Alys Woodward
SEC review of Cognos concluded with no objections found
Cognos has announced that the SEC has concluded its review and found no objections to its revenue-recognition policy. The review was mainly concerned with the way Cognos allocated revenues for support in deals with elements of both support and licences. Cognos was able to prove that the value of the support charged was fair under revenue-recognition policy.The company will release its quarterly results for the quarter ended May 31 2006 this afternoon, and is working to file its annual report for the year ending February 2006. Comment: Apart from never undergoing a SEC review in the first place, this is the best possible outcome for Cognos.The SEC's investigation started on May 15; since this time the company missed reporting its end of year for its fiscal year ending in February 2006 as well as Q1 of the current year. It also received a notice of non-compliance from NASDAQ because of its failure to file results. The share price fell sharply during the investigation period, although some analysts upgraded it to buy because of the fall (see EuroView Daily, 30 June).In EuroView Daily on 17 May we stated that these reviews do other companies a favour as they flesh out the rules of what is and isn't allowed, which by their nature don't cover every situation. We also stated that sailing close to the wind in terms of what is allowed is expected in the competitive market. Cognos has been completely vindicated - the fact that it pushed the boundaries while remaining within them shows the company's financial savvy. Now it's back to business as usual - we'll report on the results after the call.
