Tony and all thread followers, a must read!
siliconinvestor.com
(this is an excerpt from Fortune)
A few pts "bolded" by SI poster HJ:
Analysts of all stripes--from Morgan Stanley?s Mary Meeker on down to lowly researchers at the likes of the Aberdeen Group--increasingly derive a portion of their compensation, directly or indirectly, from the companies they cover
Star analysts with solid reputations such as Meeker, Merrill Lynch?s Henry Blodget, or DLJ?s Jamie Kiggen must contend with the overload too.
"In the technology world, there is no banking relationship without the analyst."
: "In the technology world, there is no banking relationship without the analyst."
."Some companies are great about paying the money and getting covered. Call me jaded, but that is the way I understand it works."
For the record, Fenik says this practice is much more rampant at other, bigger shops. How reassuring.
Message 13233895
"The living dead have gotten away with murder because the public markets have funded riskier and riskier ventures," agrees Warren Packard, managing partner with venture capital firm, Draper Fisher Jurvetson. "Look at Amazon.com -- it could be the biggest living dead the public markets have ever seen."
Message 13233135
Amazon.com, eToys, and 1-800-flowers are among the many e-commerce companies playing a shell game with "fulfillment costs," which are the expenses associated with warehousing, packaging, and shipping products. Offline companies usually record the expense on their income statements as cost of sales. But not dot-coms. A lot of them classify fulfillment costs as a "marketing expense."
Why? Because cost of sales cuts directly into a company's gross profit margin. Many e-commerce companies already operate with extremely narrow margins and have little interest in seeing them trimmed further. The other benefit: The practice enables dot-coms to hide operational expenses amid the huge marketing costs that investors believe are a temporary splurge associated with establishing brand recognition. If investors realized that these "marketing" numbers concealed large portions of the business' permanent cost structure, they might change their opinion about the company's prospects. Textbook e-tailer Varsitybooks.com went so far as to dismiss auditor KPMG in October when it objected to lumping fulfillment costs under marketing expenses. The company's new auditor, PricewaterhouseCoopers, approved the practice. |
