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Red Hat Software Businesses Software Linux

Red Hat Vs. The Lawyers 475

Posted by simoniker from the bad-dudes-vs.-dragon-ninja dept.
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?"
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Red Hat Vs. The Lawyers More

Red Hat Vs. The Lawyers

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  • No wonder books get cooked (Score:3, Insightful)

    by Anonymous Coward on Wednesday July 14, 2004 @09:24PM (#9703440)
    It's no wonder some companies cook their books. Sometimes you're damned if you do and damned if you don't.

    I'd really hate to see Red Hat take a huge hit from something stupid like this.

  • What?! (Score:3, Insightful)

    by SQLz ( 564901 ) on Wednesday July 14, 2004 @09:25PM (#9703441) Homepage Journal
    Coupled with this disclosure, the Company also revealed that it was the subject of a review of its Form -10K by the SEC.

    This is freaken sad. SCO has not been investigated by the SEC by Redhat was? My tax dollars at work.

    • Re:What?! (Score:5, Insightful)

      by superpulpsicle ( 533373 ) on Wednesday July 14, 2004 @09:34PM (#9703501)
      Well even if the SEC weren't involved, Redhat had a rough 2004 by pulling the plug of the redhat distro in favor of the corporate version and fedora. I know so many diehard fans going the way of debian and suse. Losing fan base will kill your company faster than the SEC.

      • Re:What?! (Score:3, Insightful)

        by dekemoose ( 699264 )
        Losing fan base doesn't hurt a company. Losing customer base does. Red Hat is definitely losing status as the favored distro among people with servers in their basement. We'll see if they can manage with the folks who have servers in a datacenter.

        • Re:What?! (Score:4, Insightful)

          by hendersj ( 720767 ) on Wednesday July 14, 2004 @09:43PM (#9703574)
          For many tech companies, fan base = customer base. Or at the very least, the fan base strongly influences the purchases made from the customer base.

          Lose the fan base, there's a very good chance you'll lose your customer base. Customers are fans, too.

          • Re:What?! (Score:5, Insightful)

            by 0racle ( 667029 ) on Wednesday July 14, 2004 @09:53PM (#9703642)
            Customers are often far more pragmatic then fans. When Red Hat ditched Red Hat Linux in favor of RHEL, the fans whined and went to Debian, whereas customers thought for a moment and realize RHEL had better support and were therefor happier.

            • Re:What?! (Score:2, Insightful)

              by hendersj ( 720767 )
              A short term gain at best, though - the "fan" base largely deserted RedHat, and the customers who decided that this was a good thing became the new "fans".

              It's really just a semantic discussion, though. Customers that aren't fans of a technology eventually look to other technology solutions.

            • Re:What?! (Score:4, Insightful)

              by AuMatar ( 183847 ) on Wednesday July 14, 2004 @11:11PM (#9704125)
              Except for their non-enterprise customers such as myyself. Which while not a large percentage of their revenue, was a large percentage of their user base and did much in the way of QA for them.

      • Re:What?! (Score:5, Interesting)

        by einhverfr ( 238914 ) <chris.traversNO@SPAMgmail.com> on Wednesday July 14, 2004 @10:10PM (#9703767) Homepage Journal
        First, my opinion is that Red Hat is coming back from this hardship nicely. They are doing an excellent job of determining where their holes in product lines are and filling them.

        I was one of the very vocal opponents of Red Hat dropping their standard distro in favor of Fedora, but I have largely changed my mind.

        The only real issue is that one of my RedHat servers is running 7.x because Red Hat 8 had a glibc bug that prevented one of the programs from working properly, and upgrading to Fedora is going to be *tough.* I wish they made it easy at least to upgrade from RH9 to Fedora (Hear that RedHat?).

        Now regarding this lawsuit, the SEC, etc. I find it encouraging that they are stating that the SEC must *review* (not *investigate*) their accounting statements. In other words, the SEC must probably approve the changes.

        OTOH, the investigation into SCO so far looks more serious. It seems plain that the SEC is conducting a mostly secret investigation, as evidenced by the reports of Baystar being investigated for their involvement. In otherwords, the review of RedHat's papers is routine, while the investigation of SCO is serious stuff.

