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Subject: Re: [CANSLIM] Now Xerox?
Date: Fri, 28 Jun 2002 16:27:41 -0400
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"The market always climbs a wall of worry" is an old familiar saying.
In 1965 only 10% of the population invested in the market.(Just over 50% =
of trading volume was by individuals)
The participation grew to 60% of the population in April 2002 (either =
directly or through retirement/mutual funds). The volume due to =
individuals fell to under 20%.=20
Fund managers may not have the same fear as an individual (it is not =
HIS/HER money, but YOURS!)
The larger population of individuals will also contain a larger number =
of people who know no fear.
Thus I wonder if the exhibition of fear will be as large or severe as in =
the past.=20
----- Original Message -----=20
From: Sam Funchess=20
To: canslim@lists.xmission.com=20
Sent: Friday, June 28, 2002 3:36 PM
Subject: Re: [CANSLIM] Now Xerox?
Canslim Members,=20
Been a while since my last post.=20
With that being said, I think the "scandal's" are very good for the =
long term benefit of CANSLIMers and the market. Its been a while since =
I've read HTMMIS so I can't quote chapters or such, but I recall him =
talking a lot about the fear factor. We have not had the "Fear" in the =
market yet. I think that there is no sustainable upside to the market =
until the fear has hit the market.=20
Just my thoughts.=20
Sam=20
Katherine Malm wrote:=20
Here's some background on earnings from Briefing.com for those less =
familiar with EBITDA, etc. --Katherine PS Xerox's accounting woes go =
back *years*.... P-U....=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D =20
The Earnings Confidence Problem - Part I=20
25-Jun-02 14:18 ET=20
=20
[BRIEFING.COM - Robert V. Green] In the midst of the more =
scandalous market problems, the earnings confidence problem is not =
receiving the attention it should. Here is more on the topic. =20
The Market Problems
The current market suffers from the following ailments: =20
a.. Distrust of management - from excessive comp to outright =
fraud. Tyco is the best example. =20
b.. Distrust of accounting - Andersen =20
c.. Distrust of analysts - Blodgett=20
These three problems get all the press and attention. =20
But a deeper problem is afflicting the buy side - a growing =
concern about the validity of earnings reporting. =20
The Earnings Problem
Accounting rules have always been flexible enough to allow =
most companies a far amount of flexibility both in revenue recognition =
and expense recognition. Even when earnings reporting was somewhat =
standardized, some companies were criticized for how they recognized =
revenue and expense.=20
But in the last five years, the types of earnings that =
companies have driven Wall Street to focus upon have become =
questionable. =20
There are four different basic types of earnings today:=20
a.. GAAP earnings: Generally Accepted Accounting Principles =
- - A standards board that publishes rules on how expenses should be =
booked. Generally, all types of expenses are deducted. =20
b.. As reported: Earnings excluding extraordinary items (as =
defined by GAAP), changes in accounting charges, charges related to =
discontinued operations (plant closings, etc.) =20
c.. Operating earnings: As reported earnings but excluding =
"one-time" charges which do not fit the GAAP definition of =
"extraordinary" =20
d.. Proforma earnings: Loosely defined "as if" analysis. =
Originally designed to provide comparison data for mergers.=20
GAAP accounting principles are guidelines for accountants, not =
investors. The GAAP standards are guidelines for how a company should =
keep its books, not how the company should report earnings. =20
For example, a basic principle behind GAAP is that revenue =
must be booked over the time period for which services and product are =
delivered. If a two year $200,000 contract is pre-paid in cash, up =
front, the entire $200,000 cannot be booked in the quarter in which the =
contract is signed. However, the revenue does not have to be booked as =
$25,000 per quarter for two years. A fair amount of flexibility, =
sometimes negotiated by auditors, is possible for how much of a contract =
can be booked in each quarter. =20
GAAP covers expenses as well as revenues, of course. =20
