甲骨文 (ORCL) 2005 Q3 法說會逐字稿

Good afternoon.

My name is Michael, and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the Portal third quarter 2005 conference call.

Today's conference call, including the question and answer session, is being recorded and webcast.

A replay of the call will be available later today on the Company's website. [OPERATOR INSTRUCTIONS].

The presentation you will hear on this call includes forward-looking statements, and actual results may differ materially.

Forward-looking statements include statements regarding expected future financial results; bookings; cash; revenues and expenses; continued growing business momentum; profitability and business prospects; industry and general economic trends; operating results, including delivery of project milestones,; relationships and rapport with customers and partners; customer's confidence in our product and services and support for our company; statements about our product; as well aspiring plans and forward-looking statements.

Actual results of these matters could, of course, differ materially for a variety of reasons, including those described in our SEC filings.

The risk factors identified in our SEC filings are incorporated by reference into this earnings call.

Copies of our SEC reports may be obtained from the SEC or from Portal's website.

You may find a copy of the press release announcing the results discussed in today's call on our website at www. portal.com, or you may find the press release under the heading "press releases."

Thank you.

And now, I'll turn the call over to Dave Labuda, Portal's Chief Executive Officer.

Sir, you may begin.

Thank you and welcome to Portal Software's conference call covering the filing of our Form 10-Q for our fiscal year 2005 third quarter ending October 29, 2004.

We'll also provide you with an update on significant milestones in our business.

With me on the call today is Ron Kisling, CFO of Portal Software.

I would like to thank all of you for your patience while we've worked through what has been a long and complex process.

The filing extensions we received from Nasdaq enabled Portal and our audit committee to review the prior application of revenue recognition methodologies, as well as specific transactions for Q3 and the six prior quarters.

We've concluded that for the six quarters prior to Q3, our accounting treatment was appropriate and correct in all material respects.

We would like to acknowledge that we have been silent during the past several months.

We haven't been able to communicate with you to extent that we would have liked.

Now that the filing of our third quarter 10-Q is behind us, we're able to provide some insight on our current business.

Please recognize that we have just begun the process of preparing our year-end financials for fiscal 2005.

In addition, Friday, April 29th was the last day of our first quarter of fiscal 2006.

The numbers we will share with you today for Q4 and Q1 are preliminary and are subject to change as we complete our close processes.

However, we believe the growing momentum in our business is clear and encouraging.

Since our last call, we've successfully launched Portal 7, the industry's first, fully convergent Revenue Management platform.

We already have a dozen customer upgrades underway, including Tier One customers such as Vodafone Spain.

This is encouraging because it demonstrates the confidence our customers have in our technology investments and in our product strategy.

The organizational changes we put in place last October are also beginning to show results.

We are building a tighter rapport with our most strategic accounts and we've recently expanded our business of Swisscom Mobile, France Telecom, Vodafone UK, Vodafone Japan, and Nokia.

We appreciate this customer loyalty and believe it is the result of our dedicated focus on delivering business value in partnership with our strategic customers.

We also continue to drive new license business.

Portal has experienced higher license bookings in the fourth quarter of fiscal 2005 and the first quarter of fiscal 2006 than in any two consecutive quarters in the past two years.

Vodafone, which remains our largest customer, continues to support our vision.

In the first quarter, we further expanded our business with Vodafone Group, Vodafone UK, and Vodafone Japan.

Our relationships with our other strategic customers, such as Telefonica and France Telecom, continue to grow as well.

In addition, the confidence and support of our new customers is very encouraging.

The quality of our solutions and our total commitment to the customer are critical to their decisions.

With so much at stake, we're very pleased to see companies like Telefonica, mobile-e, the second largest GSM provider in Saudi Arabia, and SIRIUS satellite radio use Portal solutions to gain a competitive advantage in their markets.

I'll now hand the call over to our CFO, Ron Kisling.

Thank you, Dave.

As many of you know, we have spent considerable time and effort performing a thorough review of our revenue recognition methodologies and certain transactions for Q3 and the prior six quarters.

We're pleased to report that our accounting treatment for the six quarters prior to Q3 was appropriate and correct in all material respects.

We did, however, make some adjustments to the preliminary Q3 numbers reported on February 3rd.