        Yes, this is your tax dollars at work, and they are working pretty well ;-)

        • A RedHat 9 to Fedora upgrade is easy... (Score:5, Informative)

          by Ayanami Rei ( 621112 ) * <rayanami@nOSPaM.gmail.com> on Wednesday July 14, 2004 @11:04PM (#9704082) Journal
          If you have yum. I swear to god... I did a fresh install, pointed yum at the appropriate mirror, and did a dist-upgrade. The only thing it didn't fix was the /etc/redhat-release still being used in the /etc/issue* banners.

        • Re:What?! (Score:5, Insightful)

          by God! Awful 2 ( 631283 ) on Thursday July 15, 2004 @02:43AM (#9705032) Journal
          First, my opinion is that Red Hat is coming back from this hardship nicely. They are doing an excellent job of determining where their holes in product lines are and filling them.

          I was one of the very vocal opponents of Red Hat dropping their standard distro in favor of Fedora, but I have largely changed my mind.
          Of course they decided to restructure their product line. Revenue from the retail products didn't make a dent in their operating costs, whereas enterprise sales have quadrupled in 4 years.

          But still, keep in mind that RedHat isn't really a software company just yet. With 90% of their >$1B capital invested in (and 3/4ths of their $14M profit coming from) bonds and other securities, they are still more of an underperforming mutual fund than a successful company.

          But it definitely seems likely that a couple of years from now their profit from RHEL is going to overtake the investment revenue.

          -a

        • Re:What?! (Score:3, Informative)

          by scruffy ( 29773 )
          I wish they made it easy at least to upgrade from RH9 to Fedora (Hear that RedHat?).

          For me at least, upgrading from RH9 to FC1 was pretty easy. Going from FC1 to FC2 was much harder (dual boot bug, no boot floppy, among other things).

      • Re:What?! (Score:5, Informative)

        by Pros_n_Cons ( 535669 ) on Wednesday July 14, 2004 @11:13PM (#9704143)
        Yes some red hat 'fans' left but I monitor 3 of fedora's lists and I can tell you there is no shortage of suse/mandrake and a few Debian converts. After the initial "red hat shot my dog" emotional rants people settled down about the whole thing. Check out distrowatch Fedora has 1100 hits per day, second most popular distro behind Mandrake and It's only 9 months old; that's not exactly what I call 'abandon ship' everyone seems to be saying.

      • there's fans then there's fans (Score:5, Interesting)

        by zogger ( 617870 ) on Wednesday July 14, 2004 @11:16PM (#9704152) Homepage Journal
        I just don't get it. With fedora, I'm getting the same deal I was getting with the distro when it had redhat slapped on the label. I get a full OS, the price is right, in my case a few bucks plus shipping, and free security and enhancement updates. When I am stuck on something I go look on google. When I had a boxed set with RH on the label, it cost me 60 clams, and I got free security and enhancement updates. The only difference is I got some redhat stickers and a dead trees version of the manual. When I got stuck on something back then I went and looked on google. I have a better distro with more stuff than two years ago, and it costs me less, so I should be mad at redhat and..huh?

        You make money from free software primarily by using that software in your other, *real* business, building/selling/servicing widgets.

        Redhat got two versions,one sorta free kinda,and one really really free,and it actually costs them to provide it. One for businesses who are theoretically making enough money using computers somehow to be able to pay a fee for the "pro-commercial" version, and another one for hobbiests and enthusiasts who agree to help out and help develop and look for bugs, etc. Seems reasonable to me.

        I don't see what the big negative deal is really. Either version works, the pro version has a different and more tweaked server and some other doo-dads obviously, but you get more support. The really free version has everything you need as well, just somewhat different, I mean apache is apache and whatnot. The money has to come from someplace. I think they made the right move, to both stay in business and keep getting better, and to offer the most to the most people for the most purposes (and most budgets to boot). It's not perfect, but what is?

    • Re:What?! (Score:4, Informative)

      by hendersj ( 720767 ) on Wednesday July 14, 2004 @09:38PM (#9703531)
      Huh? Reports are that SCO is being investigated by the SEC...

      See This [newsforge.com] story on Newsforge for some info about it, reported back in March...