As reported earnings are the historical standard for earnings. =
Until the mid-eighties, in fact, there was little debate over how =
earnings should be reported as everyone used "as reported" earnings as a =
standard. For the most part, there was no difference between "as =
reported" earnings and any other methodology because one-time charges =
were not as common. Furthermore, companies did not actively seek, as =
they do today, to have certain expenses classified as "one-time." =20
Operating earnings are designed to allow comparisons between =
quarters and years for a company. One time charges in any quarter are =
excluded because these would distort the comparison. Operating earnings =
became important when it became clear that Wall Street would completely =
ignore any "one-time" charges, and focus solely on earnings growth. This =
provided a strong incentive for companies to classify large expenses as =
one-time charges. =20
An example of one company's aggressive attempt to get charges =
classified as one-time was Excite's 1997 $40 million marketing deal with =
Netscape. Now long forgotten, Excite paid Netscape up-front for a =
four-year deal to be the principal search engine at the Netscape web =
site. Excite tried to classify the entire $40 million payment as a =
one-time charge in a single quarter. By doing so, Excite was almost =
profitable. At Briefing we highlighted this event as an indicator of the =
times. The SEC later forced Excite to restate the payment as a four-year =
expense. But many, many companies were successful in getting major =
expense outlays classified as "one-time" which improved income =
statements. =20
The focus on operating expenses led to the development of the =
"EBITDA" concept, which is "Earnings Before Interest, Taxes, =
Depreciation, and Amortization." The EBITDA concept, which has to be =
calculated from the line items shown on an operating earnings report, =
was designed to show the basic business model of the company, without =
regard to cost-of-capital. If capital were free, then EBITDA would be =
earnings. =20
The focus on EBITDA has fallen from favor in recent times for =
one single reason: Interest. The interest payments on bonds, which are =
excluded from EBITDA calculations, has ruined many debt-ridden. =20
Only through focusing on EBITDA projections could a company =
like Exodus Communications raise so much debt that their interest =
payments exceeded their gross margin. That won't happen again for =
decades. =20
Pro-forma earnings are very hard to define today. The original =
purpose of pro-forma earnings calculations was to show the effects of a =
merger in a format that allowed a single income statement to combine =
only the operating models of each company, and exclude the actual costs =
of making the merger. =20
Under the pro-forma for merger guidelines, pro-forma =
calculations could only be used for one year, after which the company =
should start reporting as-reported earnings for the combined entities. =20
However, companies soon learned that as long as they made a =
new merger each year, they could continue reporting pro-forma earnings =
indefinitely. This "flexibility" in how earnings could be reported led =
to "pro-forma" meanings that were never intended, including stock option =
compensation expenses and R&D "in-progress" write-offs. =20
The Erosion of Earnings Confidence
The now long-departed CFO of Amazon.com, Joy Covey, was the =
unsung hero of bringing pro-forma earnings to the popularity they =
enjoyed. She did so by diverting attention away from standardized =
earnings reports. =20
Ms. Covey invented the concept of "EBITMA" which was defined =
"EBITDA plus marketing." She was successful in convincing Wall Street =
that marketing costs were equivalent to capital investment, a concept =
which looks ridiculous in retrospect. But in the early days of the =
internet, marketing and brand development was equated with capturing =
"territory" which, presumably, everyone thought could never be lost. =
(Tell that to investors in Excite.) =20
Nevertheless, Joy Covey was successful in convincing =
investors, particularly convertible bond investors, to focus on the =
EBITMA concept. It was a crucial element in selling the $2 billion in =
Amazon.com bonds that built the company. After all, if you ignore the =
