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Thursday, April 14, 2005

Open Text, closed case

Open Text, closed case: Sometimes it's not what a company says, but what it doesn't say. Take Open Text Corp. (OTEX: news, chart, profile) , a Canadian software maker. The company is no stranger to readers of this column and my subscription newsletter, Herb Greenberg's RealityCheck.

On March 3, in the newsletter, I raised questions about whether the company is the focus of an SEC inquiry. The company didn't give a straight answer to my query, which was prompted after I was contacted by the SEC seeking copies of a story I had written several years ago regarding the way Open Text recognizes revenue.

Fast-forward to Monday: Open Text announced that revenue and earnings for its third quarter, which ended 11 days earlier, would be lighter than expected; ditto for its fourth quarter.

Why did the company wait so long to fess up? It didn't say, but ThinkEquity analyst Nate Swanson, who sliced his rating to a sell from buy, thinks he knows. In a note to clients he said the delay suggests poor internal and financial controls.

As it turns out, the company said its cost of complying with the Sarbanes-Oxley Act were considerable, which is ironic considering one of Open Text's products help companies comply with Sarbanes-Oxley.

posted by Brian Moran @ 10:14 AM   2 comments

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