We increased revenue and the associated cost of revenue based on the SIRIUS satellite radio contract, which had originally been deferred.

We also increased expenses to reflect the fees for the extended review, a specific severance agreement, and foreign taxes.

Before I move on to more recent business, I'd like to cover the status of our upcoming SEC filings.

We requested, and were granted, an extension to May 31st for our fiscal 2005 10-K.

We are working diligently toward this goal.

However, based on the additional time to file the third quarter 10-Q compounded by the staffing challenges in our finance organization, we do not expect we will meet that deadline.

We intend to ask Nasdaq to meet with us to discuss our plan to return to compliance.

We want to assure you that we are committed to achieving this goal.

Now, I'd like to move on and share some of the early indicators of our growing business momentum.

We are seeing good growth in bookings, by which we mean deals that have an executed, non-rescindable contract with a credit worthy customer, or for which cash has been received.

Total Q4 bookings increased 22% from the prior quarter to $39.5 million.

Preliminary results show Q1 bookings in excess of $36 million.

We are also seeing positive indicators in our cash flow.

We finished Q1 with a preliminary cash position above $55 million, reflecting a total cash burn of less than $5 million.

Our cash flow improved primarily due to two factors: our highest cash collection in three years, and cost reductions from last fall's corporate restructuring.

Our strong cash collections were due to our increased bookings and natural quarterly fluctuations.

Cash collections consist of customer payments and exclude cash receipts from financing activity such as stock options or stock purchase plans.

We are pleased that in Q1 we began to realize the savings we forecast from our corporate restructuring.

We expect to meet our goal of $15 to $19 million in savings in fiscal 2006.

I'd like to take a few moments to update you on the progress we are making in the finance organization.

We are actively engaged in recruiting and hiring the right talent.

We recently hired a vice president and corporate controller with 20 years of experience, as well as several other key finance personnel.

As part of our year-end close process, we are completing our detailed plan to address our material weaknesses and controlled efficiencies.

We will continue to keep you updated on our progress in this area.

Now, Dave and I would like to open up the call for questions.

Operator?

Thank you.

At this time, I would like to remind everyone, if you would like to ask a question, please press star, then the number one on your telephone keypad.

We will pause for just a moment to compile the Q&A roster.

Your first question comes from Sanjay Perry.

Hi, thank you.

Could you just talk a little bit about plans for getting to profitability, that's kind of the first question.

Second question is just talk a little bit about how the cash burn trended in the fourth quarter, and then how we should think about it coming from the fourth quarter to the first quarter.

And then just talk a little bit about how you're feeling about visibility in your business as we go through the balance of fiscal year '06.

Thanks.

Okay.

Hi, Sanjay.

This is Ron.

On profitability, I think, as we've I think said in the past, we're really looking at three things, which is our costs.

And in Q1 we really started to see the benefits of the corporate restructuring to bring those down.

The improving margins on the services throughout the year, and then in addition, the increased bookings.

And I think what you're starting to see in these results is our execution toward those three goals to drive profitability.

On the cash, I think if you look at the trajectory, looking at Q2, cash was about $83.7 million;

Q3, $71.2; the end of Q4, $59.7; and it is now above $55.

You're seeing that trajectory move in the right direction, and so I think what you're going -- what we expect is that to continue to move in that direction.

We have adequate cash to move to cash flow positive out of those results.

I think on visibility, what I would say is that when Dave and I have put in place the new forecasting model that we're using to run the business internally, we're evaluating and validating its accuracy and its predictability,.

And I think as we get comfortable, that we have -- that it is able to provide accurate and predictable results, we'll be able to resume guidance.

Ron, can you just give us a little bit better handle on -- it looks like the -- you ended the third quarter with 71.

You went down to 59, fourth quarter, and then you're talking about something north of 55 in the first.

I mean, should we assume that your cash break-even is kind of right around this revenue level and that you're kind of a quarter or so away from cash break-even, or is there anything that would cause the cash burn to increase going forward?

And I guess even more specifically, where does cash bottom out?

Yes.

I think what I would say is that I think we expect to see cash move along that same trajectory and that we have adequate cash to get to cash flow positive at this point.

Your next question comes from [Year Rainer].

Hi, guys.

Couple quick questions.