interest payments on the bond, and you consider spending the bond =
principal on marketing as "not an expense," Amazon's income statement =
would look great!. =20
The problem, of course, is that bond holders don't care about =
earnings statements. They just care about the payments. The jury is =
still out on whether Amazon.com will eventually be able to pay the =
principal on their bonds. (See the Stock Brief of: 14-May-01 =
Amazon.com's Bond Problem.=20
After Joy Covey established the principle of EBITMA, internet =
companies began using all types of non-earnings related statistics to =
show growth. Page views, registered users, unique monthly visitors are =
just some of the meaningless examples that became popular. (Surely you =
remember.)=20
When "non-revenue statistics" becoming drivers of stock =
prices, (around 1998) pro-forma earnings increased in popularity. After =
all, a pro-forma income statement that showed some kind of earnings =
progress looked a lot more "real" than the phony statistics being =
coughed up by internet companies. =20
But when the bubble collapsed, everyone began questioning =
earnings quality. It didn't happen overnight, and it didn't happen all =
at once. But as a long, slow evolutionary force, earnings confidence has =
eroded, and is still present today. =20
The Aftermath
The evolution of earnings focus over the past 10 years has led =
us to today's situation: a basic lack of confidence in many companies =
income statements. =20
Amazon.com still reports earnings on a pro-forma basis. In =
their Q1 income statement, you can take your choice of earnings: =20
a.. Pro-forma: $25 million profit =20
b.. Operating: $2 million profit =20
c.. Net (as-reported): $(23) million loss=20
The earnings format you choose is not relevant, frankly. It is =
far more important to the stock value what format the guy next to you =
chooses.=20
After all, value to you is primarily determined by what =
someone else will pay, not by what you pay. =20
Even GE
Even solid companies like General Electric have come under =
scrutiny because of the extremely complex financial situations. =
Unraveling a GE earnings report has now become a major task. Where GE =
only had to beat earnings estimates by $0.01 each quarter to count on an =
ever increasing stock price, today that is not enough.=20
GE stock is down 50% in the last two years despite having only =
missed one earnings estimate in the last four years and having continual =
year-over-year growth in earnings averaging 15%. =20
This bears repeating: GE, as representative a stock as you can =
get of the overall economy, is down 50% since September 2000. During =
that time period, they have grown earnings at over 11% (year-to-year =
basis) and beat or met earnings estimates every quarter except one. The =
one shortfall was October 2001, the quarter of the Attack on America and =
GE was only one penny short. =20
Why can't GE get any respect? The only definable long-term =
culprit is a decline in confidence in GE's earnings numbers. During the =
same eight quarter time-period, GE revenue growth rate has been =
consistently falling. From a growth rate of 24% and 20% in 00Q1 and =
00Q2, growth has steadily fallen, and even was negative for most of =
2001. =20
Flat or declining revenue combined with continuing increasing =
earnings leads to only one conclusion: you can't keep this up forever. =
Eventually, GE will be unable to book the earnings number higher than =
previous years. When (if), that happens, GE stock will be further =
devastated. Until then, the slow erosion of confidence causes the stock =
price to decline.=20
GE is just one good example of how confidence in earnings =
numbers has been eroding over time since the bubble collapse. Until =
greater confidence in earnings numbers is established, you can expect =
further difficulties in the market overall. =20
Standard & Poors is now pushing for a standardized calculation =
for earnings reporting, called Core Earnings. We will have more on this =
concept in Part II of this story, to appear later this week.=20
Comments may be emailed to the author, Robert V. Green, at =
rvgreen@briefing.com
=20
----- Original Message -----
From: Winston Little
To: canslim@lists.xmission.com
Sent: Friday, June 28, 2002 9:47 AM
Subject: Re: [CANSLIM] Now Xerox?
