I'm wondering if they finally figured they weren't fooling anyone
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Maybe JHG read “The Gentle Art of Swedish Death Cleaning: How to Make Your Loved One’s Lives Easier and Your Life More Pleasant”?
“I’ll start with the books”, he thought. “Get any hypothetically embarrassing expenses cleared so I can maintain a saintly image. Only Donny and Bosley need to know about all those impertinent payouts…”
I still find it hard to believe that JG, who spent decades mocking Wall Street’s focus on quarterly numbers, is going to accept a SAS IPO and stay associated with SAS as a publicly-held company. But perhaps it’ll take so long for there to be an IPO-favorable environment that he will be gone (personally or commercially) by then.
I still think a private sale is more likely.
“This will hurt product quality in the long run”
Watch some videos on R Studio, or better yet, learn how to program in it. You’ll stop worrying about product quality real quick, as it’s no longer relevant.
Game Over, SAS.
'It was explained that "the rules" required three years of some kind of public attestation...'
This is correct. Three years of records must be audited, to SEC-approved standards. So it's possible the records are GAAP-compliant, but don't meet the auditing standards.
To me, the clearest evidence of "becoming IPO-ready" is the willingness to lay off 44 experienced testers, and replace them with... nothing.
This will hurt product quality in the long term. Someone is thinking only about the short term.
A SAS organization was tracking sales in Excel? Were they not aware of SAS Financial Management?
But then again, perhaps the Excel sheets that the person witnessed were simply the data entry front end for that system.
There’s always an excuse, isn’t there?
"I'm assuming GAAP compliance is not cheap or trivial - why would a privately owned company go to that expense and effort if it's not information that will be used to run the business?"
When it was announced internally, Goodnight as much as said that the company's financials complied with GAAP. I remember thinking at the time that if the company's finances are already GAAP-compliant why would it take three years to IPO? It was explained that "the rules" required three years of some kind of public attestation, and that's the reason "IPO readiness" is taking so long.
The real reason, of course, is probably that three years (or three more years) is the length of time certain financial records have to be retained by a privately-held company, and that after three years SAS is going to be able to shred the "red flag" records that might hold up the IPO.
Sales tracking in excel is sad, but nothing to do with accounting.
GAAP is about the way information is recorded as it relates to costs, revenues, etc. regardless of the technology it’s recorded in. The fact that sas took so long getting their books compliant with GAAP is pathetic. It just demonstrates a lack of discipline, and general awareness of how the rest of the world operates.
I remember during the Global Fusion work in 2019 that all of the Central/South American sales offices were using Excel spreadsheets to track accounting. Is that GAAP compliant?
GAAP accounting is required of public companies. It also makes it easier to sell to a public company, because it’s compatible with their books.
GAAP accounting is not required of private companies, and it is more expensive. That’s probably why it wasn't done before.
A privately owned company would go through that effort to show compliance with a common business standard, whether it was required or not. It shows that the business is being managed responsibly.
I don't really understand that last comment.
I'm assuming GAAP compliance is not cheap or trivial - why would a privately owned company go to that expense and effort if it's not information that will be used to run the business? And presumably Goodnight is self aware enough to know he was always going to do what he wanted regardless of what the GAAP-compliant data told him.
GAAP is for businesses driven by the standard model of quarterly profits for shareholders......SAS was always driven by cash in JG's bank account.
To me it was always kind of comforting that he didn't care about their world - it hinted that he wasn't really seriously considering a sale. And it insulated us a bit from the 'everything is about the next quarter's numbers' madness.
Your mileage may vary.
This taking the time “to get the books in order” strikes me as ridiculous.
As a parent, it reminds me of a kid FINALLY doing his chores after a long, protracted battle and substantial loss of privileges.
These should have been in order all along as a standard business practice, but no, JHG was either too good for that, or there were other non-GAAP entries that would have tainted his saintly persona.
What a bunch of nonsense.
