Carl,
Good post.
I believe that the stock market forces businesses to focus on quarterly earnings to the detriment of long term business.
We are not that far apart. We need to be careful that we are talking about apples or oranges. Your statement that I quoted above really refers to quarterly earnings relative to expectations or guidance. This is usually a sham, and manipulated to advantage by all concerned. There is a certain unpredictability in revenues and earnings that can never be eliminated. It is stupid to hold companies accountable for trivial variances of 10% or less from expectations.
What I'm talking about is running the company so close to the "edge" that normal business variabilities can engender losses. If management was scared to death of creating a loss they would make damn sure that they operate far enough in the black that normal variations would not take them into the red. The motto should be: solidly in the black, or move on.
imagine Intel and AMD ... If anti trust laws weren't involved, and quarterly earnings weren't an issue ...
Very true, what you say. I guess that's why we do have anti-trust laws and why quarterly earnings are an issue.
Despite this, because of market conditions primarily caused by the ready availability of shrinks at relatively low cost (available to all competitors in the industry), MU lost money for two consecutive quarters. It would be insane to fire some of the best managers in the DRAM business for general market conditions caused by technological change.
What you say is true. I'm not proposing a rule that would be cast in stone. I'm advocating a culture that would be so offended by losses that management would be scared to death of them. If they were able to sufficiently explain the situation to the BOD, the board would have to decide how to deal with it. But it should require more than double talk, and a wink and a nod in the direction of Korea.
Let's put it another way: if your bank dealt with your capital deposits in the same way that your equity investments often deal with the capital you extend to them, would you be outraged or not?
As investors, we accept far too much cavalier dealing with our capital by the companies we invest in. Perhaps the reason is that more and more of us see ourselves increasingly as traders instead of investors.
Land_Lubber |