They all used EBITDA.. which Warren Buffett in May said is the =
currency of a=20
crook ... they all have a smell about them.=20
----- Original Message -----=20
From: "Kelly Short" <kelly.short@neoris.com>=20
To: <canslim@lists.xmission.com>=20
Sent: Friday, June 28, 2002 9:46 AM=20
Subject: [CANSLIM] Now Xerox?=20
=20
Enron, WorldCom- nothing. Xerox off by $6B. (Yes- that's "B" as in =
boy!)=20
Kelly=20
=20
- -To subscribe/unsubscribe, email "majordomo@xmission.com" -In the =
email body, write "subscribe canslim" or -"unsubscribe canslim". Do not =
use quotes in your email.=20
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<META content=3D"MSHTML 5.50.4522.1800" name=3DGENERATOR></HEAD>
<BODY bgColor=3D#ffffff>
<DIV><FONT size=3D2>"The market always climbs a wall of worry" is an old =
familiar=20
saying.</FONT></DIV>
<DIV><FONT size=3D2></FONT> </DIV>
<DIV><FONT size=3D2>In 1965 only 10% of the population invested in the=20
market.(Just over 50% of trading volume was by =
individuals)</FONT></DIV>
<DIV><FONT size=3D2>The participation grew to 60% of the population =
in April=20
2002 (either directly or through retirement/mutual funds). The volume =
due to=20
individuals fell to under 20%. </FONT></DIV>
<DIV><FONT size=3D2></FONT> </DIV>
<DIV><FONT size=3D2>Fund managers may not have the same fear as an =
individual (it=20
is not HIS/HER money, but YOURS!)</FONT></DIV>
<DIV><FONT size=3D2>The larger population of individuals will also =
contain a=20
larger number of people who know no fear.</FONT></DIV>
<DIV><FONT size=3D2>Thus I wonder if the exhibition of fear will be as =
large or=20
severe as in the past.</FONT> </DIV>
<DIV><FONT size=3D2></FONT> </DIV>
<DIV><FONT size=3D2></FONT> </DIV>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Dsam5@mindspring.com href=3D"mailto:sam5@mindspring.com">Sam =
Funchess</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Friday, June 28, 2002 =
3:36 PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Now =
Xerox?</DIV>
<DIV><BR></DIV>Canslim Members,=20
<P>Been a while since my last post.=20
<P>With that being said, I think the "scandal's" are very good for the =
long=20
term benefit of CANSLIMers and the market. Its been a while =
since I've=20
read HTMMIS so I can't quote chapters or such, but I recall him =
talking a lot=20
about the fear factor. We have not had the "Fear" in the market=20
yet. I think that there is no sustainable upside to the market =
until the=20
fear has hit the market.=20
<P>Just my thoughts. <BR><BR>Sam=20
<P>Katherine Malm wrote:=20
<BLOCKQUOTE TYPE=3D"CITE">
<STYLE></STYLE>
Here's some background on earnings from Briefing.com for those less =
familiar=20
with EBITDA, etc. --Katherine PS Xerox's accounting woes =
go back=20
*years*.... P-U....=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D =20
<TABLE cellSpacing=3D0 cellPadding=3D4 width=3D"100%">
<CAPTION>
<TBODY><BR></TBODY></CAPTION>
<TBODY>
<TR>
<TD class=3Dheader>The Earnings Confidence Problem - Part =
I</TD></TR>
<TR>
<TD><B><FONT face=3DVerdana><FONT size=3D-2>25-Jun-02 14:18=20
ET</FONT></FONT></B></TD></TR>
<TR>
<TD height=3D8></TD></TR>
<TR>
<TD>[BRIEFING.COM - Robert V. Green] In the midst of the more=20
scandalous market problems, the earnings confidence problem is =
not=20
receiving the attention it should. Here is more on the =
topic. =20
<H3>The Market Problems</H3>The current market suffers from =
the=20
following ailments: =20
<UL>
<LI>Distrust of management - from excessive comp to outright =
fraud.=20
Tyco is the best example. =20
<LI>Distrust of accounting - Andersen =20
<LI>Distrust of analysts - Blodgett </LI></UL>These three =
problems get=20
all the press and attention. =20
<P>But a deeper problem is afflicting the buy side - a growing =
concern=20
about the validity of earnings reporting. =20
<H3>The Earnings Problem</H3>Accounting rules have always been =
flexible enough to allow most companies a far amount of =
flexibility=20
both in revenue recognition and expense recognition. Even when =
earnings reporting was somewhat standardized, some companies =
were=20
criticized for how they recognized revenue and expense.=20
