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  slim, 3 Jul 2003 @ 7:21am

  
  

  Here's why it worked

  Ah,
  
  But you can book ALL the revenue today; and expense the cost of the equipment very, very slowly over many, many years. If your stock options are underwater, and you can surprise Wall Street analysts with a few cents more in "earnings" this quarter, you can then dump your stock on some poor sap in Toledo who thinks AOL might be the "up-and-coming" thing.

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• 

  Mike, 3 Jul 2003 @ 12:09pm

  
  

  AOL and Revenue

  Yes, Slim is on the right track. AOL wanted to be able to book the revenue, regardless of the net profit. In addition, these "round-trip transactions" are not inherently illegal...unless you make these transactions with the intention of boosting the revenue of both companies. Slim is right about the equipment revenue, by the way, because that falls under the Properties and Equipment category...the costs of which can be spread over many years just as its value is depreciated over many years.
  
  I did a report on this just a few months ago. They didn't just engage in these revenue-boosting transactions with Sun, they are believed to have done so with over 30 corporations since 1998, when their 2-years-in-the-making broadband plans with excite@Home burned to the ground.

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  • 

    Anonymous Coward, 3 Jul 2003 @ 5:25pm

    
    

    Re: AOL and Revenue

    You have to remember than in the dot-com boom, nobody cared about profitability. I can remember the president of my company saying that if we did an IPO (which was the plan at the time) the share price would be based on our top line number (revenue) and a multiple. Expenses and the bottom line didn't matter.
    
    In that environment, it makes perfect sense to jack up your revenue even if it costs you more money off the bottom, because nobody cared about that.

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