC05-4F9B-8B0E-63CD12C26E1E%7D&siteid=google&dist=google

http://www.fool.com/News/mft/2004/mft04071414.htm

Karthik
Wednesday, July 14, 2004

So.. the OSS folks now commit frauds, too.

Majs
Wednesday, July 14, 2004

Read the article, it's hardly fraud. Bottom line is their total revenue is unchanged, they just restated which accounting period some of it is recognized.

Tom H
Wednesday, July 14, 2004

Boy, IBM…or sun…time to purchase these guys!

Right now, Red Hat is a bargain, and Cleary a great gem in the Linux industry. This accounting issue is a non issue.

If I was MS, or Sun, or IBM, or CA….I would snap up red hat right now…..

In fact, that is what SCO should have done a long time ago!!


Albert D. Kallal
Edmonton, Alberta Canada
kallal@msn.com
http://www.attcanada.net/~kallal.msn

Albert D. Kallal
Wednesday, July 14, 2004

I doubt Sun's going to be snapping up anybody. More likely they're be used as the next SCO, sent out to do Microsoft's dirty work by filing a bunch of patent infringement suits. Which is why IBM won't touch Red Hat either.

Anony Coward
Wednesday, July 14, 2004

Tom H:

Recognizing revenue in the correct period is actually a pretty big deal. Microsoft got in a lot of hot water because they were sandbagging revenue for "rainy days". Granted, the sums involved were an order of magnitude larger.

Rob VH
Wednesday, July 14, 2004

I was responding to the Enron/WorldCom reference.  There's a difference between recognizing revenue too soon and completely fabricating it. But you're correct, both are wrong and will get a company in trouble (and I expect Microsoft's sums were more like 3 or 4 orders of magnitude higher).

Tom H
Wednesday, July 14, 2004

"So.. the OSS folks now commit frauds, too"

If there was any fraud, it was committed by managers, not by every last person who has ever touched source code that ended up on a redhat CD.

Besides, don't you want all the OSS developers to be just like Microsoft anyway? Wouldn't fraud be a good start along the route to traditional business practises?  :)

If there's anyone still surprised that managers + money = "creative accounting", then they've got bigger problems than worrying about who's using what software license.  :)

sheesh, you expect honesty from managers?
Wednesday, July 14, 2004

"and I expect Microsoft's sums were more like 3 or 4 orders of magnitude higher"

If redhat's figures had been just 1 order of magnitude higher then everyone would have known the numbers were being made up but at Microsoft the same numbers would still indicate a mistake with the petty cash  ;)

sheesh, you expect honesty from managers?
Wednesday, July 14, 2004


If you guys want a scary reading, check out what are called "Generally Accepted Accounting Practices".  It's a complete and total joke.


What happened to Redhat happens to almost any company at some point...

You have a big (multi-million dollar) sale.  Everyone signs the contracts on March 20th, so the money is coming.  The actual transfer of cash happens on April 2nd.

Okay, so now when should that be credited to their balance sheet?  The obvious answer is when you get the cash in April.  The less obvious and share-holder conscious answer is March when the deal was signed.  This allows for higher revenues to go on file during the first quarter.

Now, if the deal is delayed for a few months and/or re-negotiated, then they have to go back and adjust their previous statements.

KC
Wednesday, July 14, 2004

If you want frauds, the guys behind the opensource JBoss were accused of astroturfing:
http://www.google.com/search?hl=en&lr=&ie=UTF-8&safe=off&c2coff=1&q=jboss+astroturfing&btnG=Search

Further Sun has accused them of being untruthful in how they represent the licensing issues... but I assume they're both lying and ignore the issue. ;) Maybe only one is though.

Tayssir John Gabbour
Wednesday, July 14, 2004

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