    • It's a pretty minor restatement - READ THE ARTICLE (Score:5, Informative)

      by xmas2003 ( 739875 ) on Wednesday July 14, 2004 @09:41PM (#9703562) Homepage
      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 [redhat.com] and the net income/loss per share hardly changes.

      • It is pretty sad that some greedy lawyers are looking to cash in on this small change in accounting. Coincidentally, I do not believe that either method of accounting for this revenue is incorrect and certainly not illegal. No wonder so many companies continue to maintain bad accounting practices, changing them for the better will get them sued.
    • Wrong. I saw no evidence from these articles of any substantial investigation into RedHat by the SEC, just that they had posed some questions previously that were apparently legitimate since the company did restate their earnings. You may be confused - a class action lawsuit is brought in civil court by lawyers (the aforementioned "ambulance chasers" to use the deragatory for this type of lawyer) who claim to represent the aggrieved class of shareowners. Generally these lawsuits end up benefitting the la
      • The title of this article was "Red Hat vs. The Ambulance Chasers" yesterday, now it is "Red Hat vs. The Lawyers". Since when did /. start worrying about being politically correct. Many of these comments are about the title containing Ambulance Chasers, now they seem irrelevant.
    • Okay, so instead of calculating earnings from subscriptions on a monthly basis, RedHat is now going to calcuate subscriptions revenue on a daily basis. Big "F" deal. Total number of recorded subscriptions will stay the same, total subscription revenue will stay the same. The only difference might arise from how RedHat might have invested that money during an accounting cycle.

      All they effectively did was change a "YY/MM" field to "YY/MM/DD".

  • Buy Low Sell High (Score:3, Interesting)

    by bozojoe ( 102606 ) on Wednesday July 14, 2004 @09:25PM (#9703444) Journal
    Nows the time folks....buy up

  • No matter what... (Score:2, Insightful)

    by TastyWords ( 640141 )
    ...it's going to hurt.

    The longer you go, the worse it's going to be. The best thing is to deal with it as soon as possible and get it behind you. If you wait, it makes it look like you're hiding something or biding your time.

  • I'm most definitely not a lawyer... (Score:4, Interesting)

    by irokitt ( 663593 ) <{archimandrites-iaur} {at} {yahoo.com}> on Wednesday July 14, 2004 @09:28PM (#9703464)
    But it appears that the crux of this case is that Red Hat must prove that the mis-stated earnings were the result of an honest mistake, not intentional fudging (*cough* Enron */cough*).

    That makes it sound simple, but Red Hat will still have to fork out enormous legal fees to win this case, or settle with the firm (hereafter referred to as "ambulance chasers" or "greedy bastards") and fork over cash that way.

    Red Hat is probably in a better position to handle this than most Linux companies (with the obvious exception of IBM), but it has already hurt their stock price, so we'll just have to hold tight and see.

    • Re:I'm most definitely not a lawyer... (Score:5, Funny)

      by Waffle Iron ( 339739 ) on Wednesday July 14, 2004 @10:56PM (#9704035)
      That makes it sound simple, but Red Hat will still have to fork out enormous legal fees to win this case, or settle with the firm (hereafter referred to as "ambulance chasers" or "greedy bastards") and fork over cash that way.

      Red Hat will come out unscathed if they go with the precedent set by the current OS market leader in recent class action suits. They should arrange a settlement where they give coupons for free copies of Linux to the shareholders and random unrelated school districts.

  • Red Hat is still priced for perfection (Score:5, Interesting)

    by fname ( 199759 ) on Wednesday July 14, 2004 @09:29PM (#9703465) Journal
    Rad Hat has annual revenue of less than $150 million. And a market cap just south of $3 Billion. A price/sales of 20. I'm sure Red Hat is a good business, and will continue to grow, but they have to grow a lot to justify that price. And since much of their revenue is for service, their costs will grow as their sales grow (in contrast to Microsoft's Windows monopoly, which requires very few marginal expenses for each sale). Nice company, can't imagine their stock will be much higher in 5 years.

    • WRONG (Score:3, Insightful)

      by autopr0n ( 534291 )
      Redhat's P/E is an amzing 125 [marketwatch.com].