"...it's possible they didn't get systems and processes functioning properly to make a full year of '22."
I think you meant: "...it's likely that SAS management underestimated the technical complexity of third-party enterprise software (which is the very definition of irony for SAS), vastly underestimated the cost of any consulting engagements required to resolve problems encountered while trying to deploy the software (also ironic), and overestimated the capabilities of the company's IT staff to manage their part of the deployment themselves, or the software."
Yes, and in an IPO, that may work.
The end is still in private equity or a company like Broadcom, who will "gain majority control, fire senior leadership, and radically restructure the company".
In my opinion, any IPO is simply banking on nostalgia and “the greater fool” theory.
Majority control would be of interest either to private equity or to a rollup acquisition firm like Broadcom.
From SAS’ viewpoint, an IPO brings in more buyers, so might bring a higher price. But after an IPO, a private equity firm or a company like Broadcom could acquire control on the open market.
It seems unlikely that SAS would float a minority stake. Who’d want to buy that? Also, when you’ve been in charge for 40 years, you don’t acquire any sudden desire to have a Board of Directors.
To be fair, the fact that SAS is a mature company with stagnant/declining revenues and no real prospects for reversing that are a much bigger hurdle to IPO than wonky financials.
The financials can at least be fixed with enough money spent on new systems and consulting. But no bank is going to be willing to underwrite SAS as the company is now and no investors would be willing to buy in. Especially, if Dr. G. Is only planning on floating a minority stake in the company.
The only thing that makes investing in SAS even remotely interesting is the possibility to gain majority control, fire senior leadership, and radically restructure the company. That's more of a private equity play than IPO.
"So fiscal years 2022, 2023, and 2024 should be following GAAP."
They should be, but it's possible they didn't get systems and processes functioning properly to make a full year of '22. Also, the thing nobody is talking about is the fact that a company go back and retroactively make their books GAAP compliant. I think the unspoken issue is that SAS did such a bad job of tracking financials before, they just can't. So, IF that got their act together for the start of '22, you are talking another 1.5 years of waiting to even file with SEC, best case. Since nothing happens at SAS before mid-January, you are realistically talking Q2 in '25 before they file anything. And then the process STARTS. So, best case scenario, SAS IPOs in Q4 of '25 or Q1 '26. There are a LOT of nested if statements before you get there, and I just don't see it happening.
Everyone should hope they fix the company enough to be bought before Dr G kicks the bucket. After he's gone, the shareholders are running for the exits, and will sell to the highest bidder--which won't be very high now.
Point taken: Deloitte Touche Tohmatsu Ltd., commonly referred to as Deloitte.
Point being: if you were preparing for an IPO, this is exactly the sort of firm you'd hire. That doesn't mean SAS will IPO, but they're paying to have the option.
https://www2.deloitte.com/us/en/pages/audit/articles/a-roadmap-to-initial-public-offerings.html
@2pyt+1ofEVTKZ >Come on into 2023 anytime.
A little "Touchey" this morning?
Tell me you're old without telling me you're old. It hasn't been called Deloitte & Touche since the 1990s. It's just Deloitte now. Come on into 2023 anytime.
I was told that Deloitte and Touché were hired in 2021 to clean up the books.
So fiscal years 2022, 2023, and 2024 should be following GAAP.
I’m sincerely curious … anyone know why hasn’t SAS been using the Generally Accepted Accounting Principles (GAAP) all these years anyway - at least since the last time they had considered going public many many years ago (I heard). Meeting the SEC accounting standard for 3 years is a requirement. Secondly, anyone know if SAS is on track to meet compliance by 2024?
"Well the market conditions being what they are, challenging and so on and so forth, fill in with meaningless nonsense here, blah blah readiness, blah blah diversity, blah blah ride my private jet to Australia, blah blah hire more brainless marketing wizards, blah blah Viya, blah blah defer IPO until market conditions improve..."
