Stock falls after JDA admits loss and SEC investigation

JDA Software's stock is taking a hit after the supply-chain application vendor said Tuesday that it experienced a loss in the fourth quarter and the U.S. Securities and Exchange Commission is requesting information about past fiscal years.

The company reported a net loss of £885,000 (US$1.4 million) in the fourth quarter ended 31 December on revenue of £110 million ($174.2 million). JDA's fourth quarter was impacted by a £34 million ($54 million) payment to settle a lawsuit filed by a customer, the Dillard's department store chain, over software it bought from i2, which JDA bought in 2010. For the full year, JDA reported £428 million ($671.8 million) in revenue, with net income of $71 million.

Meanwhile, JDA "has received notice from the US Securities and Exchange Commission requesting information related to revenue recognition and other accounting and financial reporting matters for certain past fiscal years," it said in a statement Tuesday.

JDA's stock fell more than 18 percent in early trading Wednesday to about £15 ($24) on the news.

The SEC's inquiries include a "a comment letter from the commission's Division of Corporation Finance covering our 2010 10-K filing," CEO Hamish Brewer said during a conference call with analysts Tuesday. "Separately, we received a subpoena from the Division of Enforcement related to an investigation requesting documents for 2008, 2009 and 2010."

"We will of course work very transparently with the SEC to answer their questions and provide the documents that they've requested as quickly as possible," Brewer added.

JDA has pulled together a group that includes its legal counsel, auditor and "Big Four" accounting firms in order to collect the documents sought by the SEC, he added. This work should take several weeks and "at this stage, we do not know what this analysis will produce."

The company has "worked with the same Big Four audit firms for many years and we have not had any disagreements with them on revenue recognition," Brewer said. In addition, "at this point, this matter appears to be focused on the timing of revenue recognition rather than the existence of the revenue."

I2 also had high-profile run-ins with the SEC over revenue recognition issues.

But the SEC's requests for information don't "specify one company acquired versus JDA," said JDA CFO Peter Hathaway during the conference call. "It's pretty much focused on sort of a JDA umbrella, if you will."

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