To forecast or not to forecast?

This question was asked in a recent (Feb. 29, 2009) The Economist editorial/article about the role of today’s Corporate Planning. In good economic times, divining the future is difficult; during the current econmist chaos, it is near impossible. Or so many firms believe; many large companies, including Unilever, Costco and Union Pacific among others, have refused to give earnings guidance for 2009; in, others like Intel, Apple take it one quarter at a time. So why do it at all?

The Economist points out that of all the times to gauge the future, now is the time., an opinion I share. Of course firms need to plan internally in order to project their cost structures and cash flow requirements to sustain profitability, allocate scarce resources and maintain a viable business. Although these firms continue to plan internally, their concern (fear?) is that issuing a forecast in the current climate subjects their stock price to serious risk of missing the estimate, with the inevitable market punishment (Wall Street having suffered the same fate themselves!). Nor can the company abrogate their corporate responsibility of advising shareholders to those same analysts, as a CEO once remarked to me, “and let them earn their money.”

Rather than prepare a single number, management would do well by preparing a reasonable, financial range incorporating a range of projected risky outcomes. Failure to provide such estimates may be viewed as a signal to shareholders that the firm needs additional scrutiny or worse, that management is afraid of being held accountable for failing to meet its goals. The need for greater transparency especially in these times, would be something devoutly to be desired.

Hello world!

The last time I looked at a “Hello World” introduction was about 100 years ago, while programming Fortran/Basic/Pascal/C in my initial experiences in the business world BPC (before personal computers). While it’s nice to know that there some things don’t change, instead of announcing oneself to your computer, we can now address our introductions literally to the world at large, certainly a much more daunting proposition than entering punch card decks to a faceless computer administrator.

This blog is meant to express my personal contrarian observations on the state of the business world but given the collision of our personal and business worlds these days, I may digress into the personal side from time to time. The business world, and the world in general has gone amok in the midst of the US financial crisis (whose contagion has spread throughout the developed/developing world), so there seems to be bit more to talk/comment about these days than in previous years. Whether this recession spreads into a full scale worldwide depression, as many individuals and gold bugs observe remains to be seen, Ben Bernanke’s recent comments http://www.cbsnews.com/stories/2009/03/12/60minutes/main4862191.shtml notwithstanding.

Of course, feel free to comment or write me your observations on this blog, website or any other insights you may have.