Partner, PricewaterhouseCoopers LLP

Salt Lake City has been mentioned as having the potential to become a significant center of high-tech growth. Given that you recently came from Silicon Valley, what do you think of the prospects here?

The region has all of the basic building blocks for success. One of the things hurting the Wasatch Front is the lack of significant presence in any one sector of the field. We are strong in software and hardware, with significant talent having rolled out of Novell, WordPerfect and IOmega. We are also strong in biotech and pharmaceuticals, but I don't see any of these having reached critical mass yet.

Are high-tech companies different from other firms in terms of debt loads?

Typically, high-tech companies have much easier access to equity funding than debt, especially in their earlier stages. When you see venture funds flowing into a company, it is almost always in the form of preferred stock. Even when it is in the form of debt, it is structured in a convertible form such that the investor can secure a particular asset initially, but can benefit from the upside of an equity investment if the company takes off. After going public, most high-tech firms find that using their own stock as currency is the preferred method to finance growth, except when borrowings are needed to acquire specific tangible assets such as a building or equipment.

How has the 2002 Sarbanes-Oxley Act requiring new standards in accounting and reporting practices impacted high-tech firms?

Most of these firms have experienced recent rampant growth. From a personnel standpoint, they struggled to meet the day-to-day requirements of that growth even before Sarbanes-Oxley. Consequently, many of them were overwhelmed by the new requirements surrounding controls, a fact that is confirmed by the greater number of internal control weaknesses reported by these companies during the first two years of Sarbanes-Oxley. You have to remember that the overall risk profile of a high-tech firm is generally much different than that of a traditional company. When pricing their investments, sophisticated investors take into account all of the various risks involved, including the heightened risk of failed financial controls present in many high-tech firms.

Overall, what has changed since the passage of the 2002 Sarbanes-Oxley Act?

The effort to comply with Sarbanes during the first two years was a significant and costly undertaking for most public companies, especially mid-tier companies with inadequate internal resources. Management, boards, accountants and even the regulators struggled to come to an agreement on what constituted good internal controls over financial reporting.