Value Line: `May All Companies So Founder!'

We officers and top executives of the Value Line Cos. are shocked by the vicious attack by BUSINESS WEEK against Value Line Inc. and Jean Buttner, our CEO ("Value Line: Too lean, too mean?" Finance, Mar. 16). Your article is full of errors, exaggerations, and misquotes.

The article made the following seriously damaging statements about the Value Line Investment Survey: ". . . Survey editors no longer feel certain that computer snafus can be corrected within 24 hours--an eternity in weekly publishing." The survey's subscribers and our shareholders deserve to know that in the 61 years we've been in business, we have always sent out our publications on time.

Value Line's management has spent millions of dollars on new computer equipment in which every component has a backup recovery method. Our MIS management information systems staff has spent hundreds of hours developing a Comprehensive Disaster Recovery Plan. Our MIS staffers are on call 24 hours a day, 7 days a week just so we can prevent "computer snafus."

During the past year, our computer systems were running normally 99.57% of the time. The balance of the time was spent primarily on scheduled disaster-recovery drills conducted regularly on both mainframe and personal computers. The Value Line Cos. have never missed mailing the Value Line Investment Survey on a timely basis.

We strongly disagree that Value Line's "coffers are overflowing with idle funds." We invest our profits in the best investments around--our own family of mutual funds--which last year earned the following returns: Value Line Fund, 48.86%; Leveraged Growth Fund, 46.35%; Special Situations Fund, 36.61%. Additionally, the company invested some funds in a quantitatively managed hedge portfolio that returned 54.10% last year.

We are also investing a great deal of money in our businesses. The accusation that we are not leveraging our historic franchise is false. Just in the pastyear alone we came out with five new products.

Value Line's annual outlay for salaries and benefits has fallen as staff cutbacks occurred because we automated the work done by two departments so that we could run more efficiently. Are we to be criticized for being more efficient? Company contributions to employee health care are not down as you allege, but up 35% since 1990, and medical claims are submitted directly to the insurance carrier.

The Value Line Investment Survey's ranking system, which was originated by Arnold Bernhard, has been evolving since the company was founded in the 1930s. Jean Buttner has always acknowledged that Samuel Eisenstadt has made many valuable contributions to that evolution since he joined the company in 1946, particularly in the development of methods for ranking stocks and allocating assets.

To compare the price-earnings ratio of a financial-services company with the over-the-counter market or Dow Jones industrial average, which contains cyclical stocks whose earnings are currently depressed and whose prices are currently in favor, is to compare apples and oranges.

We have never heard Jean Buttner make any of the statements you attribute to her in the article.

As to the company having "foundered in transition from the first to the second generation"--may all companies so founder! Contrary to your assertions, management decisions have been made and new products and services were introduced.

A substantial investment has been made in a new money-management product. A mutual fund was launched in April. Two new publications have been introduced. Value Line's electronic data base has been greatly expanded. In short, there have been more decisions and actions taken to introduce new products in the past year than at any time in Value Line's history.

Since Jean Buttner became president, earnings are up 171%. In the past 12 months, the stock price has risen from 20 1/2 to 34 1/4. Third-quarter profits are up 66%, and earnings for the first nine months of the current fiscal year are already higher than those of any fiscal year in the company's history--results achieved without the help of the fired employees who we suspect fed your reporter his "facts."

Samuel Eisenstadt

Research Chairman

Harold Read

Vice-President & CFO

Rodd Baxter

Secretary & General Counsel

Rudolph Carryl

Director, Research Dept.

Value Line Inc.

New York

(The letter was signed by seven other Value Line executives.)

Editor's note: CEO Buttner declined to talk to BUSINESS WEEK or authorize interviews with other executives. Our story was based on seven weeks of reporting. We interviewed more than 20 current and former Value Line employees, as well as independent sources. We also obtained documents, including internal Value Line memorandums. We feel the story was fair and accurate.

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