<P>But in the last five years, the <I>types</I> of earnings =
that=20
companies have driven Wall Street to focus upon have become=20
questionable. =20
<P>There are four different basic types of earnings today:=20
<UL>
<LI>GAAP earnings: Generally Accepted Accounting Principles =
- - A=20
standards board that publishes rules on how expenses should =
be=20
booked. Generally, all types of expenses are deducted. =
<LI>As reported: Earnings excluding extraordinary items (as =
defined=20
by GAAP), changes in accounting charges, charges related to=20
discontinued operations (plant closings, etc.) =20
<LI>Operating earnings: As reported earnings but excluding=20
"one-time" charges which do not fit the GAAP definition of=20
"extraordinary" =20
<LI>Proforma earnings: Loosely defined "as if" analysis. =
Originally=20
designed to provide comparison data for mergers. =
</LI></UL><B>GAAP</B>=20
accounting principles are guidelines for accountants, not =
investors.=20
The GAAP standards are guidelines for how a company should =
keep its=20
books, not how the company should report earnings. =20
<P>For example, a basic principle behind GAAP is that revenue =
must be=20
booked over the time period for which services and product are =
delivered. If a two year $200,000 contract is pre-paid in =
cash, up=20
front, the entire $200,000 cannot be booked in the quarter in =
which=20
the contract is signed. However, the revenue does not have to =
be=20
booked as $25,000 per quarter for two years. A fair amount of=20
flexibility, sometimes negotiated by auditors, is possible for =
how=20
much of a contract can be booked in each quarter. =20
<P>GAAP covers expenses as well as revenues, of course. =20
<P><B>As reported</B> earnings are the historical standard for =
earnings. Until the mid-eighties, in fact, there was little =
debate=20
over how earnings should be reported as everyone used "as =
reported"=20
earnings as a standard. For the most part, there was no =
difference=20
between "as reported" earnings and any other methodology =
because=20
one-time charges were not as common. Furthermore, companies =
did not=20
actively seek, as they do today, to have certain expenses =
classified=20
as "one-time." =20
<P><B>Operating earnings</B> are designed to allow comparisons =
between=20
quarters and years for a company. One time charges in any =
quarter are=20
excluded because these would distort the comparison. Operating =
earnings became important when it became clear that Wall =
Street would=20
completely ignore any "one-time" charges, and focus solely on =
earnings=20
growth. This provided a strong incentive for companies to =
classify=20
large expenses as one-time charges. =20
<P>An example of one company's aggressive attempt to get =
charges=20
classified as one-time was Excite's 1997 $40 million marketing =
deal=20
with Netscape. Now long forgotten, Excite paid Netscape =
up-front for a=20
four-year deal to be the principal search engine at the =
Netscape web=20
site. Excite tried to classify the entire $40 million payment =
as a=20
one-time charge in a single quarter. By doing so, Excite was =
almost=20
profitable. At Briefing we highlighted this event as an =
indicator of=20
the times. The SEC later forced Excite to restate the payment =
as a=20
four-year expense. But many, many companies were successful in =
getting=20
major expense outlays classified as "one-time" which improved =
income=20
statements. =20
<P>The focus on operating expenses led to the development of =
the=20
"EBITDA" concept, which is "Earnings Before Interest, Taxes,=20
Depreciation, and Amortization." The EBITDA concept, which has =
to be=20
calculated from the line items shown on an operating earnings =
report,=20
was designed to show the basic business model of the company, =
without=20
regard to cost-of-capital. If capital were free, then EBITDA =
would be=20
earnings. =20
<P>The focus on EBITDA has fallen from favor in recent times =
for one=20
single reason: <I>Interest.</I> The interest payments on =
bonds, which=20
are excluded from EBITDA calculations, has ruined many=20
