There oughta be a law, part 1:
CEO Steve Sanghi, up to here with short-sellers, threw down the gauntlet at an investment conference when he told the shorts to "go ahead and make my day and get a life."
The stock, in this "the fundamentals don't matter" market, proceeded to double despite no good news out of the company. Sanghi told this column and interviewers on
that his company was the "exception" to all other chip companies that at the time were doing poorly. One analyst, after visiting the company, even wrote in mid-December that if anything, his revenue numbers were too low.
Think again. The company announced yesterday third-quarter earnings and revs that were shy of estimates. It blamed "some weakness in end-of-quarter turns order shipments." Translation? It looks like the company couldn't find anybody to help take more products than they really wanted just to help Microchip make its quarter.
So, why did the stock rise? CFO Phil Chapman, who sold some of his holdings at 30 -- it closed yesterday at 39 3/4 -- says he can't control analysts or the stock market.
"I don't know why stocks of all the semiconductor companies are hitting 52-week highs when there has been no change in the fundamentals since the September time frame," he told me late yesterday. "I don't understand it and we can't do anything to control it. It's astonishing to me and others in the industry how high these stocks have gone on no new information."
There oughta be a law, part 2:
-- no stranger to this column. Despite preannouncing that this would be a bad quarter, the company saw its stock nearly triple. (Am I the only one noticing the trend of companies that were run up at year-end that are preannouncing?) Then, yesterday, it announced earnings that missed the estimates that had been adjusted downward.
The kicker: In the past six weeks or so insiders, including CEO Ron Schauer and venture investors, have filed to sell roughly the equivalent of 10% of the company's outstanding shares.
Lights, cameras ...:
announced a series of steps designed to make it better, including its plan to this year make $30 million before earnings, taxes, interest, depreciation and amortization if all goes well. In fact, if the company's new efforts work out, it says it could be profitable next year.
The news caused Planet Hollywood's stock to rise 1/2, or 19%, to close at a whopping 3 1/8. But that doesn't make longtime Planet Hollywood critic Eric Von der Porten of
in California any less critical. That $30 million "would just about cover the interest expense on the company's $250 million of 12% debentures," he says.
He was also intrigued with the company's comment that it plans to "recapitalize" its balance sheet. "There was no discussion of this," he says, "but that wouldn't mean offering to exchange the outstanding debt for equity, would it?"
Company execs couldn't be reached.
Speaking of Planet Hollywood:
Regardless of Planet Hollywood's comments that it might make money in 2000 or Microchip's comments that it's better than everybody else (before it preannounces a lousy quarter), you can't help but wonder whether companies are beginning to -- or have been -- seriously abusing the "safe harbor" legislation. The legislation was designed to allow companies to make predictions without landing in court if they don't come true.
"Without the legislation," Von der Porten wonders, "would Planet Hollywood's press release have been more likely to emphasize the historical facts, which are a huge fourth-quarter write-off, plummeting sales and negative operating cash flow (even before debt service)?
"And remember, this is the same company that, in January 1998, 'forecast' $130 million of EBITDA for 1998. Now they say that the actual result will be $19 million or less, but what's a $100 million or so between friends?"
Nothing, just as long as that stock price goes higher.
Wednesday's "beyond Internet"
column sparked the usual wave of disagreement. "Great column this morning," wrote
. "This is the kind of thinking and reasoning we like to see. This helps us think about where we can go to beat the herd and then sell to them."
added, "More of this kind of stuff would be great."
On the other hand, an emailer only known as
wrote: "Hey Herb -- Dumb column. Why not go to WORK and dig up something that might make money for subscribers?"
Which is why I tell my kids that for every bad movie review, there's usually a good one.
Herb Greenberg writes daily for TheStreet.com. In keeping with the editorial policy of TSC, he does not own or short individual stocks. He also does not invest in hedge funds or any other private investment partnerships. He welcomes your feedback at firstname.lastname@example.org. Greenberg writes a monthly column for Fortune and provides daily commentary for CNBC.