DATM is an example of not believing mgt on conf calls. I, unfortunately, had exited only one-half of my position by the time the LU inventory issue came up on October 1, 1997, with the stock dropping almost 20 pts to 26 or so. After the close, the CEO stated very clearly that the LU inventory issue was a one quarter event and they saw absolutely no signs of any order falloff from LU. As a securities lawyer, I took comfort that mgt would not go out that far on the ledge unless they were damn sure that was the case. Well, on or about Oct 23, only 22 days later, DATM warned of an upcoming revenue shortfall in its earnings release. Fool me once, shame on you, fool me twice, shame on me-I exited my DATM at 20 even on that day.
I have seen many similar examples to DATM in the last year, so that I do not believe any statements meant to mitigate bad news disclosures.
Most mgts of recent public companies have little idea of how to communicate to the public and many tend to use the Clinton method of disclosure-deny, rationalize, and dribble out the bad news.
See VLSI's July conference call for a similar result. In that call, mgt looked for sequential revenue growth in the 3rd quarter. Two nights ago, the company admitted to a revenue decline-only six weeks later. |
