The Business Press Maven is sometimes accused of being a dark spirit hovering over the world of business journalism. In my defense, I usually just rest. Especially after this week of Enron and Gotti, why should The Business Press Maven waste more public time on a baseless defense? But hear this: The Business Press Maven is in a state of uncharacteristic cheer and good will toward all ( eh, most) business journalists, thanks to coverage about a big recent merger, coverage that actually benefits investors. Before I hop away in joy, let's come out and say it: something went unusually right with the vast amount of AT&T ( T)- BellSouth ( BLS) merger coverage this week. Breathlessness was kept to a minimum and journalists did not fall in love with the disparate personalities that were involved, weaving tales about how they would be Yin and Yang -- instead of Mr. and Mrs. Rose. It's all a result of what I call "devil's advocacy journalism," God bless it. Now let's hop backwards for a second, in the hope that you will learn what sort of mergers lend themselves to good coverage and which tend to be covered in a way that, if followed to the (witless) letter, will have you trading down from Caddy to Chevy. Plain old "advocacy journalism" is, of course, the sort that tries to push a worthy cause. All fine and good except when the journalist defines a worthy cause as the latest in splashy, high profile mega-merger. Name one, you ask. How about two? I pointed out several weeks ago that coverage of the Disney ( DIS)- Pixar ( PIXR) merger
lifted major story lines from AOL- Time Warner ( TWX), one of the low points of modern business journalism. Untold buckets of money were lost by any investor who gave said coverage an uncritical read.
In the case of AOL-Time Warner and Disney-Pixar, coverage of the personalities of the company's leaders and the assumption that they would coexist happily ever after were central themes. In the end, that's a story line as overblown and potentially damaging as a Kansas City twister. Price, shelf life of success in the businesses they were involved in and critical thought in general could not compete for space. So when the AT&T-BellSouth announcement hit, The Business Press Maven buckled himself into his desk chair, ready for the worst. And what comes down the pike but a wide range of well-reasoned stories about
anti-trust issues , how such a behemoth can survive against nimble competition, future implications for the deal on the industry at large, other opportunities it might open up and all the reasons it might not work, as well as a few that it might. In sum: strategic justifications were challenged instead of validated. As someone who might invest money on the strength or weakness of future merger coverage, you need to know why AOL-Time Warner spurred harmful advocacy journalism while AT&T-BellSouth spawned helpful devil's advocacy journalism. When companies in a recently hot business (Internet, at the time of AOL) hook up, beware. Same, too, whenever show biz (Disney-Pixar) or media companies are involved (see: Time Warner). Reporters, like the public in general, simply go gaga in these circumstances. Their initial excitement expands as coverage does and the conventional wisdom of investors congeals around it faster than pizza cheese. But lame companies in hypercompetitive industries creating companies we think we've seen before? (AT&T-BellSouth becoming Ma Bell redux couldn't overly excite a bunch of reporters if the press conference coffee were spiked.)
A smart investor knows that history repeats itself, but when Krispy Kreme ( KKD) jumped about 20% on news the troubled maker of doughnuts had simply appointed Daryl G. Brewster, a former Kraft operative, to lead them into their difficult future, coverage centered on the gee-whiz of the subsequent stock price jump. If the reporter does not put something like this in historical perspective, you must. I can give examples of the phenomena until the Homer Price donut machines have snorted out their last donut, but as a shorthand, let's just call it our "Carly" rule. When Carleton "Carly" Fiorina was appointed president and CEO of Hewlett-Packard ( HPQ) in July 1999 amid some of the most flowery coverage it has ever been my displeasure to see, the stock popped and few put in proper historical perspective that even a competent company leader has her work cut out for her when she takes the wheel. So near-term stock price jumps generally fizzle, as was the case with Carly. But when Carly was also named chairman only 14 months later, guess what? Another pop. Well, never accuse Wall Street or the media of learning from their mistakes. Before too long, of course, Carly, who ran Hewlett-Packard into a ditch, was popped right out of the executive suite. But think of her the next time a journalist covering a CEO-naming stock pop does not. Maybe Berkshire-Hathaway ( BRK.A) had it right this week. They announced that they had found a successor to Warren Buffett; they just did not say who it was. It is a curious strategy for a public company, and a touch too Bush Administration for my taste. In any case, let me end the week by putting one baseless rumor to rest. The Business Press Maven, who cannot place Nebraska on a map, is not the unnamed heir to Mr. Buffett.