On Tue, 01 Jul 2008 13:39:02 +0200, scott wrote:

>> So they set the budget as low as they could possibly get away with, and
>> we actually made a bit more money than that. Woo-friggin-hoo. What's
>> gonna happen next month, when we're not moving buildings and the budget
>> is expecting us to produce "real" numbers?
> 
> In my experience it is surprising how often you see quite senior people
> paying so much attention to figures like that that are just "noise" in
> the signal.  Draw a proper graph of profit over time, then make your
> conclusions based on the trend, not on some figure like "5.3% up on this
> time last year".

I think both figures are useful - year over year (or quarter over 
quarter) is something that "the street" looks at and affects stock 
price.  It's the beginning of building a trend - and if the analysts use 
it as one indicator of a company's direction (from a profit standpoint), 
it makes sense to be aware of it and know where you're going.

But the trend is also important - take Novell (since that's who I work 
for I know it better than others); the trend has been described as 
"pulling out of a dive" - 3 or 4 quarters ago, profitability had leveled 
out from a decline; since then, subsequent quarters have seen increases.

When the Q3 announcement was made a couple weeks ago, the revenue was up 
(and EPS was as well - as a result, AIUI) compared to Q3 of 2007.  That 
is a quick way of summarizing the trend over the last 3 quarters.

So looking at the snapshot of "compared to this time last year" gives a 
general indication of the recent trend, but the overall analysis includes 
the long-term trend as well.  In Novell's case, this is a recent 
turnaround after a few years of decline, so the Wall Street gurus are 
taking a cautious approach with the stock, wanting to see if the growth 
trend will continue.

>> For that matter, the top-management plan is to increase profits by 20%.
>> I have yet to hear anything about *how* this is supposed to happen.
>> They've muttered something about "oh, uh, yeah, we're going to hire
>> more sales staff". But so far, I've yet to see anybody hired.
> 
> Ditto here, when I first started the top guy told me how his plan was to
> double the sales figures over a 5 year period.  We're almost up to 5
> years now and actually are sales have gone down because other companies
> have come in that are newer are more efficient than us.  He doesn't seem
> to care about taking time out to fix this (ie (re)training people and
> (re)organising stuff), just plodding on as we are trying to win more
> business.  He'll probably be forced to do something when it's way too
> late.

I've recently learned that there often is more to the picture than what 
we in the trenches see.  I had a chat with my VP about a revenue trend 
that I didn't understand, and she explained to me that the reason the 
trend is the way it is has to do with offsetting lower revenues (as part 
of a plan in the business to grow revenue - has to do with resellers vs. 
direct sales = extending the reach often means lower revenues, so you 
have to make up for it in volume), and the offsetting revenue wasn't 
meeting its goals.  Overall profitability is what those wizards on Wall 
Street look at, so you can't just cut off one part of a revenue stream 
without offsetting it in other areas.

I was surprised at how much more complexity there is to this finance 
stuff than I thought.

Jim

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