IBM’s earnings whiff could give the Trump administration more ammunition to rethink the quarterly earnings treadmill, which a top company executive called “outdated.”
“It forces companies to do irrational things” like offering steep end-of-quarter discounts, IBM Vice Chair Gary Cohn said in an interview. (IBM chose not to do those things this quarter and paid handsomely for it: Its earnings-miss preview shaved $69 billion off its market cap last week.) A third of the contracts IBM had expected to sign before June 30 have since come through, the company said, and will show up in its third-quarter report in October.
The Securities and Exchange Commission proposed in May letting companies share their financials just twice a year instead of four times, as many European companies already do. Shareholder groups are aggrieved.
But when quarterly reporting was mandated in 1970, “it’s because it was the only time shareholders could hear anything about the company,” Cohn said. “I’m sitting here with a TV in front of me with four business channels on it; CEOs are talking every day.”