On Vodafone, sounds like you've been having some activity with them.

Can you give us a sense of, is this -- are you returning to the level of activity you saw earlier in '04, or how much business are we talking about?

I think if you look at our relationship with Vodafone, the bookings are continuing to strengthen.

And as I said earlier in the call, we've expanded our relationships in a couple of key accounts at Vodafone UK and Vodafone Japan, as well as the projects that we do with Vodafone Group itself.

The recognition of revenue from those projects is obviously somewhat variable due to the timing of projects mile stones; they tend to be very large, long-term projects.

So you will see variability in the recognition of revenue, but I think the relationship is continuing to strengthen and continues to generate increasing business.

So in that respect, are the bookings, would you say, that they span the next 12 months, 18 months, 3 months?

In terms of turning the bookings into recognized revenue, I would say it really depends on the -- it depends on the projects themselves as to how the revenue will be recognized.

In general, most of the services engagements that we have translate into revenue within a 12-month period at the most; there's very few that go beyond that.

There are some engineering related projects that -- programs around the Portal Advantage Program, where the revenue recognition may span out more 12 to 18 months beyond the time of the bookings.

Great.

One other question.

With respect to the Portal 7 upgrade, are those -- how -- what's the revenue structure around that?

Are they -- how are they paid for, are they paid for, is the upside downstream, how does that work?

Well, if you look at the relationship we have with the customer who has a license, a perpetual license that they have purchased, as part of the maintenance and support agreement they have access to the same capabilities, the same modules in our solution as we upgrade to new versions.

However, we are constantly adding additional functionality, which is separately costed, so in many cases they are purchasing additional licenses for additional services or additional capability.

And also, there are typically significant services around helping the customer with the upgrade process and insuring that it's smooth and successful.

Okay.

Thanks.

I'll turn the line over to others.

Thanks.

Your next question comes from [Israel Essler] with Raymond James.

Yes, hi there.

Some of my questions have been answered here, but can you give an update as to what you are seeing on the competitive front, and also, in terms of pricing, what do you feel the environment is right now and going forward?

I think we're seeing very strong traction with the customers that we're focusing on.

As I've said in the past, we've really created a lot of focus in the company over the last two quarters and are building stronger and stronger relationships with our key existing customers as well as building relationships with new customers in specific geographies where we feel we have a strong presence and critical mass.

And I think we're seeing a lot of success in the engagements that we are aggressively pursuing.

Okay.

In terms of pricing?

Well, I think if you look at the migration of the industry, it's really moving, I think, very noticeably, toward an enterprise software model and that plays very well to our business model.

So I think our customers are becoming very comfortable with the license-oriented pricing that we have.

Obviously, in the market there are other business models out there, and I think as customers understand that the revenue management space is maturing much like the CRM space and the ERP space did, they are starting to see that the predictability and the total cost of ownership of a platform-based solution really is a better approach.

Okay.

Kind of excluding Vodafone, where else are you seeing growth?

Any particular regions, certain carriers where you're seeing growth other than Vodafone and their property?

Well, we're actually, again, seeing strong business success in a number of areas.

Obviously, Europe is a very key geography for us.

Latin America is also coming on strong with Tier One customers such as Telefonica.

We're really continuing to strengthen our relationships with customers in the Australia/New Zealand region, as well as we're seeing results from the indirect channel models that we're building in regions where we don't have direct presence.

So the Middle East, for instance, we recently announced a significant deal in Saudi Arabia with mobile-e.

And so I think it's really a general success around the convergence of the services that our customers are trying to provide and their need to simplify their back office, as well as the convergence of pre-paid and post-paid.

Okay.

Thank you very much.

Your next question comes from [Amy Namm] with JP Morgan.

Hi.

This is Amy Namm for [Paul Coster.] Two quick questions.

First off, can you talk a little bit about what specifically you are doing to address the control issues and when you expect to have those resolved?

Yes.

As I mentioned on the call, we are putting together sort of our full detailed plan around each of our controlled deficiencies just as part of finalizing our SOX plan.

That includes the specific actions that are needed to remediate them as well as a timetable around those.

So we'll continue to update you, not only on these calls, but in our routine filings as we specifically remediate the control issues.

So at this point there are still unresolved issues left to be fixed; is that correct?

