Fast Search: The Blood-Letting Begins

See this Forbes story for the latest news on the situation at Fast Search (& Loose Accounting) & Transfer:

  • Layoff of 148 employees
  • Reduction in operating costs of approximately $12M/quarter
  • Up to a $55M one-time restructuring charge
  • Of which $25M will be cash (e.g., severance)
  • And remaining up to $30M will be non-cash

The non-cash write-offs are the most interesting ones. In the slide presentation from today’s conference call they say the $30M in non-cash charges will be for:

  • Internally developed software. This means some amount of previously capitalized R&D has now been decided to be worthless. (This is why conservative software companies don’t capitalize R&D.)
  • Acquired technologies and customers. I’ve never heard of carrying acquired customers on your balance sheet before, but saying you’re writing off acquired technologies means that some products or work-in-process R&D you had previously acquired and put on the balance sheet as assets have since been decided to be worthless.
  • Specific accounts receivable provisions. (What’s the PR rule? Always put the thing you want the least focus on 3rd in a list of 4?) I don’t know what “specific provisions” are, but I do know that writing off accounts receivable (AR) means that customers aren’t paying for deals that you previously reported as revenue, either because your agreements weren’t actually binding (and the deals should never have been reported as revenue in the first place) or because customers aren’t happy and are simply refusing to pay. One does wonder how much in additional AR write-offs is buried in this otherwise opaque $30M pool.
  • Property and equipment. I’m not sure what this is, to be frank. It’s hard to imagine walking into a building one day and deciding it’s become worthless. Perhaps it’s more about computers or about their planned real estate consolidation.

In addition, Fast provided 2007 guidance of ~$160M, which is slightly down from the reported 2006 revenues of $162.6M (see page 25).

Somewhat amazingly, for a company that on May 31 thought it was going to do “$53.5 to $57M” in the quarter ended 30 days later and did $34.1M instead, Fast gave guidance for revenue growth for “succeeding years” (i.e., beyond 2007) of “30%+”.

Here I was thinking it was bold to provide 2007 guidance under the current circumstances, and they’re giving guidance for 2008 and beyond.

See the FAQ for disclaimers. See these posts (Fast Warns, Who’s Accountable) for more on the story.

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