Minimal Disclosure.

Minimal Disclosure.

Minimal Disclosure.

Commentary about business and finance.
April 11 2002 4:55 PM

Minimal Disclosure: GE Speaks, Andersen Shredding Tales, Etc.

It was an extremely sour day for the markets, dampening the mood for the entire week. GE reported numbers that investors didn't like (see below), and IBM, already a killjoy earlier in the week, got hit again when a newsletter called SEC Insight said it had learned that the Securities and Exchange Commission has started "an inquiry" regarding IBM; the company hasn't commented. Here's more of what's been happening.


GE Speaks: As part of its responsiveness-to-investors campaign, GE conducted its first-ever conference call today, and has even made it available for replay here if you feel you simply must hear the whole thing. It was not an auspicious debut. Quarterly revenue fell short of expectations and was essentially flat in comparison with the year-earlier number. Earnings were up—but only if you exclude a $1 billion accounting charge. Without the exclusion, earnings were down a bit. The markets reacted to this by slamming GE shares by 9 percent, to about $33.70 (compared to a 52-week high of over $53). And the call itself? Well, I've heard better ones. CEO Jeffrey Immelt was a no-show, and most of the talking was done by CFO Keith Sherin, who marched through a 50-minute presentation laced with occasional detail on such topics as goodwill impairment. Every article about GE results will probably include his comment that "the business environment is still tough," but only by hearing the whole call you can you appreciate the human touch of the almost-plaintive little, "You know?" that he appended to this statement; he probably used the word "tough" at least a dozen times in relation to the environment for specific GE business sectors or the economy generally. The question-and-answer session at the end of the call (often the highlight of these things) was a somewhat brief 15 minutes of fairly uninspired queries. The star of the show, I think, was David, our "conference facilitator." From the moment he got things under way with a chipper, game show-host-like, "Mr. Wacker, you may begin your conference," David was cheery, yet professional. Well done.

Pleas, Please: Former Arthur Andersen employee David Duncan pleaded guilty to obstruction of justice charges and will now cooperate with government prosecutors. A lawyer for Andersen said the firm is "shocked and disappointed" to hear Duncan admit that he committed a crime. "We always believed him," the lawyer said of Duncan, who of course was fired by Andersen and blamed for everything a few months ago. Meanwhile, according the Wall Street Journal, the government's evidence against Andersen includes a videotape of a manager instructing the shred team on how to proceed and noting that if it all goes well, "whatever there was that might have been of interest to somebody is gone and irretrievable." So, who exactly thought it would be a good to videotape this? Anyway, the New York Times says Andersen is nearing a settlement that will include an admission that it "did wrong" in destroying documents.

Bull-Split: Perhaps AT&T honchos are bummed out that it trades at $13. And perhaps they'll feel better if it traded at $65, overnight. (AT&T will trade at an even more embarrassing $4 or $5 a share when its sale of Comcast is complete, so really the reverse split would put it at maybe $20.) It's doable! In a maneuver more common to flailing startups than massive blue-chip firms, AT&T wants to do a one-for-five reverse stock split. This of course makes a company's individual share price higher, but without changing the actual value of the firm. But even if this makes AT&T feel better, there's no reason anyone else should: Reverse splits tend to be associated with attempts to make a stock look healthier by means of a completely meaningless mathematical shift—and because everyone knows this, it's usually interpreted a sign of desperation. Maybe AT&T should just go all out and do a one-for-100 reverse  split—a $1,300-a-share stock, now that would be impressive, right guys?

Oil's Not Well: Earlier the market was worried about Iraq's effect on oil price. Now the concern is Venezuela. See this installment of "International Papers" by Slate's June Thomas for more. And in the useful flashback department, here's a piece about Venezuela's oil dependence from early 2000 by "Moneybox" founding writer James Surowiecki.

The Wall Street Journal Redesign: Is pretty good. I have no complaints.

Recommended: The latest in a long line of great Pop Life columns by the New YorkTimes' Neil Strauss, this  one on the unlikely return of long-lost musician Gary Wilson. "While You Weren't Looking" by Caitlin Cary (ex Whiskeytown). Trillin on Shopsin's in The New Yorker: One of the best writes about one of the best.