debt-ridden. =20
<P>Only through focusing on EBITDA projections could a company =
like=20
Exodus Communications raise so much debt that their interest =
payments=20
exceeded their gross margin. That won't happen again for=20
decades. =20
<P><B>Pro-forma earnings</B> are very hard to define today. =
The=20
original purpose of pro-forma earnings calculations was to =
show the=20
effects of a merger in a format that allowed a single income =
statement=20
to combine only the operating models of each company, and =
exclude the=20
actual costs of making the merger. =20
<P>Under the pro-forma for merger guidelines, pro-forma =
calculations=20
could only be used for one year, after which the company =
should start=20
reporting as-reported earnings for the combined =
entities. =20
<P>However, companies soon learned that as long as they made a =
new=20
merger each year, they could continue reporting pro-forma =
earnings=20
indefinitely. This "flexibility" in how earnings could be =
reported led=20
to "pro-forma" meanings that were never intended, including =
stock=20
option compensation expenses and R&D "in-progress"=20
write-offs. =20
<H3>The Erosion of Earnings Confidence</H3>The now =
long-departed CFO=20
of Amazon.com, Joy Covey, was the unsung hero of bringing =
pro-forma=20
earnings to the popularity they enjoyed. She did so by =
diverting=20
attention away from standardized earnings reports. =20
<P>Ms. Covey invented the concept of "EBITMA" which was =
defined=20
"EBITDA plus marketing." She was successful in convincing Wall =
Street=20
that <I>marketing costs were equivalent to capital =
investment,</I> a=20
concept which looks ridiculous in retrospect. But in the early =
days of=20
the internet, marketing and brand development was equated with =
capturing "territory" which, presumably, everyone thought =
could never=20
be lost. (Tell that to investors in Excite.) =20
<P>Nevertheless, Joy Covey was successful in convincing =
investors,=20
particularly convertible bond investors, to focus on the =
EBITMA=20
concept. It was a crucial element in selling the $2 billion in =
Amazon.com bonds that built the company. After all, if you =
ignore the=20
interest payments on the bond, and you consider spending the =
bond=20
principal on marketing as "not an expense," Amazon's income =
statement=20
would look great!. =20
<P>The problem, of course, is that bond holders don't care =
about=20
earnings statements. They just care about the payments. The =
jury is=20
still out on whether Amazon.com will eventually be able to pay =
the=20
principal on their bonds. (See the Stock Brief of: <A=20
=
href=3D"http://www.briefing.com/scripts/sub/stocks/PowerAnchor.asp?varArt=
icleID=3DSB20010514082806rvgreen">14-May-01=20
Amazon.com's Bond Problem.</A>=20
<P>After Joy Covey established the principle of EBITMA, =
internet=20
companies began using all types of non-earnings related =
statistics to=20
show growth. Page views, registered users, unique monthly =
visitors are=20
just some of the meaningless examples that became popular. =
(Surely you=20
remember.)=20
<P>When "non-revenue statistics" becoming drivers of stock =
prices,=20
(around 1998) pro-forma earnings increased in popularity. =
After all, a=20
pro-forma income statement that showed <I>some kind of =
earnings</I>=20
progress looked a lot more "real" than the phony statistics =
being=20
coughed up by internet companies. =20
<P>But when the bubble collapsed, <I>everyone </I>began =
questioning=20
earnings quality. It didn't happen overnight, and it didn't =
happen all=20
at once. But as a long, slow evolutionary force, earnings =
confidence=20
has eroded, and is still present today. =20
<H3>The Aftermath</H3>The evolution of earnings focus over the =
past 10=20
years has led us to today's situation: a basic lack of =
confidence in=20
many companies income statements. =20
<P>Amazon.com still reports earnings on a pro-forma basis. In =
their Q1=20
income statement, you can take your choice of earnings: =20
<UL>
<LI>Pro-forma: $25 million profit =20
<LI>Operating: $2 million profit =20
<LI>Net (as-reported): $(23) million loss </LI></UL>The =