Yes.

There still are controlled deficiencies that we are in the process of -- we are working on to remediate.

Okay.

Secondly, could you give a little bit of color on -- in terms of how we should think about the licensing business going into 2006, specifically, as a percentage of total revenue?

Should we be anticipating that mix to change significantly at this point?

Well, if you look at the profile that we are driving to as a management team, we essentially have a model for Portal, not for any specific quarter, but just kind of a medium-term business model, with about 35% of our business coming from the licenses, about 25% from support, and about 40% from services.

Okay.

And we're working very closely with our integration partners to really tune the types of services that we're providing to really leverage the fact that -- the product-based solution.

Okay.

So that medium-term business model is something that you feel is achievable in FY '06 or is that further out?

It's really designed as a model that we're driving to.

Obviously, quarter-over-quarter fluctuations are -- can be fairly significant because of the size of the deals we operate on.

So I really -- I can't say exactly when we'll be there.

Great.

Thank you.

Your next question comes from Arif Karim with Pacific Edge.

Hi.

I had missed a little bit of the beginning of the call when you talked about some of the progress you've made with customers.

Can you just kind of review that with us a little bit?

And I think just kind of briefly mentioned you expanded with business with some of those names, but if you could give a little more color around that.?

And then, I guess, more specifically, I know you're working on some converged billing deals where some of your customers were actually looking to implement you guys for converged voice and data solutions.

Have any of those gone live yet?

The customers that I mentioned earlier, where we specifically have expanded business, were Swisscom Mobile, France Telecom, Vodafone UK, Vodafone Japan, a partnership agreement with Nokia, as well as Vodafone Group, and obviously, we have many other customers as well.

In -- I'm sorry, can you repeat the second half of your question?

Yes.

Can you just tell us a little bit more about some of the work that you've done with those customers that you've mentioned in terms of what are these expansions that you've done?

I mean, any kind of detail around that would be helpful.

And then I know you had in the works implementations of converged solutions for data and voice, if any of those have gone live, can you talk about that as well?

Sure.

In terms of the projects that we're doing at these customers as well as others, typically we are -- in the beginning of our relationship with a new customer, we are often brought in to innovate new services on top of a legacy infrastructure.

So a lot of our projects have to do with layering on data services first, and then as our relationship strengthens with that customer, it is often the case that they will start moving us across.

It's common for the next phase of a replacement project to be installing our rating and discounting capabilities on top of the voice services, and then eventually to have us take over all of the billing and all the financial management as well.

In terms of fully converged services, there are many customers where we are implementing voice and data, which are live today.

Can you mention any of those?

Who are live today?

Orange Switzerland is an example;

Vodafone Pacific;

SIRIUS satellite radio is full end-to-end infrastructure;

Telefonica in Latin America is using us for both voice and data.

Okay.

Great.

Thank you.

Your next question comes from Michael Turits with Prudential Equity Group.

Hi, guys.

How are you doing?

It's Mark Griffin standing in.

Doing well.

Good.

I saw the cash numbers you put up, and I was just wondering about -- in the filing you guys put out the other day there is a little section on the restructuring and the different details.

There was two line items; there's a current portion and a long-term portion.

Have they been paid?

Like, there's a current portion of $9.8 million for severance and what not and the restructuring.

Yes.

You know, after -- it says after cash payments.

Has that been already paid at this point?

The bulk of the total restructuring on the balance sheet is related to lease payments, which are paid out over the remaining lease payments.

So those are paid month-in and month-out.

So those have not been fully paid, the $9.8 million you were referring to.

So the current is still lease payments and not the long-term?

I thought more the long-term would be the lease payments.

Well, the current stuff would be the lease payments that are due over the next 12 months.

There's a very small amount of severance remaining, but it's principally lease payments.

Okay.

The -- there's a delta of about 16 million or so between what could be, let's say your maximum amount, your maximum exposure for lease payments of 32 million if you don't sublet it in some form or other; is that correct?

You have a delta between -- you took a charge of $16.8 and you could be liable for up to $32 million.

Have you made progress on subleasing this property?

Has it been successful?

Is it still-- I mean my point is can we still see more of a charge if this subleasing is not successful?

