Table: Tricks of the Trade
How companies pump up sales and earnings
PLOY BIG BATH VENDOR FINANCING
HOW IT Takes a large write-off, Lends money to financially WORKS booking costs now to boost fragile customers so that earnings and margins in they can buy products, the future. pumping sales and profits.
DRAWBACK Unless operations improve, Company can be left with more charges must be taken bad debts--and falling to maintain earnings. Even- sales, when it stops tually, investors shun the lending. stock.
WHO'S DONE IT Cisco, DaimlerChrysler, Kodak Motorola, Lucent, Nortel
PLOY PENSION GAMBIT BEFORE ITS TIME
HOW IT Decides pension plan is Treats pending sales as WORKS overfunded and cuts company if they have already contributions. Hides gain occurred, books sales with- in financial footnotes. out subtracting promised rebates.
DRAWBACK Rates of return on pension Cuts future sales and earn- investments may worsen, ings, giving appearance of requiring bigger future con- faltering company performance tributions. unless operation is repeated.
WHO'S DONE IT IBM, GE MicroStrategy, Informix, Cendant
PLOY BACKDOOR BARGAINS
HOW IT Promotes sales by buying a big WORKS customer's stock or granting it cheap warrants.
DRAWBACK Investors may be suspicious of stated values; hard to do over again, so future results could falter.
WHO'S DONE IT Flextronics, Amazon