[Don Plumley]

Before Sarbanes-Oxley and Reg FD, the estimates game was more of just that, a game. There were whisper estimates, analysts that had unequal access to management estimates, etc., etc. So Reg FD tries to equilibrate the playing field that making sure that when officers and employees discuss material financial information, including future estimates/projections, that they do so in a manner that any potential investor has open and equal access - such as by releasing on the internet or through previously announced conference calls.

So the question is asked why don't companies just sandbag their estimates so they can exceed them? A couple of reasons: Pressure to show that your company is beating your competitors in terms of earnings growth; Sandbagging becomes obvious after a short period of time, so then your projections lose credibility; and management making and meeting their estimates demonstrates the control they have over their business and knowledge of industry trends.

In good times, this is all fairly easy. But this pressure to provide consistent positive performance really shows up after a few bad quarters. The first time, there are usually enough reserves and room on the balance sheet to prop up the numbers. Increase inventory, reduce contingent reserves based on a "reassessment", stretch out payables, etc. But unless sales start picking back up, its very difficult to maintain this game, and numbers (and projections) start going south. A great manager at that point tells the analysts that a) unexpected things happened; b) here's what we are doing to fix it; and c) here's what it means short term to our results. The stock takes a hit, but over time, things should return to normal. But not all company executives have the backbone to do this.

Google has taken the angle of not providing any estimates, and cheers to them. But they are a lonely voice in a crowd of thousands, that are pressured by analysts to provide projections. Game on.