Spinning Financials – A Bad Trend

It’s a bit surprising when the financial statements of companies become the subject of spin.

Here you are, CEO of a top ten semi company, and your Q1 figures are 10% down sequentially when the market grew 2% +. What do you do?

Well you call up your PR and get her to issue a results release which compares your Q1 with a quarter that was even worse – and announce  . . . . growth!


2010 was a 32% industry growth year. If you didn’t grow in 2010 you’d cut back on capacity too much, you’d cut back on product development too much, you’d developed the wrong products or your mismanagement was epic.


ST Microelectronics had Q1 2011 sales down 10.5% on Q4 2010.


But the company’s Q1 results announcement highlighted the comparison between Q1 2011 and Q1 2010 which showed a sales increase of 9% – which was not actually a particularly good result during the industry’s best 12 months in a decade.


As for ST’s operating profits in Q1 2011 – they fell 40% from the $245m of Q4 2010 to $142m in Q1 2011.


While ST’s net profit slumped from the $219m of Q4 2010 to $170m in Q1 2011.


But the press release highlighted the Q1 2010 to Q1 2011 increase which went from $57m to $170m.


Unfortunately, a lot of the commentators are too lazy, craven or stupid to do anything else than print the release as is.


This is a very bad trend.



  1. Usual press releases were never bare statements of facts, Dick, but the financial ones were typically straightforward. Look at TSMC’s financial releases which are a model of straightforward presentatrion of facts both palatable and unpalatable. In other companies, however, financial press releases are becoming increasingly dressed up to accentuate the positive and obscure (or not mention) the negative. e.g it has become the custom to start them off with 3 or 4 bullet points all of which are very positive. If y-o-y growth is good but sequential growth bad than the y-o-y figures are highlighted. If cash-in-hand is good then that is higlighted. If ASPs have fallen off a cliff that is not mentioned or buried. All very human nature – I agree- but somehow you expect these annoucements to be bloodless statements of truth. To see them dressed up as bullshit paeans of praise to the immaculate execution of the management is a little alarming.

  2. David, I am not sure that press releases ever “used to be bare statements of the facts” My memory of the agency period in my life is that facts were massaged by the CFO, the lawyers nd the CEO. One company I knew changed its accounting period twice and then moved its accounts from pounds to dollars. Another used complex rules for intra-company pricing to get the best tax breaks.
    Is it possible that you have just got more sophisticated/cynical in reading these releases?

  3. David, don’t forget about the all time favourite Balance Sheet Entry: Goodwill
    Its a wonderful number directly from our butt that you can keep bumping to ‘smooth’ out quarters.

  4. The press releases announcing financial results used to be bare statements of the facts, Dick, now they commonly selectively highlight the good points and smother the bad ones. Who’s to blame them? No one I suppose, but the practice serves to spread false impressions and may contribute to the self-delusion harboured by many managements.

  5. Uhm – I think you will find its a bit more complicated than that.
    1) If you look at any company’s quarterly figure announcements they compare the results with the same quarter as last year. I would imagine if you find STs Q4 2010 release it compared with Q4 2009 not Q3 2010. Analysts want to see the same quarters as they feel that thee is an underlying cycle in purchasing with some quarters historically higher than others.
    2) I don’t know about ST but the majority of financial releases are prepared by bean counters and lawyers. They are quasi-legal documents and have to pass all sorts of regulatory and legal standards

  6. David … I absolutely agree, what a sad day for industry, for Europe and especially ST.
    ST is (was / could still be ) a truly great company but releases like this chill you to the bone. Whatever the reasons, Q1 (and 2010 for that matter) were NOT good results so something is clearly wrong with current execution.
    No amount of P&L spin will ever change that plus there’s the real danger you start to believe your own hype. Worse still, do they really think no-one’s going to smell through the smoke screen?
    Come on ST … get back to doing what you do best; time for the business to start driving the balance sheet not the other way around.

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