NEW YORK (Dow Jones)Baseball, apple pie and GE.
That's not quite how that hackneyed but still endearing phrase goes, but the way some pundits and institutional investors have been talking about General Electric Co. (GE), it might as well be.
At issue is the idea that anyone might question gasp! the mighty blue chip's steady-as-they-go earnings growth or debt load or other financial matters. Those who are against the questioning have in some cases gone so far as to suggest that scrutiny of GE is not only unwarranted but is tantamount to attacking the broad stock market and therefore the economy itself.
Message to these people presumably many of whom are owners of GE stock or bonds: GE is all grown up, and it can stand the attention.
In fact, it's better for all concerned if major, established businesses like GE are given thorough checkups that in turn further affirm the faith that so many investors have had in them for so long. What results is a stronger shareholder base and a stronger stock market and, yes, a stronger economy.
The recent GE-is-untouchable brouhaha got its start last month when big bond fund manager and big thinker Bill Gross of Pacific Investment Management Corp. criticized the way GE was managing its debt.
As widely reported, GE officers responded to that criticism and even went so far as to offer an apology to investors if they'd been mislead about GE's borrowing rates.
The GE debate kept going as the company's first quarter earnings and first ever earnings conference call approached. GE announced its intention to hold earnings conference calls in February at the same time it said it would offer more detail about the financials of many of its units. Would those numbers really provide a better understanding of GE's overall financial health, some wondered aloud? Would the company offer real insights in the earnings call?
Fair questions. What was absolutely clear at the time GE unveiled its new disclosure plans was that the company was doing right by shareholders. Meanwhile, concerns about corporate accounting were building amid the fallout from bankrupt Enron Corp. and its onetime auditor, Arthur Andersen. So as GE earnings drew nearer it seemed that the company's new disclosure policies would provide an excellent opportunity for everyone shareholders, "hot money" managers like hedge funds, believers and skeptics to satisfy themselves about what kind of company GE is.
Oh, to even suggest such a thing! I did in a column Wednesday about broad issues of corporate disclosure, writing that GE's earnings were an excellent opportunity to learn more. That evening I received a telephone voice message from an unidentified caller asking why the column would even raise the subject of the quality of GE's earnings. The caller inveighed at length against Bill Gross (who was never mentioned in my column) and asked what would happen if GE's borrowing costs rose, an eventuality, the caller said, that could "cost jobs and hurt the economy."
In response to my Wednesday column I also received an email from GE spokesman David Frail. That email carried this subject line: "Your Editorial today," followed by one line: "We agree."
Others publicly and privately have railed against the GE questioners. Their invective is beside the point.
GE is up to the challenge, as it proved Thursday after reporting first quarter operating results of 35 cents a share, as expected. The company's revenues fell short of forecasts, leading to inevitable questions about how the top and bottom lines gibed. GE took a handful or so of questions on its call and encouraged investors to call afterward for further information.
To sum it up: GE is saying more about itself, though there are probably more questions to be asked. The more investors learn about GE the more they'll be able to feel good about owning GE securities.
It's OK to ask questions about a company, even a legend like GE. Shareholders benefit. So do all other investors who stand to gain from the evolution of corporate disclosure practices.
Those who would have you not ask questions are not helping.
By Gene Colter A Dow Jones Newswires Column
Gene Colter; Dow Jones Newswires; 2019382068; gene.colter@dowjones.com
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