PALO ALTO, Calif. (CNN/Money) -
My favorite part of IBM's pre-announcement Monday, its first since 1991, was how little it said. "The business environment remains very tough," is the most qualitatively demonstrable thing the company allowed in its four-paragraph news release.
That $17-billion truism -- the amount being the lost value in IBM's shares Monday -- was attributed to Chief Financial Officer John R. Joyce. Oh, that and the fact that IBM's revenue forecast for the first quarter is about a billion dollars shy of what investors expected and that earnings will be as much as 22 percent below what Wall Street had forecast. It's kind of surprising that the stock only fell 10 percent.
But again, the beautiful thing here is IBM's delightful arrogance in simply releasing the bombshell, making some cursory statements about which segments were hit worst (semiconductors, hard disk drives, and other hardware), and saying, effectively, "Check in with us later for more details." You can almost hear the groans from a Wall Street accustomed to having much more than this spoon-fed to it. And promptly, please.
"No color was provided, and there is no conference call before the April 17 release," sniffs hardware analyst Steve Milunovich at Merrill Lynch. "IBM's pre-announcement is bad for tech overall, given that IBM has been gaining share in many segments," he adds, understatement apparently being one of Milunovich's hidden talents. "End user demand is weak, even for the seasonally softest quarter of the year."
What's delightful about this lack of information? Well, it's another sign that diligent analysts will be rewarded for analyzing. Knowing a company well, digging into its various operations, and paying careful attention to what's going on among competitors, customers and suppliers all are profitable enterprises again for investors. By not giving additional guidance, other than to comment on the quarter just ended, IBM is embracing the call by contrarian pundits that companies should show rather than tell. (Read an engaging polemic on the topic, "Just Say No To Guidance," in a recent issue of Fortune, written by future TV star Geoffrey Colvin.)
| |
RECENTLY BY ADAM LASHINSKY
| |
| | |
| | |
|
Now, IBMologists, like the Kremlin watchers of old, will set to work interpreting the meaning of who was standing where when this news was announced. The conventional wisdom is that new CEO Sam Palmisano is re-setting the bar, lowering the impossibly high standards former CEO Lou Gerstner made sure he met. Note that Palmisano wasn't quoted in the release at all. Will he personally own up to IBM's failings in the company's conference call, now an agonizing nine days away? Who knows.
Expect the time between now and IBM's formal earnings release to be full of surprises, as analysts do the tough job of checking in with every tech company affected by this announcement, namely, every tech company. First come the platitudes, like this one, from Banc of America's Joel Wagonfeld: "The magnitude of IBM's miss -- and the fact that it reflected 'across-the-board' weakness -- suggests the IT recovery may be even more delayed than previously expected."
That's been obvious for weeks. Next come the specifics.
Adam Lashinsky is a senior writer for Fortune magazine. Send email to Adam at adam_lashinsky@timeinc.com.
Sign up to receive The Bottom Line by e-mail.
|
