The Earnings Cult

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times Magazine, June 9, 2002

The Earnings Cult
By HARRIS COLLINGWOOD

Investors, pummeled financially by a two-year drop in stocks and
psychologically by the atrocities of 9/11, are said to be chastened now. A
newly sober Wall Street shudders when recalling the stock market bubble, as
a groggy partygoer regrets the excesses of the night before. The day
traders have taken their optimism and margin accounts and chat-board rants
and disappeared down the same hole that swallowed the age of irony.

That's what we're told. But then we get a day like May 8. After the close
of trading the previous day, Cisco Systems, the former Internet titan,
disclosed a modest profit of $729 million, or 10 cents a share, and the
markets went wild. The Nasdaq composite index, thick with technology
stocks, soared 7.8 percent, its biggest gain in more than a year and the
eighth-biggest ever. The Dow Jones industrial average posted its best
performance since September. And why? Because Cisco beat its modest
earnings-growth target by a slim two cents a share.

Never mind that Cisco's quarterly revenue was basically flat, and that
analysts and Cisco's own management attributed the profits to cost cutting
rather than to an upturn in business. Forget that the earnings report was,
in the words of one analyst, ''the end of decay,'' not an ''indication of
robust growth.'' Ignore the fact that capital spending by business -- the
engine that drove the technology boom and fueled Cisco's historic rise in
the 90's -- shows no signs of recovering from a two-year slump. Cisco beat
its forecast, and that's all that matters.

full: http://www.nytimes.com/2002/06/09/magazine/09EARNINGS.html

Louis Proyect
Marxism mailing list: http://www.marxmail.org



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