There, fixed it for ya.
"A potential buyer would absolutely care about how lean the company is... they should at least demonstrate a healthy margin by cutting costs dramatically."
Thanks for your clear explanation. So far the cuts have not been "dramatic".
An IPO does not require growth or margin, but it does require three years of financial records. "IPO-readiness" was announced in mid-2021. So an IPO probably can't happen for at least another year.
https://www.sec.gov/files/ipo-investorbulletin.pdf
"I'm wondering if they finally figured they weren't fooling anyone"
Agree. Despite big $$$ having been invested over the past few years, revenue remains constipated. That suggests the decision makers do not have their finger on the pulse beat of what the market wants. In order to sell that, you must lure a buyer who is willing to buy an old milk cow having ever decreasing production. Those are not easy to sell. That could be why a buyer has not come forth. The time period it takes to get books in order and achieve compliance to standard accounting principles...that time period has past. Hence they can no longer play the IPO card.
Pride and stubbornness are the main reasons a card hand gets played beyond the point of when it should have been folded.
replying to Post ID: @1lgi+1ofEVTKZ
A potential buyer would absolutely care about how lean the company is. They aren't going to get a detailed breakdown of the company operations before seeing revenue and margin numbers. If they don't see solid revenue and margin numbers, they won't take it further. If SAS wants to attract a good buyer, they have to grow both revenue and margin. Since they clearly aren't growing revenue, they should at least demonstrate a healthy margin by cutting costs dramatically. Then a potential buyer sees a company with healthy margins, and they can focus on planning a revenue growth (turnaround) strategy.
I'm at a customer org now so can probably offer some realistic good/bad news.
bad: yes your core product is "going away". we are using it less and less as new data people prefer R or python. I'm sure something "better" will replace those one day.
good: we are still "all in" on one of your "Solutions", probably will upgrade.
that means your main revenue stream goes away. what you think of as a smaller one is growing.
so a strategy of dealing with
- core product going away (slowly),
- take those profits and funnel into new businesses is not only sound, but the ONLY way ANY enterprise moves forward when faced with disruption on a large scale ... unless you just want to be BlackBerry or Palm or dead companies. as a customer, that's not acceptable as we're using your solution, while phasing out your core things due to them organically dying.
- that requires good management. it's not about "bad salespeople", "bad R&D", whatever. it's about top business management. you have to be able to attract the people who are able to run the top companies ... FAANG, whatever, you name it. DEI and layoff stuff are just sub-bullets. as a customer, I don't give a sh-t about that now: it's internal HR management stuff that is incidental to 1, 2, and 3. is your management ABLE to bet on the winners and fold the losers (including the big losers) over time?
- ultimately that means the company will be scaled down and different, producing different kinds of products and revenue streams. but it could survive and thrive later in a different way.
- if your management only thrashes and tries to save the big deaths, ignores these solutions customers are buying and using out here, you will probably face the issues you say.
"Dr G isn’t doing mass layoffs because he realizes it will show how weak the business actually is. He’s hoping natural attrition, retirement buyouts, and small/strategic layoffs will get the company lean enough to be attractive to a buyer."
Would a private buyer care how "lean" the company looks? A PE firm, or a company like Broadcom, could make it as "lean" as they want after they buy it.
Refraining from mass layoffs, while making the company "lean enough" seems to prepare for a public IPO, not a private buyer.
I know several very senior level, retirement eligible, people in R&D that work on marginal products who are waiting for someone in HR to come for them. And frankly, amazed it hasn't happened. They have good skills for their SAS job but the solutions don't, and won't, sell. They plan on working and collecting a paycheck for as long as allowed.
How many high paid and very senior people with VP, SVP, or EVP have been let go. Or are they all really that good?
Without an IPO SAS will die. They just are not doing enough of the stuff that new customers want. So that leaves mostly existing customers as the company withers.
