April 3, 2006
To Our Worldwide Customers and Partners:
A little more than a month ago, I wrote to you expressing my enthusiasm at joining Motive as Chairman of the Board and Chief Executive Officer. As many of you know, I also pledged to support a thorough and comprehensive review of Motive’s prior financial statements, and to finalize as soon as possible the filing of appropriate documents with the Securities and Exchange Commission (SEC).
To that end, we filed with the SEC a Form 8-K reflecting our decision to restate financials in certain periods dating to fiscal year 2001. The decision followed a determination by our management team and the Audit Committee of our Board that insufficient evidence existed to support Motive’s prior determination that vendor specific objective evidence (VSOE) of fair value existed for the maintenance element for the majority of Motive’s software arrangements. VSOE is an accounting concept that needs to be established by a software vendor in order to separately recognize revenue from the license element and undelivered elements (e.g., maintenance and services) of a software transaction, and to determine when revenue recognition occurs. Generally speaking, the absence of VSOE results in the recognition of revenue over longer periods of time. Our recent determination doesn't question the underlying validity of Motive’s revenues nor any customer transactions; it is expected to impact only the timing of our revenues.
I would like to share with you some important points about what our filing means for the company and for you:
- For Motive’s customers and partners, it is – and will continue to be – “business as usual.” Our relationship with you is not affected by the developments discussed in our filing. There will be no change in our customer services, nor will there be any change in the quality of our products or our commitments to you.
- Motive is financially strong. The accounting issues being reviewed are past practices, not current practices. Motive is a solid company with a strong cash position and no debt. Our restatement and related filings do not reflect on our core business or strategic vision.
- Motive’s management team will thoroughly review previous accounting practices. Our first priority is to ensure that we address all relevant issues so that we can put them definitively behind us and make one final restatement.
- We expect procedural issues to impede our ability to successfully file restated financials in time to meet the Nasdaq-imposed April 13, 2006, deadline for continued listing. In the event this happens, we expect our stock to move from the Nasdaq National Market to the over-the-counter (OTC) market. This should have no effect on our business operations. Upon filing the necessary financial statements and periodic reports, we will seek re-instatement on the Nasdaq National Market as promptly as possible.
As we continue to move through this process, we are committed to communicating directly and openly with you. If you would like to receive additional information or speak with me directly, please don’t hesitate to call me at 512-531-2424.
Thank you for your continued support.
Sincerely,
Alfred Mockett
Chairman and CEO
Motive, Inc.
