To: Clint E. who wrote (34483 ) 9/28/2001 5:05:30 AM From: Clint E. Read Replies (1) | Respond to ((PR Specialist @ his best!))-- IBM (IBM) 89.72 -1.58: IBM has been getting pummeled all week following a slew of brokerage firm estimate cuts. In these post-reg FD days, most companies issue a press release when they need to warn that they will miss earnings. IBM does not appear to have followed this path. We have heard from numerous sources that IBM was calling analysts earlier this week and asking for their earnings models. Asking for models has long been Wall Street code for guiding estimates lower. This was a common tool of the trade prior to reg FD. But earnings estimates are considered material information, and material information is supposed to be made public now, rather than whispered to analysts. We counted at least six brokerage firms that cut their IBM estimates on Tuesday and Wednesday. Estimate reductions are certainly not unusual in the wake of the Sep 11 attacks and you could conclude that this is simply coincidence, but the reports of calls being made by IBM to discuss models certainly raise doubts. We discussed the issue with IBM, but got the expected response: the company would not respond to hearsay and is in its quiet period so any discussions with analysts that might have taken place would not have involved a discussion of the business. But this led us to the key question: would inquiring about an analyst's earnings model be considered a discussion of the business? We asked this question several times, but the IBM spokeswoman would only say in response that the company would not discuss its business during the quiet period. That wasn't the question, but it was the only answer that was forthcoming. So did IBM engage in selective disclosure and guide numbers down this week? The answer is undoubtedly subjective. It is unlikely that the company explicitly told analysts to cut estimates, but it might have asked the questions that it knew would produce that result. Aside from the reg FD issue, this question is worth asking because it's the difference between analysts all jumping on the same bandwagon and guessing that the Sep 11 attacks will reduce IBM earnings and IBM actually delivering that message itself. Obviously, this is a critical distinction - if the former is true, betting that analysts are too pessimistic might be worthwhile, but if the latter is true, that would seem foolish. - Greg Jones, Briefing.com
