(Editor's note: To access some of these stories, registration or a subscription may be required. Please check the individual links for the site's policy.)This sounds like a lame algebra question, but as always, The Business Press Maven hopes it will foster investor understanding of how Wall Street is covered. Did I really say that? I meant miscovered. Here goes: A press release hits the wires at 8:30 a.m. EST on Friday. It travels into the public consciousness, and within 90 minutes, four news outlets write several sentences each on it. Boys and girls, here is the question: Why in the name of insular industry practices do three even bother writing if they are just regurgitating the blessed press release? Business media, you wretched little stenographers, it has now been mathematically proven that you are going to wear me to a nub before the year is through. At 8:30 a.m. Friday, XM Satellite Radio ( XMSR), the faltering satellite radio giant, announced that it had ended 2006 with nearly 1.7 million subscribers and added 442,000 new ones in the fourth quarter. It also said it had achieved positive cash flow in the fourth quarter, which is good news -- unless subscriber growth isn't as great as the raw numbers suggest. Then, long-term, I doubt it will hold. But taking marching orders from the press release, the business media quickly swung into action. Speed is everything in news, right? Perspective? Accuracy? It's for wimps!
Well, there was
MarketWatch at 8:44 a.m., with a headline: "XM: Cash flow positive in fourth quarter of '06." In the first sentence, the story mentioned the 1.7 million subscribers added during 2006; in the second sentence, it dutifully handed over the 442,000 added in the fourth-quarter number. Then it was over. Then came Reuters, nine minutes later, with nearly the same first two sentences, but it added a third, attempting larger perspective in referring to the fourth quarter's positive cash flow: "Media companies typically use cash flow as a measure of financial performance." Reuters even called the problematic satellite radio market "burgeoning." The Associated Press, after 10 a.m., added a bit about Sirius' deals with the auto companies, and it mentioned the stock price. But that was it. Which one does The Business Press Maven's coveted "Nod of Approval" award go to? Well -- none, obviously. I've only given the award out to TheStreet.com a few times, if only to avoid charges of favoritism, but I feel compelled -- considering the above -- to give it out to a short, pitch-perfect 9:35 a.m. file by Scott Moritz. The headline? "XM Misses User Target." Of course that 442,000 number sounds good, if you are just taking a glance at it. But numbers are judged against expectations, and these were light. Wait! What about the most important factor regarding these expectations, Scott? The timing of their lowering? And that is when The Business Press Maven read the lead and had to dry little tears of joy from my keyboard: "XM Satellite (XMSR) sank 2% early Friday after the satellite radio broadcaster missed its twice-lowered year-end subscriber growth target."
So business was sinking in the quarter -- and fast. XM had to lower subscriber expectations twice. Thanks, Scott. I wouldn't have known that -- geez, I wouldn't even have known they were light -- from the others. And if you think that is the end of the story, I have to add an addendum. The addendum? At 10:30 a.m.,
Reuters added an addendum. "Adds details," the new article said. "A shift in reality," it should have said. The new headline: "UPDATE 1-XM subscriber count falls short on retail demand." By the third paragraph, Reuters was talking about how satellite radio has "lost some of its luster" and how the new customer count in 2006 was less than half of its increase in those heady bygone days of 2005 when Howard Stern, a.k.a. Fart Man, signed for $500 million, was going to bring immediate happy days. From Fart Man, let's move on to The Wall Street Journal. Because as bad as this need-for-speed-so-we'll-put-misinformation-out-there reporting was on XM, the Journal did worse with its coverage of Home Depot's ( HD) executive shakeup (or down, in this case). You skinny little Wall Street Journal, The Business Press Maven wants to put out your big lights after reading your Home Depot coverage. For shame. You earn my dreaded "Back of the Hand" award, and I regret that I have only one to give you.
There is nothing that so needlessly hurts investors than CEO greed (if you can find a bigger waste of corporate money, do tell), and investors have to see it for what it is. Unfortunately, the Journal -- on both its editorial page and in its news pages -- acts as an enabler. Its guiding (lack of) principle is that if it is done and is done by a CEO, it must be right. Sometimes this is accomplished by an open defense, sometimes more subliminally by subordinating -- or not mentioning altogether -- the most important factor that puts Robert Nardelli's -- or any CEO's -- tenure in proper perspective. Inexplicably charitable, The Business Press Maven is willing to ignore a Wednesday report from the Journal that quoted a Nardelli friend saying that Nardelli felt "unappreciated." This is a man who was given $210 million to leave. Imagine what appreciation would have cost shareholders? But the next claim by the Nardelli friend also goes unchallenged -- that Nardelli resented the fact that he was blamed for Home Depot's decline when General Electric's ( GE) Jeffrey Immelt was not. Let me make it clear here, because The Wall Street Journal does not and because every investor has to think in these terms: Nardelli's tenure as the leader of Home Depot began in the first half of 2000 and thus coincided with the biggest boom in house building and home improvement since the first tepee went up in America. That he could not make shareholders one thin dime out of it ( Lowe's ( LOW) made plenty) -- well, that speaks to the lame caliber of his leadership, which was riddled with missteps.
Meanwhile, in a comically inept article that appeared on A1 the next day called "
Executive's Fatal Flaw: Failing to Understand New Demands on CEOs," Alan Murray explained that Nardelli was "old school" and that his undoing was not understanding how modern CEOs work. Nothing on the missed opportunity of the housing boom. Not a word. Suffice to say: By pocketing hundreds of millions without creating an ounce of value for shareholders, Nardelli seemed to have a pitch-perfect understanding of the modern CEO. It's time that The Wall Street Journal does, too.