I'm starting to feel sorry for Lexar (NASDAQ:LEXR). I've been pretty hard on the firm in the past, because I just didn't see how its business model could succeed in the long term against the profitable and determined gorilla of the flash-chip world, SanDisk (NASDAQ:SNDK). The stock is down a good 60% from the end of September, when I tried to warn investors to keep their eyes on what matters.

Just last week, the beleaguered firm had to issue a warning on a huge profit whiff for the all-important holiday quarter. Way back then, the firm predicted a loss of $0.44 to $0.48, a major downer from the couple o' cents that management figured to earn not too long before.

Yesterday, management said that quarterly results would be postponed in order to accommodate the dread accounting change. Yesterday's panicky selling was probably not warranted by this particular switcheroo. Essentially, Lexar's going to account for some of its revenues on a sell-through rather than a sell-to basis.

Here's the difference. With the sell-to, you record revenues when you ship to the retailers and other normal conditions are met (likelihood of payment, etc.) Simple? Not exactly. Some of Lexar's customers get right of return, price guarantees, sales incentives, and other privileges that complicate the equation. In the past, Lexar used estimates to cope with this, charging the estimate against revenues to get the net.

Now, it's going to record some of these revenues only when the retailers have pushed the product out of their doors. That means deferring revenue from products that were already shipped into future quarters. So, it means sales for the fourth quarter will look smaller than originally predicted. Ideally, it would also mean more accurate financial reporting.

Is this good news or bad news for investors? I'm going to have to go with "neutral." Changing how and when the bills are counted might make Lexar look more profitable this quarter -- or should I say less unprofitable -- and it may make revenues look better next quarter. But it won't change the basic problem, which is SanDisk. When you lose money selling your product, selling more of it -- via deals with Eastman Kodak (NYSE:EK) -- doesn't help much. When your main competitor can force you to sell your stuff at a loss, with minimal carnage for itself, well that's a big problem.

The story at Lexar remains grim. It's not doing anything that any number of the smaller flash companies can't do. That makes a comeback pretty tough. It makes a much-hoped-for buyout unlikely too. The IP that hopefuls keep screaming about? Look at the sheets. It's just not worth that much. I'm not saying that all of Lexar is worthless, but until investors see exactly what happened last quarter, even $3.75 a stub looks pretty rich.

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Seth Jayson prefers his pictures on gelatin plates, but he's been known to work with megapixels as well. At the time of publication, he had shares of SanDisk but no position in any other company mentioned. View his stock holdings and Fool profile here. Fool rules are here.