Between the Lines

Wall Street: Too much sway over the tech sector?

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Every technology company has three main constituencies: Employees, customers and shareholders. Does that last category overwhelm the first two? Should it? These questions are worth asking--at least when it comes to putting technology companies in context. Vinnie Mirchandani and I had this back and forth about Wall Street's influence over technology companies at SAP Sapphire this week. Vinnie made the following points:

Technology companies cater to Wall Street interests too much often at the expense of good strategy.
Isn't what a company does for customers and developers more important than shareholder interests?
What's wrong with being a mid-size technology company if customers and employees are happy and the products--software, hardware, services--fit a need? There's nothing wrong with it, but Wall Street would lead folks to believe that any company that isn't acquired by Oracle isn't worth existing.
And why are we listening to Wall Street at all given that analysts, investment bankers and other financial wonks can't even manage their own businesses (subslime, credit swaps, write-offs galore)?

Vinnie's points make a ton of sense and as a card carrying capitalist pig it was a point of view that took a little time to sink in. But he's right. This Wall Street influence thing is a conversation worth happening. Let's view some recent news events and downplay Wall Street to see how things may look differently.

Microsoft-Yahoo. The ultimate Wall Street story here. Microsoft bids for Yahoo, which plays hard to get. Microsoft walks and takes its $45 billion and goes home. Yahoo is doomed right? If you're a shareholder you're a little bent over this Microsoft thing. However, customers don't see any difference. I'm still happy with Yahoo services. And it's quite possible that employees didn't want to be a part of Microsoft.
AMD. Analysts were clamoring for more detail and were even pitching a breakup ahead of the company's shareholder meeting. Wall Street got none of those items. AMD is a prove it company, but you can't ignore the customer angle. Customers like having AMD around as a counterweight to Intel. AMD fills a need. It's a different perspective from what you'll get from Wall Street's view.
Amazon. This year Amazon has been in Wall Street's good graces. But for the last two years, Wall Street has been annoyed with Amazon's capital spending, which was needed to build out Amazon Web Services. There are very few folks that would argue that AWS wasn't worth the effort today.

Every once in a while happy employees, shareholders and customers line up in a virtuous cycle like Google and Apple are seeing, but those three constituents are out of synch more than you'd think. The key is to not let Wall Street dominate your view. Thoughts?

posted by Larry Dignan
May 9, 2008 @ 4:39 am

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Wall Street: Too much sway over the tech sector?

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