      • Re:WRONG (Score:3, Insightful)

        by fname ( 199759 )
        It's really not complicated. I stated P/S because that what I meant to do; the earnings part of price/earnings is easily manipulated, and when a company is restating earnings, it's probably not the best measure of a company. I prefer to look at price/sales, sales growth, and a guess of a growing company's eventual margins. I think it's a good way of estimating what the earnings will be in a few years. Sales numbers are much harder to mess with, as a 10% change in revenue recognition will completely wipe-out

    • Re:Red Hat is still priced for perfection (Score:4, Insightful)

      by _Sprocket_ ( 42527 ) on Wednesday July 14, 2004 @10:54PM (#9704022)


      And since much of their revenue is for service, their costs will grow as their sales grow (in contrast to Microsoft's Windows monopoly, which requires very few marginal expenses for each sale).

      Good point. However, remember that "service" in this case is more than a helpdesk ticket. Service is also software. Software-as-service takes on two forms.

      The first software service is packaging. All of Redhat's software is Open Source. One can download, build, and configure the exact same system that is bundled as any of the official RedHat platforms. However, Redhat does this for their customers with official RPMs.

      Of course, this service isn't unique. Even if you don't want to package your own RPMs, there are others who will - collected in to public repositories. So why is Redhat's service unique?

      Redhat offers a slow-moving target for enterprise developers. If you're dependant on enterprise applications (say, Oracle) you're going to want to run on a platform Oracle has agreed to support. Redhat does the testing and negotionation with enterprise developers to create that platform. Redhat's RPMs are a part of this.

      Some techies will find this all a bit dubious. But then, the concept of "someone to support it / blame" is seen as dubious - and it's often cited as a real issue with Business IT.

  • Restate UP (Score:5, Funny)

    by cyberfunk2 ( 656339 ) on Wednesday July 14, 2004 @09:29PM (#9703467)
    I wish , just once.. a company I owned stock in would restate their books in a positive manner... ie: oops, we forgot to count that extra 200 million worth of revenue.

    That'd be a pleasant change.

    • Re:Restate UP (Score:3, Insightful)

      by bofkentucky ( 555107 )
      Actually thats what a lot of the dot commers were doing (and got in trouble with the SEC for it). Microsoft held back signifigant portions of their Windows 2000/Office 2000 era earnings in a "cookie jar" that was supposed to level out revenue after the dot com bubble burst. Not every .com was part of a pump-and-dump scam, some had intentions of riding out the crash.
      • Microsoft held back signifigant portions of their Windows 2000/Office 2000 era earnings in a "cookie jar" that was supposed to level out revenue after the dot com bubble burst.

        Which also cheats investors - the ones who had and sold stock that DIDN'T go up - or didn't go up as much as it should - because Microsoft understated their earnings. Investors are trading stock all the time, and while investment is not zero-sum a market distortion reified by a transaction during the distortion IS. It helps some i
    • After the whole Enron thing, a large company (I forgot who) restated their earnings, and actually multiplied their revenues by 3. What they had been doing was storing money off the books so that they could keep their numbers good even when things were bad.

  • Well, posting the contract revenues WAS a scam (Score:5, Informative)

    by prostoalex ( 308614 ) on Wednesday July 14, 2004 @09:30PM (#9703470) Homepage Journal
    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 [yahoo.com], 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.
    • 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).

      RedHat is an open-source oriented technology company. Microsoft is a cash heavy mutual fund with broad investment across the technology industry. Redhat's multiple reflects investors optimism in RedHat's volatility and future business potential. Microsoft's lower multiple reflects its more stable and mature business model.

      Put in other terms, Microsoft is as much like Redhat a
      • Oh, come on, there're like 500 companies on that list trading at P/Es below Red Hat. Some are service-based, some might even rely on Linux.

        RHAT is outrageously expensive, and it certainly seems like someone among the C-level executives tried to pull an Enron by writing down cash that didnt get to the bank yet.

        Although they are certainly nice about admitting it themselves, investors are kinda funny people in the way that they hate losing money. And if one bought a share of Red Hat in Jan 2000 for $190-200

    • Is posting of contract revenues unusual? (Score:4, Interesting)

      by djh101010 ( 656795 ) * on Wednesday July 14, 2004 @09:37PM (#9703520) Homepage Journal
      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.

