Avid Stock

Avid’s Accounting Dilemma: NASDAQ Looms…

Avid, developers of Pro Tools and its assorted consumer and professional hardware accompaniments, has received a letter from the NASDAQ stock exchange warning it about its non compliance with their rules following its withholding of its previous accounting period…

This might be a little more about the numbers than many of you care to look into too much, and indeed we don’t seem to have that many Pro Tools fans here at OD anyway, but when I saw this at Synthtopia I thought it was interesting nonetheless. Avid has withheld its fourth quarter 2012 Form 10-K financial report:

avid

On March 19, 2013, the Company filed a Form 12b-25 with the SEC stating that it was unable to file the Form 10-K with the SEC on or before March 18, 2013, the prescribed due date, because it is continuing to evaluate the accounting treatment related to bug fixes, upgrades and enhancements in certain of the Company’s customer arrangements (collectively, “Software Updates”). The primary focus of the Company’s evaluation to date has been to determine whether certain Software Updates previously thought to be only bug fixes met the definition of post-contract customer support under U.S. Generally Accepted Accounting Principles.

This puts Avid in breach of NASDAQ rules, and makes them eligible for removal from the exchange. Timescale wise, Avid has to present a plan of action to regain compliance by the 20th of May 2013; if NASDAQ accepts Avid’s plan then Avid expects to have until the 16th of September 2013 to file their report and get back into the good books. If not, NASDAQ’s decision is up for appeal.

A few important things to note:

  • Avid isn’t simply Pro Tools. There’s a bunch more stuff over there.
  • NASDAQ isn’t the only stock exchange, and this isn’t an immediate threat to Avid’s actual ability to trade publicly.
  • In the short term, things will continue precisely as normal in terms of Avid shares being on NASDAQ.

It’s not really clear what this means for Avid long term, although they do say they have “no debt and ample cash”, so hopefully they have plans to make this a blip on the radar by this time next year. After what was undeniably a bumpy 2012 with a lot of structural and intellectual property changes to the company, and the declining stock value over the past six years or so that the image up top makes clear, one thing’s for sure: the possible implications are a little too much for my BA Business brain to ruminate on without quite a lot more thought, so I’ll pass over to anyone who’d like to comment below – are you an Avid customer?

You can read the full press release from Avid here, and if you like you can look at Avid’s NASDAQ stock reports too.

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