More on Fast's "Extensive" Profit Warning

See this Forbes story for more information on the situation at Fast Search & Transfer. The shortfall seems bigger than I previously posted:

  • The 2Q07 revenue guidance I cited was evidently the bottom of a consensus range of $50M to $60M (see below)
  • The company’s new guidance is $34M to $38M
  • The company’s 2Q06 revenues were $38.5M (though the SEB Enskilda analyst says that “historical revenue figures are now called into question,” seeming to suggest a possible restatement.)

Quotes from the Forbes story:

Fast Search & Transfer fell 0.3 to 10.45 [NOK] as analysts got to grips with the implications of the internet search firm’s extensive profit warning last Friday.

Last Friday shares in Fast slumped almost 30 pct after it warned that its second-quarter results were unlikely to meet market expectations, with sales coming in at 34-38 mln usd compared to what analysts say is a consensus forecast of 50-60 mln.

The group blamed ‘changes in business practice’ and the tightening of internal control procedures, along with lower sales, a rise in exceptional items and the need for an increased provision for bad debt.

Analysts had already expressed serious concerns about Fast’s accounting procedures, and particularly the aggressive methods of recognising revenues. However today they said Fast’s profit warning had been even more severe than had been expected.

[…]

The broker said that despite previous warnings over margins, strong top-line growth had ‘continued to support the investment case’. SEB said last week’s warning had ‘called the historical revenue figures into question’.

‘Its profit warning was more extensive than our concerns about its aggressive revenue recognition and receivables write-downs,’ the broker said, arguing that the firm’s cost base is ‘clearly geared to significantly higher revenues than the company expects’.

[…]

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