earnings=20
format <I>you choose</I> is not relevant, frankly. It is far =
more=20
important to the stock value what format <I>the guy next to =
you=20
chooses.</I>=20
<P>After all, value <I>to you</I> is primarily determined by =
what=20
someone else will pay, not by what you pay. =20
<H3>Even GE</H3>Even solid companies like General Electric =
have come=20
under scrutiny because of the extremely complex financial =
situations.=20
Unraveling a GE earnings report has now become a major task. =
Where GE=20
only had to beat earnings estimates by $0.01 each quarter to =
count on=20
an ever increasing stock price, today that is not enough.=20
<P><I>GE stock is down 50% in the last two years despite =
having only=20
missed one earnings estimate in the last four years and having =
continual year-over-year growth in earnings averaging =
15%. </I>=20
<P>This bears repeating: GE, as representative a stock as you =
can get=20
of the overall economy, is down 50% since September 2000. =
During that=20
time period, they have grown earnings at over 11% =
(year-to-year basis)=20
and beat or met earnings estimates every quarter except one. =
The one=20
shortfall was October 2001, the quarter of the Attack on =
America and=20
GE was only one penny short. =20
<P>Why can't GE get any respect? The only definable long-term =
culprit=20
is a decline in confidence in GE's earnings numbers. During =
the same=20
eight quarter time-period, GE revenue growth rate has been=20
consistently falling. From a growth rate of 24% and 20% in =
00Q1 and=20
00Q2, growth has steadily fallen, and even was negative for =
most of=20
2001. =20
<P>Flat or declining revenue combined with continuing =
increasing=20
earnings leads to only one conclusion: <I>you can't keep this =
up=20
forever. </I>Eventually, GE will be unable to book the =
earnings number=20
higher than previous years. When (if), that happens, GE stock =
will be=20
further devastated. Until then, the slow erosion of confidence =
causes=20
the stock price to decline.=20
<P>GE is just one good example of how confidence in earnings =
numbers=20
has been eroding over time since the bubble collapse. Until =
greater=20
confidence in earnings numbers is established, you can expect =
further=20
difficulties in the market overall. =20
<P>Standard & Poors is now pushing for a standardized =
calculation=20
for earnings reporting, called Core Earnings. We will have =
more on=20
this concept in Part II of this story, to appear later this =
week.=20
<P>Comments may be emailed to the author, Robert V. Green, at =
<A=20
=
href=3D"mailto:rvgreen@briefing.com">rvgreen@briefing.com</A><!--(RVG)-->=
</P></TD></TR></TBODY></TABLE>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message -----</DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Dwlittle1@peoplepc.com =
href=3D"mailto:wlittle1@peoplepc.com">Winston=20
Little</A></DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A=20
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Friday, June 28, 2002 =
9:47=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Now=20
Xerox?</DIV> They all used EBITDA.. which Warren Buffett in =
May said=20
is the currency of a <BR>crook ... they all have a smell about =
them.=20
<P>----- Original Message ----- <BR>From: "Kelly Short" <<A=20
=
href=3D"mailto:kelly.short@neoris.com">kelly.short@neoris.com</A>>=20
<BR>To: <<A=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
>=20
<BR>Sent: Friday, June 28, 2002 9:46 AM <BR>Subject: [CANSLIM] Now =
Xerox?=20
<BR> =20
<P>Enron, WorldCom- nothing. Xerox off by $6B. (Yes- that's "B" as =
in=20
boy!)=20
<P>Kelly <BR> </P></BLOCKQUOTE></BLOCKQUOTE>- -To =
subscribe/unsubscribe,=20
email "majordomo@xmission.com" -In the email body, write "subscribe =
canslim"=20
or -"unsubscribe canslim". Do not use quotes in your email.=20
</BLOCKQUOTE></BODY></HTML>
- ------=_NextPart_000_000F_01C21EC0.B9D6A040--
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- -In the email body, write "subscribe canslim" or
- -"unsubscribe canslim". Do not use quotes in your email.
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