      I suppose some of 'em will, but this holder of a non-trivial number of shares of Redhat stock, sees this as a ploy by an external hostile force (the lawsuits, not the restating, obviously). As such it pisses me off more than it makes me want to take part in such a lawsuit.

      If there's a class-action lawsuit, I will take the proceeds and dump it right back to Redhat, in the form of subscriptions or straight donations. The P/E ratio isn't relevant to the fact that some sleaseball lawyer, probably in Redmond's pocket, is making a stink about this.

      That having been said, it's a true sign that you're succeeding when your competition feels threatened by you. Sleep well, Bill... the penguin is gonna get you.

    • Re:Well, posting the contract revenues WAS a scam (Score:5, Informative)

      by khallow ( 566160 ) on Wednesday July 14, 2004 @10:29PM (#9703891)
      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.

      No, the Q4 2004 earning (not 2003 earnings!) dropped from $0.0264 to possibly as low as $0.0220, a 17% reduction max. The minimum reduction would be half that. Further, it's not clear to me how relevant their earnings per share are since they are still slightly positive. For the fiscal year of 2004 (including this errant quarter), we're talking an earnings drop of no more than 5%.

      The big question is whether this is the only problem with their books. I suspect that's really why their share price dropped so dramatically.

  • Gotta Love the Lawyers (Score:4, Insightful)

    by Anonymous Coward on Wednesday July 14, 2004 @09:30PM (#9703471)
    Isn't it just grand how thousands of very intelligent geeks spent countless hours creating and improving Linux and Red Hat, and now a bunch of doughy, pasty-faced vultures at "Goodkind Labaton Rudoff & Sucharow LLP" will rake in an assload of cash from this?

    God, I really hate the American legal system.

    • Relax. This is bogus and happens all the time. (Score:4, Informative)

      by Ungrounded Lightning ( 62228 ) on Wednesday July 14, 2004 @10:57PM (#9704036) Journal
      Isn't it just grand how thousands of very intelligent geeks spent countless hours creating and improving Linux and Red Hat, and now a bunch of doughy, pasty-faced vultures at "Goodkind Labaton Rudoff & Sucharow LLP" will rake in an assload of cash from this?

      Naw.

      There are a number of sleazebag outfits like "Dewey, Sooem, and Howe" who file class action suits every time a stock takes a major dive, and advertise for some (possibly former) stockholder to sign on as lead plantif. (Expect several more before this is over.)

      Usually what happens is they get before a judge and get pitched out on their ear. Occasionally the company screwed up, in which case they MIGHT get some judgement - of which Dewey et. al. split a big chunk and a bunch of stockholders maybe get pennies per share. It's like playing the lottery, for law firms with some small-change time on their hands.

      They almost never get anywhere. But when a whale truly IS wounded the shark's chunk is SO big that every time there's blood in the water the sharks circulate in hopes of a feed.

      Red Hat will no doubt slap these guys down in due course - at which point you will see a small note in the stock's news page. That's part of why corporations keep at least one attorney on staff. Partyl to make sure they stay squeaky-clean - partly to lead the coutner-attack when somebody says they're dirty.
  • Now is a good time to make sure you have a local mirror of fedora.

  • As far as I can tell... (Score:5, Insightful)

    by Samrobb ( 12731 ) on Wednesday July 14, 2004 @09:35PM (#9703506) Journal

    RedHat was following the rules (particularly the ones about switching auditors), and their new auditors convinced them to use a slightly different accounting method for their subscription accounting. It looks as if their previous accounting method was not neccesarily incorrect, flawed, or false - just different.

    How is it that someone can bring a class action lawsuit against a company for changing their accounting practices from one one allowed method to another allowed method?

    • Anyone can sue anyone else at any time, regardless of the facts.

      It's like buying a lottery ticket. You're going to lose a lot of the time, but sometimes you win big.
  • ...after you WIN the lawsuit (as per Sun), or after your fortunes fade (as per Apple). Next thing you know your company's viable again, and besides you don't really need your soul while you're still alive do you? :-)

  • A good buy (Score:5, Interesting)

    by anim8 ( 109631 ) on Wednesday July 14, 2004 @09:41PM (#9703556)
    I think the Motley Fool article is right. The drop in the stock price makes Red Hat a good buy right now.

