Page 259 - Executive Warfare

The New Bosses

reach them and that your stock will be punished for it. Another analyst
may set expectations deliberately low to dampen your stock price imme-
diately.And sometimes the analysts who
really like your stock will moderate their
estimates just to keep the average down THE CONSENSUS
so that you can beat it. EARNINGS
As a result, parts of the consensus ESTIMATE IS A BIT
will be scientific, parts of it will be LIKE A FRUITCAKE
entirely political, and parts of it will be ASSEMBLED
lazy tarot card reading. It’s a meaning- WITHOUT A RECIPE.
less number, yet your stock will suffer if NOBODY IS QUITE
you don’t meet it, even by a penny a SURE HOW MUCH
share. CANDIED LEMON
But what is a penny a share? In rough PEEL IS IN IT.
terms, if you have 250 million out-
standing shares, a penny a share repre-
sents a mere $2.5 million in net income. If you are making $250 million
a quarter, that is just 1 percent of the total.
Arranging your business so predictably,down to the tiniest sliver,to match
the consensus estimate quarter after quarter without cheating is impossible
because of the pin-the-tail-on-the-donkey way the number is constructed.
Any company that hits its mark quarter after quarter is managing its
earnings. And the consequences of that, as we well know, look like a Law
& Order episode.
My advice is, give Wall Street proper warning, but miss your numbers
when you need to. It’s better than joining Jeff Skilling and Bernie Ebbers
in prison.

THE EXPECTATION OF WEALTH—DON’T BE A LEMMING
The pressures that Wall Street puts on organizations to make their num-
bers, come hell or high water, may someday lead your bosses to put pres-

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