You know, as you raised the point, we have been actively looking to manage our excess facilities.

A significant portion is subleased, and we're continuing to actively manage the remaining facilities.

And the restructuring charges represent our best view today of the sublease income that we'll receive and the space that we deem excess.

Okay.

One other question.

You were saying March -- I'm sorry -- May 31st is the deadline to file the 10-K and you won't meet that deadline.

You're talking to the NSD; that's correct?

Yes, that's correct.

Okay.

That's for the January quarter, and what kind of -- when do you think you might be able to get that in and subsequently, once that's done, how much further along would the April quarter that just closed be able to come out with information on that?

Could they be back to back in some format?

So we are finalizing our detailed plans and schedule around our year-end audit, which covers the January quarter, as well as the whole SOX evaluation.

Because that has not yet been fully reviewed and approved by our audit committee, we can't reveal that at this time.

But we are keeping Nasdaq fully informed of our situation and, obviously, they have been supportive of us so far.

Well, my question is more for the -- let's say the first Q of fiscal '06.

If your audit committee, when it does and it approves the process and stuff that you've used for the fiscal year '05, will the first quarter of '06 kind of -- not rubber stamp, but kind of breeze through, because the processes have been approved, everything's okay?

Are you following my thought process on that?

Yes.

This is Ron.

I think the -- we're working to develop a plan that will allow us to come back into compliance as quickly as possible.

The timing of that plan is dependent, certainly, on our plan as well as reviewing that plan with our independent auditors that also have to review, or audit the year end and review the quarter.

So as Dave said, we're in the process of reviewing that plan with those parties, and as soon as we have completed that review and have identified some dates, we'll be able to announce those.

Okay.

Thanks.

Your next question comes from Justin Martos with Grand Partner.

Couple questions.

On the -- what's the sort of operating cash burn, ex any working capital changes in the past two quarters?

If you look at over the -- I guess if you look back to Q3, the cash on restructuring has been around $3 million in those quarters in terms of cash-related to that.

So the remaining portion of the burn was principally from operations and CapEx, and changes in working capital.

Okay.

But ex -- I mean, but when you ex out that changes in working capital, do you have that number handy?

You know, I don't have that number handy.

Okay, and then for -- what are the services gross margins now and what have -- versus last quarter, what's the sort of trend there?

Yes.

I think on the services margins, I guess two things.

One is changes, as we look at the margins going forward, we've made changes in the services organization by bringing in experienced services margins, and with the organization I think the other driver is wrapping up legacy contracts that have had typically lower margins, and then making sure that we're bidding new projects at our target margins that will drive the improvement.

On a -- margins in Q3, just as we have a couple quarters that we're looking at, let me -- I don't have that handy.

The services margins in Q3 were about -- this is total services -- around 46%.

And that was in Q3?

Q3 of FY '05.

Okay.

And can you give me a description of where they have gone since then?

Well, yes, and I think if you look at what we have done, from an organizational standpoint we've changed the field organization dramatically; really put in best practices around the world; a much tighter, more centralized management structure for scoping projects; for the approval process for new projects; we have new management tools and project management processes as well.

So we are aggressively looking to drive those margins up.

The results will have to speak for themselves as we announce them.

Right.

And then -- for the past quarter, the revenues that you booked were on services gross margin and it's probably at that 46% level or lower, and that the fact that -- and then going forward that's the higher amount.

Is that a fair interpretation in terms of how the mix has been going?

If I understood your question, the margin in -- 46% in Q3 was quite a bit favorable to what we had seen historically, and that was largely due to the Softbank transaction that we recognized in Q3.

Most of the services costs, because of the contracting process around that, had been incurred in prior quarters with the services revenue coming in in Q3.

So I think that's what caused the very positive margins in Q3.

You know, I think to Dave's point, if you look at sort of the historical trend, we expect to see against that trend, margins to come up, but the 46 is probably a unique [inaudible] that trend.

But the revenue that you're booking for the January quarter and for the quarter just ended in April, those are all service gross margins from things that you've bid, say, 12 months ago, and so the margins will continue -- I mean, we've just seen continued low margins, so is that fair to say?

I think that's actually not -- not necessarily a good conclusion.

I would say the majority of the services projects that we do are in the 4 to 6 month range.

