High-Tech CEOs: Stop the Finger-Pointing
It is somewhat disconcerting to see high-tech CEOs play the blame game in explaining their companies' earnings disappointments. For much of the '90s, they took most of the credit for profit surprises on the upside but now, in the downturn, they turn to finger-pointing. It's time for them to take responsibility.
It is, of course, perfectly understandable why so many high-tech CEOs are in shock. After nearly five years of amazingly strong growth, the economy suddenly dropped from a 5.8% annual growth rate in the second quarter of 2000 to 1.1% in the final quarter. A drop of nearly five percentage points feels like a recession, even if it isn't technically one. Worse, much of the decline was due to a sharp falloff in purchases of information technology. This wasn't supposed to happen. High-tech CEOs thought productivity-enhancing IT products would be always be recession-proof. Oops.
But there's no good excuse for the mega-whining in Silicon Valley. One CEO blames Alan Greenspan for not moving fast enough to prevent the downturn. Another blames bad supply-chain inventory-control software. A third actually blames his own customers for cutting orders and hurting profits.
If you are an investor, it's easy to get a bit paranoid. One day your favorite CEO is boasting the company will blow past the downturn and the very next his CFO is admitting to a "surprising" drop of 30% in earnings. Why the sudden surprise? Have CEOs been deliberately misleading?
Probably not. They're just executives used to hitting earnings projections no matter what. It's time for CEOs to reassess old assumptions, take personal responsibility, and above all, be brutally honest with themselves and investors.