If there is no hope of an IPO, then the most humane thing is to announce that SAS is going on "hospice" care. Existing customers get fair warning that the software is being frozen and will only be supported(in a frozen state) for a period of time that allows natural customer attrition. Renewal fees could also be locked in - or discounted. Employees know they are riding it out with a dying company. Some will leave and that is good because reduction of employees should be married to reduction of customers. Transparency is a much better way for the ship to go down than trying to fool the crew -or passengers.
From way back in the past, keep recollecting a billionaire saying something like: "when i am done with SAS, they will be throwing dirt over me". If that is the plan, the aforementioned is one way that plan can be executed.
@1yty+1ofEVTKZ ...natural attrition, retirement buyouts...
I plan on staying unless there is a retirement offer. I wonder if others think likewise.
Dr G isn’t doing mass layoffs because he realizes it will show how weak the business actually is. He’s hoping natural attrition, retirement buyouts, and small/strategic layoffs will get the company lean enough to be attractive to a buyer. The company revenue isn’t growing, with many poor/unprofitable products, and too many business models under one company.
They need to sell off jmp, outsource all cloud infrastructure to hyperscalers, ditch poor/unprofitable products, outsource cleaning/grounds/cafeteria staff, sell/lease buildings, sell the airplanes, fire all the useless “Industry Consultants”, change the comp model for sales (and fire most of sales managers because they are garbage), and sell the consulting organization to Zencos.
If sas can’t grow revenue and profitability after doing all that, they should just sell the land and patents, and turn off the lights.
No, I am not SAS HR, and I am not optimistic at all.
We agree that JHG is a shrewd businessman. So why is he not doing more layoffs now? There are certainly many SAS products that are unprofitable, or barely profitable.
You can believe in other motives than kindness. But surely, the best case for the employees is if the current owner remains in charge. Because any other owner will do a mass layoff.
Give me a break! It’s not an altruistic world as you might imagine we are living in. SAS is a business and G is a shrewd businessman, always has been. If he was so genuinely kind hearted towards his employees then he would have shared stake in his company long back and he has had plenty of opportunities to go for IPO on past occasions. SAS was first of its kind and highly successful first few decades because there wasn’t any competition and the company was riding the monopolistic wave. It probably made the employees complacent and the owners egoistic that nothing can hurt them. When competition finally showed up in the last two decade, well the outcome is where we are today.
PS - honestly I won’t be surprise if SAS HR wrote this comment as it reeks of misplaced or surface level optimism.
“Broadcom and SAS were reported to have "discussed" a range of $15-20B. That may simply mean that SAS asked that price; Broadcom may not have made any offer.
But yes, attrition is helpful toward reaching that "best-case scenario". So if reducing headcount helps, why SAS isn't doing more layoffs now?
Because JHG is kind to his employees. Any buyer, whether PE or a company like Broadcom, will see a mass layoff as a good business decision. He'll do all he can to avoid one.
Best case scenario for the employees is for the current owner to remain in charge.”
Broadcom and SAS were reported to have "discussed" a range of $15-20B. That may simply mean that SAS asked that price; Broadcom may not have made any offer.
But yes, attrition is helpful toward reaching that "best-case scenario". So if reducing headcount helps, why SAS isn't doing more layoffs now?
Because JHG is kind to his employees. Any buyer, whether PE or a company like Broadcom, will see a mass layoff as a good business decision. He'll do all he can to avoid one.
Best case scenario for the employees is for the current owner to remain in charge.
They just don’t care anymore about attrition or preventing high performers leaving due to the lack of RSU commitments or future IPO. For all big G cares about right now is selling the company to the highest bidder and I bet he deeply regrets not selling to Broadcom for such a steep premium offer (15-20B) Hock Tan was making for SAS. The best case scenario now would be a PE firm paying 8-10B for what’s remaining of SAS, and cleaning house from top to bottom we’re talking 30-40% layoff to extract projected returns forecasted at the time of deal making.