Motorola Inc has become the latest victim of the Securities and Exchange Commission’s anti-earnings manipulation crusade. Late on Tuesday, the Schaumburg, Illinois company said it would restate its third quarter figures to accommodate a $99m reduction in what was originally a $117m charge for in-process research and development on the July acquisition of Starfish Software Inc. Consequently, Motorola’s third quarter net-earnings will now show a $27m profit and not the previously announced $42m loss. Going forward, however, Motorola’s earnings will now be reduced by amortization charges on approximately $99m of capitalized goodwill. The company did not specify its policy on goodwill, but earnings could potentially be reduced by $3m to $4m per quarter for the next seven year. Revenues will remain unchanged. In a written statement, Motorola insisted that its original results, reported on October 5, had been in accordance with established accounting practice, and that the SEC had changed the rules after their release. The SEC, on the other hand, points out that the rules governing the write-off of in-process R&D have not been altered. In a letter to the American Institute of Certified Public Accountants dated September 15, the SEC called for the profession to tighten up on what it saw as abuses of existing rules. Motorola’s restatement follows similar moves by Cabletron Systems Ins and Lernout & Hauspie Speech Products NV.
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