It was shocking to hear Dr Dwight Decker, Chairman of the Global Semiconductor Alliance and Chaiorman of Conexant, say that the financial institutions are holding back innovation in the semiconductor industry.
“The large companies tend to under-innovate,” Decker told me last week, “the financial markets don’t let them do it.”
Just to be sure, I asked Decker: ‘Are you saying the Wall Street analysts are stopping semiconductor CEOs investing in R&D?
“There’s no doubt about it”, replied Decker.
‘Why don’t the CEOs do what Bob Swanson of LTC does and ignore the analysts?’ I asked.
“The reason Bob Swanson can do it is because he delivers outstanding results”, replied Decker.
Even so, the Wall Street analysts refuse to recommend LTC shares which have remained broadly flat for years.
Mind you, flat shares are better than falling shares, which has been the norm for most semiconductor companies' shares recently, even for those companies whose CEOs follow the promptings of the analysts.
When you go to companies’ analyst meetings, you hear the names of these analysts: ‘I’m so-and-so from Bear Stearns’, ‘I’m thing-a-me-jig from UBS’, ‘I’m what’s-his-name from Citigroup’, ‘I’m who-jama-flip from Lehman Brothers’ – in other words a litany of all the irresponsible institutions which have brought the world’s financial system to its knees.
These analysts have no compunction about telling other companies how to run (or ruin) their businesses, but are awful at running their own businesses.
The world’s CEOs should get together and decide, collectively, to throw off the shackles of these wreckers.
After all the analysts can’t punish everyone by marking down everybody’s share price at the same time, without looking even sillier than they already do.
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Comments (6)
David, while I wholeheartedly agree with your idea, the problem with your suggestion is that the CEO of the average (public) semiconductor company is so fantastically rewarded, compared to his employees (obviously not to the average wall street analyst), and this reward generally based on sucking up to wall street in some form or other, so I dont think it will happen! After all we all only live once. isclaimer - I am such an employee, and not a wall street analyst, so my opinion may be skewed....
Posted by colin hendry | April 24, 2008 12:44 PM
Posted on April 24, 2008 12:44
I'm afraid you're right, and as a mere hack I've never been exposed to the temptations which CEOs endure. I just wish there were more Swansons than sucker-uppers.
Posted by David Manners | April 24, 2008 1:11 PM
Posted on April 24, 2008 13:11
The semiconductor industry was the one that encouraged the analysts. Where once major conferences merely had press rooms, about a dozen years or so ago, major conferences had an analyst room (of much superior ilk by way of phones & connections) that definitely took precedence over the 'technical hacks' In fact analysts were invited to lecture to the press.
I keep recalling that little phrase about 'Those who live by the sword!'
Posted by gail purvis | April 24, 2008 3:22 PM
Posted on April 24, 2008 15:22
Yes you're right. I think the semiconductor people were initially flattered by the interest but, as you say, they made a rod for their own backs.
I reckon that's because analysts insist on unremitting growth in revenues and profits whereas, in life as in business, sometimes retreat and retrenchment are a better strategy than continual expansion.
We, the taxpayers, are all paying out now to save the Wall St and City banks from the consequences of their crass expansionism.
And semiconductor CEOs, with a few honourable exceptions, are driving themselves nuts trying to find new business areas and diversifications, some of which are proving very foolish.
Posted by David Manners | April 24, 2008 3:37 PM
Posted on April 24, 2008 15:37
Dwight and I can at last agree on something. He's 100% correct. Having monitored the semiconductor for many years, it's clear that semiconductor shipments always peak in the third month of any quarter. That's not because sales were up in that third month, but an effort to ship anything that's not tied down so that the quarterly revenue expectations of Wall Street are met.
Posted by Will Strauss | April 24, 2008 6:26 PM
Posted on April 24, 2008 18:26
Thanks Will that's interesting. I just hope that the current collapse of the bankers' credibility will encourage CEOs to be a little less slavish in their attitude to them.
Posted by David Manners | April 25, 2008 11:28 AM
Posted on April 25, 2008 11:28