BakBone Boss Soldiers On

NEW YORK -- New BakBone Software Inc. (Toronto: BKB) CEO Jim Johnson had to face the financial community today -- unarmed with the information his audience wanted most: earnings results.

Johnson cant discuss the backup software company’s financials because of accounting woes that have resulted in the Alberta Securities Commission (ASC) suspending trading of its shares on the Toronto Stock Exchange (see BakBone Slapped in Toronto).

“I would love to say we were past that, and flash numbers, but I can’t,” Johnson said at the RBC Capital Markets

Fabric Computing Forum when pressed on financials.

Though Johnson declined to provide details, another source close to BakBone says the company hopes to restate its earnings by the end of January, when it is due to announce results from last quarter. The problem is that auditor Deloitte & Touche LLPis trying to decide in which quarter to place certain revenue, the source says.

It might turn out not to be serious, but the delay certainly can’t help BakBone’s reputation. Financial analyst Bradley Mook of Emerging Growth Equities (EGE) discontinued coverage of the company in late December, citing “lack of timely and dependable financial reporting.” Analysts also say BakBone’s goal of getting listed publicly on the Nasdaq is dead for now (see BakBone Calls a Reverse).“While shareholders have been waiting for the company to tie up these issues, get current with its reporting and move ahead, the list of missteps continue to grow longer,” Mook wrote in a Dec. 28 research note.

Johnson’s two-plus months as BakBone boss have been marred by the accounting woes. He took over from Keith Rickard November 1, a week after BakBone hired Deloitte & Touche as its new independent auditor. KPMG had abruptly quit as auditor in October without explanation while BakBone was working on refiling earnings for most of fiscal 2004 and all of 2002 and 2003 (see Bakbone Reports Restated).

Things grew worse in December when the Alberta commission suspended trading because BakBone missed the filing deadline for the quarter that ended in September, and then BakBone announced it had to restate previously issued audited statements from 2004 (see BakBone Needs to Restate).

Johnson says he hasn’t spent much time personally on the accounting problems, but he’ll certainly be happy after the restatement. “It would make my life a lot easier, and it would make the company’s life a lot easier,“ he says. “But it takes up less than 10 percent of my time.”

If the other 90 percent is spent reassuring BakBone partners, Johnson isn’t letting on. Still, all of BakBone’s sales are indirect, so Johnson has to be concerned about the reaction its partners are getting from their customers.“I recently asked an alliance partner specifically if it was an issue,” Johnson says. “He said, ‘Maybe two or three months ago we had people ask about it, but it hasn’t been an issue lately.' ”

Once BakBone gets its accounting house in order, Johnson wants to focus on building partnerships -- adding OEMs and perhaps getting involved in the software acquisition trend. The question is, will BakBone be a buyer or a seller?

The answer could be both. Johnson points out that during his time as an executive at Sterling Software, Sterling acquired 47 companies before it was scarfed up by Computer Associates International Inc. (CA) (NYSE: CA).

“I’m a believer in looking at these opportunities,” he says. “In my 60 days here, I’ve had seven companies come to me with technology, and we’re exploring those.” Then again, he’d probably welcome any conversation these days that doesn’t include accounting.

— Dave Raffo, Senior Editor, Byte and Switch0