CNET también está disponible en español.

Ir a español

Don't show this again

Christmas Gift Guide
Tech Industry

2HRS2GO: Lessons in investor relations

Maybe someday the likes of Intel and SAP will discover stock markets have changed.



Have an opinion on this?



This week's statements from these two technology powerhouses exemplify an old, Blue Chip, Captain of Industry attitude. Trust us. Business is good. Forget expectations.

We missed by two cents -- no big deal, things are strong and they're going to stay strong. We're finally lowering our earnings target after almost a year of everyone else telling us we're being too optimisic -- hey, it's still 20 percent growth, so be happy.

Patronizing shareholders worked a decade ago, when most people relied on their brokers for information. But the Web has been a popular medium for several years now. Online trading isn't a novelty anymore, with wire headlines and analyst research dancing across millions of PC screens daily. Data, research, innuendo, assumptions estimates, forecasts, stock charts based on astrology -- all there for assimilation.

Intel (Nasdaq: INTC) and SAP (NYSE: SAP) want you to forget all that. It's nice to say, "I don't care what anyone else thinks, here's what I'm telling you."

That attitude may work for a columnist or a radio talk show host, but it's a lousy way to treat your shareholders. In an ideal world, people would wait for results and judge a corporation based on absolute, objective measures. Unfortunately, we live in reality, where people make their decisions by compiling all manner of bits flowing over the Internet and other places. That cacophony of data forms the benchmark against which companies are measured.

That morass of information is messy and often wrong. It's also up to companies to defuse it early, so that shareholders aren't let down.

Talking to analysts throughout the quarter should be a given for a major tech company, yet Intel executives won't even talk about something as basic as prices. "We don't give guidance on ASPs (average selling prices) for chips."

Why not? Product prices aren't R&D trade secrets or hidden strategic plans. Your shareholders -- your company owners -- have a right to know how much you think their products will sell for. And it would improve analyst forecasts -- the main benchmark for the performance of a publicly-traded, widely-held company.

Intel could see where First Call's numbers were going. The company could easily have guided analysts throughout the third quarter, without resorting to headline-grabbing preannouncements. Takes too much time? Make the time. How hard is it to talk to an analyst for 10 minutes: "Hey, loved that last report. You want to know how it's going? Well, chip prices are still falling, so we're not sure if we can keep margins up like we said two weeks ago."

And be conservative on guidance. It never hurts to prep analysts with targets based on worst case scenarios, particularly if you're Intel or SAP, where even the "worst case" usually means billions in revenue and hundreds of millions in earnings. "We think 0.18 micron will help us in the fourth, but right now it's cutting into our gross until we get production up full swing. I wouldn't put much stock in it for now." At least, that's what Intel should have said.

Bill Gates' executive team has mastered the art of analyst guidance, which probably explains why the company has never missed estimates. Brick and mortar retailers release data like clockwork, in the form of monthly reports of comparable store sales.

Talking to Wall Street obviously won't change anything about a company's operations; if business stinks, it stinks, and if it's good, it's good. But a stream of dialogue does manage public perception -- and for someone on a stock market, that's ultimately what matters.

Other issues:

  • eToys
  • (Nasdaq: ETYS) A Goldman Sachs report gave shareholders a reason to cash in after a recent run-up for the online retailer of kids' products. eToys were at 59 5/8 just two weeks ago when Goldman analyst Anthony Notto called the stock a "trading buy" and set a price target of 80.

    Notto today changed his eToys rating to "market outperform" because the stock hit his target so quickly, yet his long-term outlook for the company hasn't changed. The analyst's published forecast for the company's fourth quarter calls for revenue of $81.98 million, but he sees eToys topping that figure. "I firmly believe the company is the leader in the space," Notto said this morning. "They have a very strong, customer-centric management team. ... More important, they understand how to do it online. I continue to be a bull on the stock."

  • Yahoo
  • (Nasdaq: YHOO) Online taxi cabs? More distribution always helps a portal, but anyone who needs to be plugged in that badly needs more hobbies.