Well, fans, today has arrived. The Street has issued a collective judgment on our three amigos–it’s declared them to be middle-aged. It hasn’t done this formally, of course. But if you look at how the Street has treated these three stocks lately, it’s the only conclusion that you can draw.
Let’s start with Microsoft, whose stock took an enormous hit in the spring when it said it would spend $2 billion more than expected on expansion. That’s chump change for a company with $32 billion of cash on hand, especially when you consider the possible cost of not spending enough in certain areas and getting gored by a Google or one-upped by a YouTube. But news of this extra expansion knocked Microsoft shares down 12 percent, an extraordinary one-day decline for a company with the nation’s third-highest stock-market value.
Because the company is firmly controlled by chief executive Steve Ballmer and cofounder Bill Gates (whose wife, Melinda, is a director of NEWSWEEK’s owner, The Washington Post Company), it could have gone about its business and told the Street to kiss off. Instead, the company, which declined to comment for this column, kissed up to the Street. It spent time listening politely to big investors, announced huge stock buybacks and saw its share price run up sharply. Ironically, one of the reasons the stock kept going up after the initial announcement is that Microsoft’s previous spending on things like its Xbox gaming console and its long-delayed Vista operating system may finally be paying off.
Finally, there’s Wal-Mart, whose stock rose 4 percent when it announced sharp cutbacks in U.S. expansion spending to keep it in line with its lower-than-expected sales and profit growth. “We believe the decision to slow down our capital expenditures is the right thing to do for our company and our shareholders,” says spokesman John Simley. One reason for the cut, he told me, is to reduce “cannibalization.” That’s when a new Wal-Mart gobbles up customers from existing stores, rather than creating new customers.
There’s nothing wrong with being a middle-aged company, of course. There are plenty of mature businesses in the world–I work for one of them–and it makes perfect sense for them to behave in a middle-aged way rather than trying to be young and hip and go-go. Life is like that. Sooner or later, everyone gets older.
title: “Life In The Slow Lane” ShowToc: true date: “2022-12-08” author: “Rosie Jackson”
Well, fans, today has arrived. The Street has issued a collective judgment on our three amigos–it’s declared them to be middle-aged. It hasn’t done this formally, of course. But if you look at how the Street has treated these three stocks lately, it’s the only conclusion that you can draw.
Let’s start with Microsoft, whose stock took an enormous hit in the spring when it said it would spend $2 billion more than expected on expansion. That’s chump change for a company with $32 billion of cash on hand, especially when you consider the possible cost of not spending enough in certain areas and getting gored by a Google or one-upped by a YouTube. But news of this extra expansion knocked Microsoft shares down 12 percent, an extraordinary one-day decline for a company with the nation’s third-highest stock-market value.
Because the company is firmly controlled by chief executive Steve Ballmer and cofounder Bill Gates (whose wife, Melinda, is a director of NEWSWEEK’s owner, The Washington Post Company), it could have gone about its business and told the Street to kiss off. Instead, the company, which declined to comment for this column, kissed up to the Street. It spent time listening politely to big investors, announced huge stock buybacks and saw its share price run up sharply. Ironically, one of the reasons the stock kept going up after the initial announcement is that Microsoft’s previous spending on things like its Xbox gaming console and its long-delayed Vista operating system may finally be paying off.
Finally, there’s Wal-Mart, whose stock rose 4 percent when it announced sharp cutbacks in U.S. expansion spending to keep it in line with its lower-than-expected sales and profit growth. “We believe the decision to slow down our capital expenditures is the right thing to do for our company and our shareholders,” says spokesman John Simley. One reason for the cut, he told me, is to reduce “cannibalization.” That’s when a new Wal-Mart gobbles up customers from existing stores, rather than creating new customers.
There’s nothing wrong with being a middle-aged company, of course. There are plenty of mature businesses in the world–I work for one of them–and it makes perfect sense for them to behave in a middle-aged way rather than trying to be young and hip and go-go. Life is like that. Sooner or later, everyone gets older.
