Quarterly guidance: it's become the "metric" by which a public company's stock rises and falls. Indeed, meeting guidance and then issuing a positive outlook is often tantamount to a nice stock boost.
Missing the target in one or more of these categories can send a public company's stock plummeting.
This has pretty much been the case with Yahoo, eBay and Amazon.com, three of the Web's
largest companies. But not always with Google, the industry's biggest (not including Microsoft, which is mostly software) and most dynamic company. Google didn't always issue guidance, a move that
left analysts guessing what to expect when it came time for the search giant's earnings. The result was some serious volatility, and in the end, the company came around. Its success and stability
since then proves that guidance--and more information in general--is good for investors.
Which makes the U.S. Chamber of Commerce's recommendation that companies eliminate quarterly guidance a
puzzling one. It wants the SEC and the government to reform its regulatory approach in hopes of helping U.S. companies remain competitive with overseas firms. While these bigger issues are debatable,
eliminating guidance would have the opposite effect. Taking away transparency leads to stock market bubbles, as the dot-com implosion showed. If companies show they're confident about where they're
heading, it's a signal that they're in control.
advertisement
advertisement
Read the whole story at Marketwatch »