    The downside is the frivolous lawsuit. In the end RH should prevail, but it will spend a pretty penny defending itself. I'm all for class-action lawsuits when they are appropriate. This one against RH is not.

    Tort reform is one of the few issues where I side with Republicans. Fair implementation is going to be the hard part.

    • Re:A good buy (Score:5, Insightful)

      by Erwos ( 553607 ) on Wednesday July 14, 2004 @10:10PM (#9703768)
      Uh, the article _I_ read said it was still vastly overpriced - it's just that this downturn was not really based on any fundamentals. Red Hat is still making money selling support, and financial rewrites don't change that.

      Ask anybody in my LUG - I'm the biggest Red Hat supporter in the world. But that _does not_ mean their stock is worth buying.

      -Erwos

  • Red Hat versus reality is more like it... (Score:5, Interesting)

    by YU Nicks NE Way ( 129084 ) on Wednesday July 14, 2004 @09:53PM (#9703643)
    About a month ago, Red Hat suddenly lost their CFO. Immediately thereafter, they pre-released earnings in order to cushion the blow. Now we find out two things: (1) the day before the CFO left, their auditor complained about their accounting practices, and (2) they recently received a request for information from the SEC. They didn't announce either of those facts during their extraordinary earnings release or at any time since then.

    Like it or not, those are both material facts. No, the accounting change isn't all that significant, and yes, most SEC audits turn out fine, but that is irrelevant. They did things to prop up their stock price, and didn't publicize all the news, limiting themselves to the better news. To the extent that they propped up their stock price by selectively releasing only positive informaion, they're in violation of their fiduciary responsibility to their shareholders.

    Blaming the ambulance chasers for Red Hat's misbehavior is like blaming Janet Reno for Microsoft being held in violation of the Sherman Antitrust laws. Just like MS, Red Hat did this to themselves; the attorneys are just doing their jobs by trying to hold crooks accountable for their crimes.
    • I think you misunderstood what I was suggesting. I'm not saying that Red Hat did the right thing, I'm just saying that what they did -- at worst -- constituted poor market management, but if the law suits read "Red Hat propped up their stock price for a month before reporting the comments of their auditors", then I could understand (not sure it would go very far, but that's another thing).

      What the suit alleges (at least the first one) is that Red Hat scammed the public out of ... something (it's really not
    • The CFO is still on board. The announcement was that he was going to resign, not that he had.

      Should also note that so far, there are not any plantiffs in the case, only a law firm seeking a lead plaintiff.

      I wonder how easy it'll be for the firm to get this certified as a class action, considering that 11.3% of the stock is held by insiders and 81% is held by institutions. By my book, that leaves under 8% generally owned by the public. That's still around 14M shares, but when you consider that a bunch o

  • The joke's on them... (Score:3, Funny)

    by raistphrk ( 203742 ) on Wednesday July 14, 2004 @09:54PM (#9703654)
    ...suing a company that has all its intellectual property assets under the GPL. Are the lawyers going to try to get their fees from Bob Young's enormous collection of Tux plushies?
  • They're gonna sue RedHat for making their stock a good buy?

    Or are they gonna sue because RedHat corrected a mistake?

    Or are they gonna sue because RedHat failed to cover up their mistake?

    What part of this am I missing?

    I'm sure it will all make sense when the price of oil drops and this law firm takes the oil companies to court because people will be charged less for at the pump.

  • Ambulance chasers?? (Score:2, Insightful)

    by autopr0n ( 534291 )
    How the hell are these people "ambulance chasers"? There's no ambulance here, just the kind of shady accounting that we all decry when it's Ken Lay or the guy from worldcom.

    And I love how the poster tries to make it seem like the lawyers are trying to sue because of the announcement rather then the act they were announcing (i.e. that they cooked their books)

    Poster needs to get a clue. Maybe red hat did just make 'a mistake' but they're still liable for it.

