Vignette announced its first-quarter earnings Wednesday after the close of the market. The content management software maker lost $7.9 million on sales of $9.1 million. Sales grew 35.8 percent from the December quarter, while expenses grew 7.5 percent. Sales quadrupled compared to the quarter a year ago.

Revenues were evenly divided between software license sales and professional service fees. While that may be surprising for a company as young as Vignette -- large software companies like Oracle have built up profitable services arms over a comparatively long time -- part of the reason may lie in the way Vignette recognizes revenues.

While most software companies book license sales to earnings as soon as a deal is struck, Vignette doesn't report the license fees it charges its customers as earned until its StoryServer or Syndication Server products are up and running. Since services are billed on a pay-as-you-go basis, Vignette's accounting tends to understate the pace of license sales, according to Vignette chairman Ross Garber.

For example, Vignette announced 15 new customers for the first quarter, including Wired Digital. But according to Wired spokesperson Andrew DeVries, the project to move its Wired News site onto StoryServer won't be completed until the summer -- meaning Vignette won't recognize license revenues from Wired until the new site is up.

CONSERVATIVE ESTIMATEDespite the damper it puts on reported revenues, Wall Street analysts are giving Vignette's books the thumbs-up.

"I think it's a good method," said Sarah Bernstein, an analyst at First Union.

C.E. Unterberg, Towbin analyst Tara Long wrote up Vignette's accounting policy in a recent report on the company, saying that it "aligns Vignette's interests with that of its customer, creating a selling point."

"As an analyst, I like conservative things," says Ms. Long. "They have 45 more days [of visibility to future earnings]." She points out, though, that Vignette's sales force could still push through deals to make their quotas: "It's essentially the same crunch time, just 45 days earlier."

ACCOUNTING FOR TASTEMr. Garber argues that it's still good to have more warning if revenues aren't meeting expectations. "In no way does this take the pressure off our sales force," he says. "But if some quarter in the future doesn't meet expectations, we know that well in advance, and can start managing the expense line."

Vignette's conservative accounting method could prevent stock blowups that have been all too common in the software industry. Over the past decade, all the database software giants -- Oracle, Sybase, and Informix -- have seen earnings fall apart in the wake of accounting debacles. Informix is still recovering from having to restate years of earnings.

It would be hard for software companies that are already public to shift over to the new way of recognizing software license revenue, argues Mr. Garber.

"Our competitors will have problems turning over, because they would have to miss two or three quarters," he says. Software companies going public now, however, might do well to follow Vignette's lead.

In the meantime, Vignette doesn't seem to have any problem meeting analysts' expectations; four out of five analysts covering Vignette have a Buy or Strong Buy rating. Mr. Garber says that "the business model continues to track to plan, and perhaps even faster than anticipated."