Opinion ID: 731320
Heading Depth: 5
Heading Rank: 1

Heading: The Fourth Quarter for 1990

Text: 20 Plaintiffs contend that, in the fourth quarter of 1990, defendants recognized nearly $3 million in revenue from transactions with Sony, NEC, Control Data, Convex, and Olivetti. According to plaintiffs, had defendants not recognized this revenue, MIPS would have reported a $2,576,000 loss rather than the $546,000 loss, that was actually reported. 2 21
22 In the fourth quarter of 1990, defendants recognized $1 million in revenue from Sony based on a letter from Sony stating that it was exercising an option to purchase a license. The letter, however, stated that Sony was agree[ing] to discuss, in good faith, the details and schedule associated with the above option during the first quarter of 1991. The discussions over the licensing agreement appear to have taken place after the income was recognized. An agreement was executed in April 1991 and provided that Sony's obligation to pay was conditioned on its receipt of all deliverables. In May 1991, Sony still had not received all deliverables. 23
24 In the fourth quarter of 1990, defendants recorded $250,000 in revenue from NEC based on a signed purchase order. That purchase order contained various contingencies, none of which had been satisfied when the revenue was recognized. In addition, plaintiffs provided evidence that suggests the actual agreement may have been finalized sometime in April 1991. 25
26 In the fourth quarter of 1990, defendants recognized $250,000 in revenue from Control Data. Plaintiffs provided evidence that suggests material terms of the licensing agreement were still being negotiated when defendants recognized the revenue. 27
28 In the fourth quarter of 1990, defendants recognized $950,000 in revenue from Olivetti. According to defendants, a binding agreement in the form of a signed letter of intent existed when the revenue was recognized. However, plaintiffs have provided documentary evidence that suggests that a binding agreement may not have been executed until after the fourth quarter ended and that Olivetti may have signed a backdated agreement. It also appears that the deliverables were not shipped until February 19, 1991. 29
30 In the fourth quarter of 1990, defendants recognized $450,000 in revenue from Convex based upon a December 28, 1990 agreement, which gave Convex the right to cancel and receive a full refund if MIPS failed to tape out the R4000 by December 31, 1991. There is evidence in the record that suggests the R4000 microprocessor was behind schedule. In addition, the deliverables had not yet been shipped when the revenue was recognized. 31