Tricks of the Trade
How companies pump up sales and earnings
PLOY BIG BATH VENDOR FINANCING
HOW IT Takes a large write-off, Lends money to financially
WORKS booking costs now to boost fragile customers so that
earnings and margins in they can buy products,
the future. pumping sales and profits.
DRAWBACK Unless operations improve, Company can be left with
more charges must be taken bad debts--and falling
to maintain earnings. Even- sales, when it stops
tually, investors shun the lending.
stock.
WHO'S DONE IT Cisco, DaimlerChrysler, Kodak Motorola, Lucent, Nortel
PLOY PENSION GAMBIT BEFORE ITS TIME
HOW IT Decides pension plan is Treats pending sales as
WORKS overfunded and cuts company if they have already
contributions. Hides gain occurred, books sales with-
in financial footnotes. out subtracting promised
rebates.
DRAWBACK Rates of return on pension Cuts future sales and earn-
investments may worsen, ings, giving appearance of
requiring bigger future con- faltering company performance
tributions. unless operation is repeated.
WHO'S DONE IT IBM, GE MicroStrategy, Informix,
Cendant
PLOY BACKDOOR BARGAINS
HOW IT Promotes sales by buying a big
WORKS customer's stock or granting it
cheap warrants.
DRAWBACK Investors may be suspicious of
stated values; hard to do over
again, so future results could
falter.
WHO'S DONE IT Flextronics, Amazon
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