THE DAY AHEAD: Bunker investor relations backfires on Macromedia

COMMENTARY--Earnings conference calls tend to sound alike after awhile. Company executives read prepared comments, go over a few details and then provide some kind of outlook so Wall Street can cook up their financials models.

But Macromedia (Nasdaq: MACR) broke the mold. Execs said nada about the outlook for the June quarter even though it was halfway through it. You could call it bunker investor relations.

Wall Street didn't take the silent treatment well, especially since the Web infrastructure software maker already missed its fiscal fourth-quarter estimates. Shares fell 22 percent last Thursday. That's what happens when you refuse to cooperate at least a little with Wall Street.

Many companies haven't been able to project profits for the rest of 2001, but most at least venture a guess about one quarter. It's hard to believe Macromedia can't predict its business 59 days into the future because of economic conditions. Macromedia's June quarter will be a total surprise to investors. Apparently, it'll be a surprise to Macromedia, too.

That's not a good sign. By not giving any hints into the future, Macromedia is forcing analysts, who usually guess wrong about the future anyway, to produce financial predictions that are even more half-baked than usual. That'll create total chaos with First Call estimates, the measuring stick that moves stocks. Bottom line: You can't have any confidence in First Call estimates for Macromedia.

It only took a few minutes of Macromedia's conference call for message board mavens to lose confidence in the company. Macromedia watchers said management was unprepared and noted the company lacked "visibility shmisibility." One commentator said it was surprising management didn't say a dog ate their outlook.

Granted, Macromedia has a few moving parts. It recently acquired another software firm and is launching a host product of upgrades. But analysts were still flabbergasted by Macromedia's reluctance to talk about anything having to do with the future. Here's a look at one analyst's fruitless attempt to get Macromedia execs to say anything useful:

U.S. Bancorp Piper Jaffray analyst Gene Munster: Should we expect the year to be dramatically down in revenue? Is that fair to say?

Macromedia CEO Rob Burgess: Umm. We got our story and we're sticking to it. That wouldn't be how I would describe it.

Munster: OK. I mean you're really giving us no guidance on the revenue side and you need to give us some sort of flavor. I know you've been adamant that you won't give any revenue guidance, but is it just a down year or is it a dramatically down year?

Burgess: I don't really want to characterize it. Going forward as we get visibility in the short term, I'll try to provide that to you. As we get back to normalized times, I'd expect we'd get back to the kind of guidance we had in the past.

Munster: Do you think you'll be in a loss mode this quarter?

Burgess: Sorry Eugene, I'm just not going to comment on these things.

Munster: I guess where I'm confused is it sounds like last quarter was a pretty linear quarter. What could you be seeing that's so dramatic it makes you want to pull back all guidance?

Burgess: We're not seeing anything dramatic. The central point here is that we're dealing with very uncertain economic times and I don't want to run the company so that people are forced to make really short-term decisions. I think we want to make the right long-term decisions for our customers and our company. At the moment we don't want to throw out proxies that just aren't representative. I don't think it's the right thing to do.

Munster: Any chance the June quarter will be up sequentially?

Burgess: I'm sticking to my same answer. We're not providing an answer to that.

Maybe Munster should have asked why Macromedia even bothered with the conference call. TDAIN

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