I was reading this February's issue of Fortune on a Sunday a couple of weeks ago. It's not my usual, but I was at the hair salon and it was the only thing on the rack that I thought wouldn't make me dislike mainstream periodical literature more than I already do. From that point of view, my hour was a success (haircut wasn't bad either) but it left me grumpy as all hell at the systems that people who call themselves investors (this includes me) have available to them to know what's going on in the companies they invest in.
First article on the hit parade, a really interesting discussion of how Apple has made the iPod great and where it sits in terms of overall market strategy for the future including the roll of OS X, etc. Astute, thorough and correct to the best of my less-than-insider but better-than-nongeek knowledge. Next it was followed by a reasonable article on the decline of Sony and, more or less, how they came to let Apple eat their musical lunch. Again, strategic analysis making great sense with a historical bent in this case.
Then there was the article on Electronic Arts. I suppose compared to the other two (which were the features) the columnist doing the piece was doing fluff. His overarching point, though, was that EA is the next big thing in games entertainment and Wall Street isn't giving them enough love. Uh... what? Let me say that again: WHAT?
This fellow claimed he'd been paying attention to the company for the past few years. He called it one of the best run games companies out there.
Now it's possible that financially EA really is a brilliant investment win without regard to its internal management practices, but how did this fella who's been paying attention to the company for "a couple of years" miss the fact thatEA has had its internal software engineering and staffing practices skirts flipped and what got shown off was exceedingly incompetent use of resources of the most embarassing kind -- a combination of software engineering management theory incompetence and savage human resource mismanagement as bad as a meat processing plant lacking only the truly starvation wage pay.
Does the columnist honestly think that a company is brilliantly managed because they've been on an acquisition binge buying smaller shops and shutting them down left and right? Buying titles and killing off the design shops that made them possible essentially smacks of short term Wall Street management and highly short sighted overall management practice. Probably all he's been looking at is the last three or four years of financials.
And that's my point: financials do not make a company past a certain point. They show you nothing about its real vision. And too many of us dopes buying stocks don't know anything about what we're buying except the financials and one or two products we like.
Posted by karen at March 31, 2005 07:10 PM