The Last Word at First Call

Charles L. "Chuck" Hill is a big man on Wall Street. The 6-foot-5-inch director of research at Thomson Financial/First Call is ringmaster to the frenzied circus of earnings reports every quarter. Stocks regularly soar or crater according to whether companies beat or fall below the per share earnings that Hill says are the consensus among brokerage analysts.

Hill, 63, aims to make his market-moving numbers credible by having all estimates calculated the same way. So he polls the Street's financial analysts to see how exactly they're working out their figures and enforces a standard, normally the one used by the majority. Getting everyone in line leads to a lot of screaming and shouting. "They'll be proactive in calling and yelling at you," says Lehman Brothers Inc. analyst Robert Rouse.

LIST MAKER. Tempers often run high because of the billions at stake. For starters, analysts often try to distinguish themselves from competitors and gain lucrative business by finding different ways to measure a company's results. But there are genuine differences of opinion about how to calculate earnings. Consider "one-time" gains and losses. Many analysts want to exclude them from regular earnings. They have a point, because such items generally don't reflect a trend. And not everyone agrees what "one-time" means.

The problem becomes acute when it comes to deciding how to treat companies' gains from their investments in other companies. Last year, chipmaker Intel Corp. said the large gains it made were ongoing and should be included in earnings. Some analysts disagreed strongly. "I was sympathetic with them," says Hill, himself a tech-stock analyst on the Street for 22 years. But the majority wanted to do it Intel's way. Hill reluctantly adopted their view as the First Call standard.

Still a keen rugby player with a team of Harvard Business School alums, Hill is tough with analysts he thinks are getting out of line. His sanctions can be deadly: He drops them from his A-list of analysts. The list, used by institutional investors to determine who offers useful opinions on stocks in which they're interested, is a powerful marketing tool for brokerages looking to earn trading commissions. Hill did just that to Rouse in a spat over the estimates of pharmaceutical researcher Quintiles Transnational Corp. earlier this year. Rouse, like many analysts on the stock, was excluding its Internet spending. Says Hill: "I just thought it was outrageous."

His role in these debates gives Hill enormous power to determine what companies can pass off as earnings in their press releases. That leads critics like Rouse to contend that First Call should "present whatever analysts put out, not define what the formulas need to be."

CRUSADE. That was just what First Call was doing when Hill signed on as one of its first employees in 1991. Brokerage firms would use First Call to send analysts' reports electronically to clients all at once so that everyone would get the "first call" on what could be a stock-moving view.

It was because Hill found wide discrepancies in the figures that different houses were using that he decided to change things and began his long-running crusade for consistent numbers. These days, clients, too, demand a more sophisticated service. So Hill now churns out an array of services ranging from putting together Wall Street's collective insight on next year's earnings by companies in the Standard & Poor's 500-stock index to tracking how well estimates eventually match actual results. That's why he appears on TV and in the press so much--and why he's such a power on Wall Street.

By David Henry in New York

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