Tuesday, March 1, 2005

Companies Giving and Meeting Guidance

An article in the Wall Street Journal discussing the practice of "guidance":

Barry Diller, chairman and chief executive of IAC/InterActiveCorp, says that two years ago he decided the media company should no longer provide a range of likely earnings, but rather would provide business trends, because he didn't want his executives making decisions to try to match investors' short-term expectations.

"The more I began to understand the Wall Street game, the more I realized that [giving such guidance] doesn't have anything to do with building long-term value. It's a kind of ritualized Kabuki dance," he says. "Most corporations are concentrating on making their numbers, but none of it has a single thing to do with actually building a business, and a good part of it is inimical to that, because you can't run a business on quarters."

I do agree that if one-time exceptions happen all the time, doesn't that defy the meaning of an "exception"?