    • Re:Ambulance chasers?? (Score:3, Interesting)

      by ONOIML8 ( 23262 )
      Whoa dude, hold up on that clue thing for a minute.

      Do a google on that law firm. Then come back and tell us they're not "ambulance chasers".

      And read the press release again. There hasn't been anyone harmed here. That law firm is looking for some patsy to put their name on their trumped up charges.

      I've got to ask you, how is someone harmed if the price of a stock dips? I tend to look at that as a good thing since it allows me to purchase more stock for my money. Was someone forced to sell their stock
  • The particular law firm is a new one on me, usually these are done by that scumbag Bill Lerach in San Diego.
    "Strike suits" are a basic fact of life for public tech companies. In fact, it kind of proves RH is growing up.
    The idea is that any sudden movement of a company's stock, in either direction, is actionable because the company presumptively withheld information that impaired the public's opportunity to either profit or avoid losses. Eventually the lawyers quietly get paid huge $$$ to go bother someone e

  • This happened to me at C-Cube (Score:3, Interesting)

    by Anonymous Coward on Wednesday July 14, 2004 @10:09PM (#9703760)
    I worked at C-Cube, makers of the first MPEG video decoder chip, in the late 90's. It was great fun and it looked like I was going to make a fortune on my stock options.

    Then the organized short sellers hit. Then the class action law suit. The stock tumbled. My options went under water. I made nothing.

    Watch out Red Hat. These soul sucking vultures can destroy your stock price and your company. Your CEO will waste so much energy dealing with this distraction that your core business will suffer. Next employees will start leaving. It is a downward spiral.

    It happened to me. My advice, take this threat seriously. Good luck.
  • Does anyone know why RH is restating their financial performance? Could they not have predicted the possible repercussions of their CFO leaving and now this and done something about it? Or did they understimate how people would overreact (if overreact they did)?

  • Periodicity (Score:3, Informative)

    by beldraen ( 94534 ) <(moc.liamg) (ta) (risialptnom.dahc)> on Wednesday July 14, 2004 @10:16PM (#9703807)
    In order to comply with its accountant's recommendations, the company in its restatement will shift revenue recognition for the firm's Linux services to more closely follow the exact date that service agreements begin. In effect, it moves some of the revenue previously recognized in the first month of the contract to the last month, and that appears to be it.
    There is a basic concept in accounting that the revenue should be displayed on the books in the same period that it is earned. While this sounds like a simple thing, in practice it can be very difficult. Do you consider the revenue earned when you sign the contract? Do you consider it earned when you do work? Do you consider it earned when customer requests work? How do you handle it if the work continues over more than one accounting period? How do you handle it if they fail to pay for the work?

    Sounds like me that they decided the booking for their system was out of kilter for one month and just adjusted the entries back by one. Unforunately, it is the ignorant masses that do not understand it; they caused the price drop. Personally, I would see this as a sign that they wanted a more strict book keeping, which on the face of it sounds like responcible accounting behavoir. Take basic accounting and you'll quickly realize there are many complex issues and multiple ways to be "right."

    My two cents,

  • "Here in America... (Score:4, Insightful)

    by kravlor ( 597242 ) on Wednesday July 14, 2004 @10:17PM (#9703821) Homepage

    ... you can sue anybody for anything. It doesn't mean you'll win."

    I like to repeat that saying to myself when reading about lawsuit X, which I heard from a very successful personal injury law firm leader [knowyourrights.com].

    IANAL, but it seems to me that this public admission of change from one acceptable accounting practice to another should help things blow over; we'll likely see this case dismissed.

    It also strikes me as odd that they'd put out a press release about their shiny new lawsuit without a plaintiff.

  • The root problem (Score:4, Insightful)

    by BCW2 ( 168187 ) on Wednesday July 14, 2004 @10:19PM (#9703828) Journal
    Earnings statements are done within the US tax code. There is no one on the face of this earth that knows everything in that abortion. It's huge, with a hundred years of crap that never got deleted, and it changes every single year. It is impossible for the IRS to keep up with all of it, why should anyone be surprised if a mistake is made?

    It's time to junk the whole thing and go far a flat rate with no loopholes, for individuals and businesses. It would end the cottage industry of lobbyists, lawyers and accountants that make a fortune translating, modifying, and manipulating the mess.