As I said, very few of them go out past 12 months, it's very unusual.

And if you look at the strength of our bookings in the fourth quarter and the first quarter, a lot of those projects start up fairly quickly after the deals are booked.

Right.

And on the bookings, you don't break out the services versus license bookings do you?

We don't specifically do that, no.

But you will when you have the financial statements filed, or you will not?

No, I -- we do not separate out the license and services in the bookings number.

And then in the booking number, how much was Vodafone and it's related entities for -- of that booking?

Did you guys talk about that?

We don't separate that either.

What we have said is that we are see stronger license bookings in the fourth and first quarter, as I mentioned.

And one other follow-up question on Vodafone.

Are you guys in Vodafone Germany in the old [inaudible] properties?

We do have a relationship with them.

It's -- I mean we --

But you're not implemented there in Vodafone Germany?

We are actively providing services in Vodafone Germany.

Obviously, their legacy system is not from us.

Right.

Okay.

And also how about the Vodafone [tim] or Vodafone Italia?

Yes, we do have a strong relationship with Vodafone Italy.

And then the regions for Vodafone, how do you -- I mean, is it UK first then Spain then the other properties, or how would you rank your penetration?

I think what I will say is that we are in a majority of the Vodafone companies, and the relationships vary quite a bit and we are obviously pursuing to strengthen them, all of them.

Great.

Thank you very much.

Your next question comes from [Ringin Razuradnum].

Quick question on operational expenses.

Can you just talk maybe a little color on where we see that going and maybe the magnitude of the decrease quarter-on-quarter?

And then my second question is on restructuring.

What should we be thinking about for further cash restructuring payments, or is the majority of that already completed?

Well, I think as Ron mentioned a few minutes ago, the majority of the remaining restructuring payments are related to real estate obligations.

Some of those are quite long-term.

In terms of the savings from the restructuring we did in the fall, as we have said, our target was to realize a $15 to $19 million savings across fiscal 2006 in our operating expenses.

And based on the Q1 preliminary results, we are comfortable that we expect to achieve that savings.

Is there any color you can give us on what operational expenses are, in terms of numbers, or how we should be thinking about that over the next three or four quarters, in terms of the ramp down?

No.

I think -- I mean, the operational expenses will be much more clear when we do a full release of our numbers for Q1, and I think we'll talk more about it then.

Okay.

Great.

In terms of the bookings, is there any color you can give us on either number of new customers you signed during the quarter, size of deals, or any way we can kind of compare this to previous quarters?

Is there metrics around that?

I think we'll provide more color in those areas when we do our full announcement for the quarter.

Okay.

Thanks very much.

[OPERATOR INSTRUCTIONS].

Your next question comes from Sanjay Perry.

All right.

Thanks.

The follow-up question I had was, Ron or Dave, can you just help me understand, obviously, we've seen some nice turnaround in your business, but can you help us understand a little bit some of these metrics that you guys gave with the bookings and the cash collections?

I guess I'm trying to understand what to do with these numbers and how I translate them into a model.

I mean do I interpret that as -- I guess I'm just trying get a handle on should I assume that your quarterly revenue numbers now begin to pick up every quarter?

I guess I'm trying to get an understanding of the opportunity here for licenses, anything that just allows us to understand how big the business could be.

And then secondly, I just want to get a handle on this cash collections statement that I think you made on one of your releases, either the 18th or the 25th, where you said it was better than the last two quarters and any other quarters, I guess, in the last couple fiscal years.

I guess I'm just trying to understand how far away we are from getting to cash positive and what exactly do you mean by "cash collections"?

If you could just help us understand that a little bit, please.

So if you look at the bookings, I mean, obviously, it represents a forward-looking indicator in terms of the strength of the relationships we have with our customers.

We're not providing guidance at this time on how that will specifically translate to revenue, but I think if you look at it at a high level, when we book business with a customer, it is often a combination of licenses, a service engagement, and support and maintenance.

At this time, the licenses and the services bookings will get recognized together over the lifespan of that services engagement because of the lack of [VSOE] on consulting.

The maintenance will get recognized across the maintenance period separately.

So as for how that drives your model, I'll leave that to you.

Cash collections, as Ron mentioned, is essentially cash collected from our customers, so not cash received for stock option exercises or activities like that.

