Yet another reason companies shouldn't offer forecasts: In its second quarter earnings release earlier this year, after taking a drubbing, chip-maker Miscrel (NASDAQ:MCRL) CEO Raymond Zinn, said, "Although Wall Street appears to have lost interest in technology, especially the semiconductor sector, we believe the pessimism and concerns that have weighed on investor's minds are unjustified given the current performance of the semiconductor companies."
He went on to say that he believed the industry would continue "to grow at historical rates" in 2006 and 2007, adding that "we are confident" Miscrel will "participate fully in the industry's anticipated growth" thanks to its "high performance product portfolio."
His comments, in July, caused Miscrel's stock to lift 13% overnight to $10.43 on their way to a $11.38 in December. The stock is now $9.98.
Enter January and the company lowered fourth-quarter estimates, citing a "weakness in demand" at the end of December "as customers attempted to further reduce their inventory levels at the end of the year."
That's what happens when chip-makers recognize revenues when products are sold into the channel -- especially when a quarter of their sales are split between a stocking representative and a distributor, which it appears earlier in the year took on more product than they could reasonably sell. (Hint: Future sales suffer.) So much for that "unjustified" pessimism and concern by investors. Turns out they weren't skeptical enough.
MCRL 1-yr chart: