The New Sign Language
"Missing the quarter isn't big news: They've been giving the body language that business wasn't going too well." -- Gregory Geiling, analyst with J.P. Morgan regarding Cisco's most recent earnings report, Feb. 7 on CBS MarketWatch.
To: High-tech analysts
From: The bosses
Re: Update on High-Tech Executive Body Language
Analysts, we're so proud of you we could cry. Last year, when the Securities & Exchange Commission made a big whoop-de-do about cracking down on companies giving selective disclosure to the Street, a lot of us panicked. They issued that insomnia-cure document where more space was devoted to explaining concepts such as "promptly" and "intentionally" than Watson and Crick required to explain the origins of all life when they discovered DNA. Let's face it: The truly savvy among us had always relied on private sessions after public meetings to do our real work. You'll remember fondly those whispered conversations on the phone, in the men's room, in the parking lot, in the elevator.
For example: "You're looking confident, Lou."
"Well, I'm feeling confident, Pete."
Shoot, an exchange like that could conjure a shimmering image of your bonus on the horizon, and up your estimates three cents a share.
Enough nostalgia. The game has changed and you all have responded beautifully. First, despite the challenges of the New Economy, you've kept up the faade that stock recommendations are based on statistics and analysis. Who will forget the day Stan Bumbleberg came up with "number of monetized eyeballs" as a value indicator, and just look how long investors bought it! We may need to wave a fond goodbye to the hockey stick growth chart, but clearly the Texas Twister and The Big Dipper are going to be huge. Remember: Prizes for the most vaguely accurate sounding explanation for how we derived those values!
Secondly: Some of you are still reporting flak from clients for the abrupt downturn. Some people just aren't as intellectually flexible as we are, and can't get why last year's platinum is this year's Play-Doh. If you don't already have it, we suggest grabbing a copy of tech guru Geoffrey A. Moore's latest book Living on the Fault Line, which tried valiantly to prolong the Internet stock market rally by rationalizing it with a set of graphs and buzzwords so complex, so mind-boggling, so spiced with zoological, seismological, and meteorological metaphors that you just thanked God to be a part of the action. When explaining to clients how you might have gotten off track, just remind them that "as Moore warned us, this was always about gorillas recrossing chasms in the middle of tornadoes."
Finally, the real point of this update: With private guidance sessions now theoretically out, the importance of the raised eyebrow, the panicky run to the elevator, and the precisely timed arm cross has never been higher. But even in the space of a few months, we find we have to recalibrate our observations to make sure they are tracking with the new New Economy, where all tech stocks are suspect. Here's a little guide to shifting trends in the wink-and-slink world of body language guidance.
Faux breeziness. Cisco Systems Inc. (CSCO ) is a great example of this. Forget all that wiring-the-world stuff. As the astute among you realize, the Street is focused on CEO John Chambers' unruly forelock, which has always screamed: "Who has time to comb? I'm acquiring companies at such a speed that even my hair is whipped about! We'll be coming in a penny over estimates--no sweat!" As our colleague Gregory Geiling hinted, hidden Wall Street cameras picked up in the weeks before Cisco's disappointment that those strands sat sulkily in parallel formation with the rest of Chambers' hair. Be on guard: Although Nasdaq's decline has walloped a lot of faux breeziness out of the corner offices, it hasn't entirely disappeared. With his sloppy grin and comfortable clothes, Amazon.com Inc. (AMZN ) CEO Jeff Bezos, for example, remains a breeziness enigma. Sell to be safe.
Precision grooming: Evidence of unflappable control...or a dark contraindicator? You need a compass and a circuit engineer to make sense of the diagrams explaining Carly Fiorina's makeover strategy for Hewlett-Packard Co. (HWP ) Let the amateurs sweat that. What concerns us is: How does the CEO of Silicon Valley's most venerable company have time to maintain such uniform and precise lipstick coverage? We urge against going long on HP until Carly moves a few steps in the Madeleine Albright direction of sensible shoes and damn the mascara. Warning to Oracle Corp. (ORCL ) watchers: CEO Larry Ellison straddles the breezy-precision grooming divide with his periodic beard grow-outs. Sources say his barber uses technology that ensures whisker lengths accurate to one micron. Watch Ellison for secondary body language indicators such as whether his lips and hands appear chapped from near-death sailing adventures, indicating he's not taking this downturn seriously. Lower your estimate accordingly.
Leaving the room. Be careful with this one, gang. Savvy analysts first realized the magnitude of Xerox Corp.'s (XRX ) problems when former Xerox execs kept professing to need a bathroom break during guidance sessions. Then we'd discover them madly photocopying black sheets of paper, trying to drive up late-quarter ink and toner revenues. A couple of us got stung using this indicator for eBay Inc. (EBAY ), however. Not long ago, Meg Whitman ducked out of a major analyst's meeting midway and two buy-siders liquidated their positions on the spot. But minutes later, we heard a lusty "Yes!" ring out. We found her at an admin's desk logged on to an auction page, whooping that she had finally completed her G.I. Joe "Desert Storm" series set. In this case Whitman's body language was a powerful piece of evidence of the soundness of eBay's irresistible business model.
Strange accoutrements. We are not cheered by the sight of slide rules in the pockets of Lucent management. Enough said there.
Puppy dog head flop. This is rampant right now. You'll recognize this head-to-the-side posture as confused attentiveness most often seen among congressional leaders attempting to follow the words of Alan Greenspan. However, when an executive from a troubled company displays this posture, it means: "I don't have a clue what to do, but if you give me the slightest indication of what I could say that would raise your opinion of my strategy, I'll be out the door like a shot to implement it." Actually, this is not unlike what it means in dogs, i.e., "Was that the sound of a bag of dog food being torn open?" When you see this, put out a short-term buy, but tell the house account traders to short like crazy.
Zen mindfulness (a.k.a. If only you knew what I know). Think Apple (AAPL ) CEO Steve Jobs, fingertips pressed together, sardonic smile, eyes veiled behind minimalist eyeglasses. In the hands of a master such as Jobs, this body language can inspire employees to remarkable heights and add $5 in value to any stock. But it was hijacked during the recent dot-com runup and successfully--if temporarily--implemented by scores of pretenders. This latter group effectively parlayed their sneers and fluency in HTML into a mystifying smokescreen for having no business competency whatsoever, all the while shaking their heads and sighing: "You just don't get it." If any executive of any public company has the gall to cop this attitude now, SELL SELL SELL.
As always, we remind our members to report new forms of panic, shiftiness, or obfuscation to our 24-hour hotline. Also, check our Web site, where you'll note under "late-breaking news" that we have moved singing, whistling, dancing, and other displays of unbridled joy on the part of high-tech execs out of "strong buy" and into our "most likely to be audited next" category.
By Joan O'C. Hamilton, email@example.com