  • I'm a curse of their stock (Score:3, Funny)

    by melted ( 227442 ) on Wednesday July 14, 2004 @10:33PM (#9703902) Homepage
    You know why RHAT fell so hard? Because I bought a few shares just a few weeks ago. Whatever stock I buy, the behavior is the same - it goes down the drain really quickly.

    Now if RHAT pays me a million bucks I'll dump the stock and their problems may go away. Or they may not.

  • The rules are the rules... (Score:3, Insightful)

    by timothy_m_smith ( 222047 ) on Wednesday July 14, 2004 @10:38PM (#9703931)
    Just because people here think that Red Hat is a good company doesn't mean that Red Hat is held to a lower standard. An earnings restatement is an earnings restatement. If they did wrong they should suffer the paint that other "restaters" have felt. Subscription accounting models are very difficult to account for and have caused problems for many in the past.

  • You're not really a public company... (Score:3, Insightful)

    by winkydink ( 650484 ) * <sv.dude@gmail.com> on Wednesday July 14, 2004 @10:43PM (#9703964) Homepage Journal
    ...until you've been sued by Millberg Weiss. They sue everybody.

    Get over it.

  • Who benefits (Score:4, Insightful)

    by Comatose51 ( 687974 ) on Wednesday July 14, 2004 @11:20PM (#9704174) Homepage
    I'm not sure why they're sueing Red Hat since the plaintiffs are the stock holders of Red Hat and the defendant is Red Hat which is owned by the stock holders. The only one who's going to profit from this are the lawyers.

  • Unfair editorializing: "ambulance chasers" (Score:4, Insightful)

    by AtlanticCarbon ( 760109 ) on Thursday July 15, 2004 @01:26AM (#9704758)
    This kind of biased editorializing that has been pointed in the past but why not point it out again: I don't remember the anti-MS California class action attorneys being labeled "ambulance chasers." What bothers me more though is just any old lawyer being called an ambulance chaser. Sharks, maybe. Ambulance-chasers, no. It reminds me of when people call liberals "terrorists" because they are anti-war. I don't care if you think they are bad because they are anti-war, but don't use some irrelevant word. Same thing goes here. Ambulance chasers are laywers that solicit clients soon after personal injury. Anyway, it doesn't look like the class has been certified. It could be this case goes nowhere and it doesn't even cost RH that much (relatively). (Don't mod me troll because I mentioned lawyers, liberals, and M$ in the same post :P)

  • Red Hat vs The Ambulance Chasers (Score:3, Funny)

    by nathanh ( 1214 ) on Thursday July 15, 2004 @04:12AM (#9705333) Homepage
    You know, that'd be a great name for a rock and roll band.

  • My letter to the lawyers (Score:4, Interesting)

    by emtboy9 ( 99534 ) <jeff AT jefflane DOT org> on Thursday July 15, 2004 @09:22AM (#9707010) Homepage
    Here is what I sent to them, for curiosities sake. If I get a reply, I will post it as well:

    I would like more information regarding your action against Red Hat. As a share holder, I find it a bit confusing as to what prompted this action. The restatment makes little to no difference on their bottom line, as the did not misreport any erarnings. The restatment merely takes the number from one column and moves it to a different columns. The dip is stock price is due to the market's normal reacivity to announcements of this sort, from any company whatsoever.

    As a shareholder, and as someone who is qualified as part of this class, I find it odd, and a bit disconcerting at the speed at which this was filed. I dare say that no one actually came to you asking for a mass tort suit, but here it comes anyway. Sadly, your firm seems to me to be nothing more than opportunistic lawyers intent on making a large fee from the settlement of class action suits.

    Of course, I could be wrong, and I always stand waiting to change my opinions of people and situations, should an incontrovertable arguement be presented to me.

    Therefore, my challenge to you, is to convince me otherwise. I have read the documents you have provided regarding this case, but have yet to be convinced that I should join this venture. As I see it so far, the only people who really benefit from litigation of this nature are the lawyers themselves, with the many plaintiffs recieveing a paltry share of the settlement.

    So please, enlighten me. Convince me. Change my mind. That is my challenge to you. Are you up to it?

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