And as we said, the strength there was really a combination of our very strong bookings in Q4 and Q1, which obviously drives an AR balance that we can go collect, as well as some natural quarterly fluctuation.

So should I assume that revenues should begin to kind of -- or at least licenses should begin to pick up every quarter, or how I do think about it, Ron?

Yes .

I think sort of providing --

I'm just looking directionally.

I'm not even going for numbers.

Directionally, I think you'll need to look at what the bookings, and kind of directionally what the bookings are.

I think to what Dave said is that the bookings typically will translate into revenues over the services period, which is typically four to six months on most engagements, and we've seen bookings over the last two quarters tick up a little bit.

I know you guys said -- you kind of gave a little bit of a time line on the 10-K -- but what's your sense of when we get some clarity, just with basic financial statements for the January quarter and the April quarter?

I mean, is there going to be kind of a release in the next 30 days just of preliminary financial statements like you guys did for the October quarter?

I think the preliminary release we did for Q3 was, obviously, based on the unusual circumstance of having such a long delay for our 10-Q for that quarter.

So as we finalize the plan to finish the year-end audit and move back toward compliance, we'll evaluate what the right communication strategy is.

Okay.

Great.

Thanks.

Your next question comes from Eric Best with Best Systems.

Yes, hi.

I have two questions.

Seems that Portal 7 was released, I believe, during Q3.

Can we expect that the R&D expenses will start going down or are already going down?

And my second question is in regard to -- you guys mentioned Nokia.

Can you, a little bit, explain the relationship with Nokia?

Thank you.

Sure.

In terms of Nokia, we have an agreement where they are using our platform as part of an overall offering that they have into the market, which includes network equipment and software to provide prepaid support for networks for voice and data services.

And so we are essentially -- have an OEM-type arrangement with them where they resell our software.

We do maintain a very good relationship with the end customer to support them, obviously.

From an R&D standpoint, we are a technology company.

We intend to continue to invest strongly in R&D.

We consistently get feedback from our strategic customers that it is one of the key differentiators for us in the marketplace, and so I would say that we will maintain our investment.

Does that mean the same levels that you guys showed up in Q3 or can we expect some reduction?

I would say that we have not -- we have not achieved our cost savings as part of the restructure through cost reductions in R&D.

We have taken cost out of the Company in other areas.

Thank you.

Your next question comes from Chuck Goldblum with Emancipation Capital.

Thank you.

I guess, for a while now you guys have been sort of out of touch with investors and with the Street beyond the few conferences you attended.

Now that the last quarter's numbers have come out, will the company be a bit more available to investors?

We certainly -- and hopefully this call is an example of this -- we certainly intend to be less silent than we have been over the last several months, yes.

Okay.

And just rephrasing a prior question, what is your expectations as far as -- I mean let's put it this way, you put out October numbers well prior to the 10-Q coming out.

What sort of things do you need do internally to determine when you could put out preliminary numbers for fiscal Q4 as opposed to when the the 10-K comes out?

As I said a few minutes ago, we are obviously still finalizing our detailed plan and schedule to finish the year-end audit and the SOX testing and prepare the 10-K.

As part of that, we will evaluate what the best communications plan and schedule is.

So I -- we don't have that finalized today

Okay.

Well, that's fine.

I guess the question is not -- apart from the 10-K and apart from the Sarbanes-Oxley related stuff, what sort of stuff do you need do to determine when you can put out a preliminary release on Q4 data, just to give us a sense of what sort of bogeys you need to hit, just to put out that?

Well, obviously we need to feel very comfortable with the quality of the analysis that we have performed; because they are preliminary results, they haven't -- they have not yet been passed through the full audit and approval by the auditors and, therefore, you saw some changes, some adjustments were made to the third quarter numbers.

But obviously, we have to feel very comfortable that they are portraying the results accurately.

Okay.

Thank you.

That is all the time we have for questions.

Gentlemen, do you have any closing remarks?

Yes.

I want to thank everyone, again, for joining us today.

We're very encouraged by the growing momentum in our business and we look forward to sharing more with you when we wrap up our fiscal 2005.

Thank you.

This conclude's today's Portal third quarter 2005 conference call.

You may now disconnect.