by Susan Wolfe
“Yeah, as soon as somebody out there coached him on it for a week. It’s ludicrous, frankly, and I just hope it doesn’t come back to bite us like this flipper thing did. My bigger concern is Sally. How did she manage to plant herself in the middle of this SEC problem?”
“By convincing Roy your spending was out of control. Why didn’t the board speak up for you when Roy said the side deal investigation got out of hand?”
“They probably thought there wasn’t much point. Unless he’s convinced them it did get out of hand. Let’s not worry about that right now. Let’s figure out how to keep our momentum on this SEC thing, now that Sally wants to prove she’s indispensable.”
Well, Georgia thought modestly, she might be able to help distract Sally. If attrition couldn’t hold her attention, Georgia was pretty sure she knew something that would. It would have to wait a few days, though, because for the moment Georgia was definitely overbooked with Glen. Well, maybe she had time for one more little confidence-booster. She glanced at the time on her iPhone. In fact, maybe she could take care of that now.
She knocked on Sally’s invariably closed door (so much for ‘management is listening’) and stuck her head in. Sally was at her computer with her back to the door. “There’s a reason my door is closed,” she said to her computer monitor. Those purple epaulets looked even weirder from the back.
“Oh, sorry, Sally,” Georgia said, ducking her head and starting to withdraw.
“Georgia!” Sally cried, swinging around to her desk as she motioned her in. “I can break for a moment. What’s up?”
“Well, I just wanted to be sure you knew about the meeting on the second floor in half an hour to wrap up the warning letter for Charlie Reebuck.”
Sally stiffened. “I certainly didn’t know, and it’s not convenient for me. I’ll tell them to reschedule it.” She reached for her phone.
“You know, Sally, I kind of wish you wouldn’t do that. They don’t know I’m running as a sort of go-between, and how would you explain how you found out about it?”
Sally considered, and put her phone back down. “All right. I’ll rearrange my schedule so I can be there.”
“Maybe you could just be sort of passing by, you know, and happen to see the meeting?”
“Of course, Georgia. That’s exactly what I’ll do. I won’t forget this, you know. I won’t forget this at all.”
Georgia winced as she hurried back to her cube. Sorry Ken, she thought. Now you’re stuck with the Nusty Beech in your meeting, and she’s bound to be pissed. But all in the service of a greater good.
CHAPTER 21
Georgia found Zack standing at his office whiteboard, using a bright green marker to create a chart. Beyond him she could see morning light filtering through that luminous, pearl-gray cloud cover that was unique to California.
“What’s that?” she asked, pointing at Zack’s chart.
He turned around in that lethargic way that made people underestimate him. “Hi, Georgia. I just got the first draft of the earnings release, and the numbers look funny.”
“You think they’re wrong?”
“They all look higher than I remembered.”
“Higher than the preannouncement?”
He entered a final number and stood back to consider the whole chart. “Yep.”
“So our preannouncement was wrong? That’s what Ken was afraid of.”
“What was our original guidance?” He flipped efficiently through a seemingly random drift of paper on his credenza. “Here it is. Read them off to me, will you?” He started a new column on the whiteboard.
“So we basically hit our original guidance,” he concluded a moment later.
“Then why did we preannounce?”
He picked up his phone. “Let’s ask Ken.”
After Ken arrived and studied Zack’s whiteboard, he used the speakerphone to call Jill at Woodrow, Mantella.
“That’s unfortunate,” she said simply in response to Ken’s description.
“Are we likely to get sued?”
She considered. “Probably not. Shareholder lawsuits usually start because companies inflate their numbers to get their stock price up. Deflating your numbers and depressing your stock price isn’t self-serving, it’s just . . . not very bright. I don’t think a lawsuit would go anywhere.”
“What about the SEC? How are they likely to react?”
“There’s really no precedent that I’m aware of. Companies don’t often shoot themselves in the foot like this.” She was silent a moment. “What I’d worry about is bad publicity. You’re a business intelligence company. The analysts could get pretty nasty about you not knowing your own numbers. It undermines the confidence of the street.”
“Thanks, Jill. I’m heading into prep for the analyst call now. I’ll call you if I need backup.” He hung up and looked at Zack. “Thirty percent of our market cap. $1.3 billion dollars. Out of sheer incompetence.”
“We lost more than we saved by filing on time,” Zack agreed. “What was the point of killing ourselves if we just ended up in the same place?”
“You told them so,” Georgia reminded him.
“Not very effectively, it seems. Well.” He stared out Zack’s window, where the clouds were darkening and picking up speed.
“We’d have lost something in the market, anyway,” Zack reminded him, “because our license revenue was below the analysts’ expectations.”
“Yeah, but it wouldn’t have been 30 percent, and we wouldn’t be facing a firing squad on the analyst call this afternoon. Anybody got a blindfold?” He sighed and stood up. “I need to help them get ready. Funny, what I want to do is leave the building and never come back.”
She hated that discouraged sound in his voice. “Maybe you should go to one of your church services.”
He snorted softly. “I probably should, Georgia. But I’ve gotta get through this meeting first. Can you copy Zack’s chart into your computer and join us? We’ll have to generate the Q&A right there in the prep meeting.”
When she entered the boardroom twenty minutes later, she found a dozen people with their computers open, and piles of paper in drifts. Monica, the head of investor relations, and finance and marketing people were peppering Roy with questions and then critiquing his response. The white board listed their key themes:
- License revenue strong recovery in Q4.
- Calypso strategic success, and boon for Lumina customers.
- Full Oracle compatibility in 6.1 release.
All just so gosh-darned positive. (Calypso was Roy’s Plan B that replaced the Futuresoft acquisition.)
“Have we thought about how we’re going to defend the erroneous preannouncement?” Ken asked when there was a pause in the questioning.
“What was erroneous?” Roy asked, glancing up.
Ken turned his astonished gaze on Cliff, who kept his face carefully neutral. “Well, pretty much everything. We not only came in higher than the ranges we gave them, but we also came within our original guidance.”
“No, we didn’t,” Cliff objected. “We missed on revenue.”
“By $300K on a $53 million number. That certainly wasn’t enough to warrant a preannouncement.”
“Actually, it was even less than that,” a finance person pointed out. “We rounded down. If you look at the raw data, we only missed by $160K.” The finance person flinched as Cliff turned to glare at her.
“So what?” Roy declared. “We were conservative. That was the best data we had at the time. And we did come in well below street expectations on license revenue.” Which even Georgia knew by now was completely irrelevant.
“That’s great, Roy,” Ken said, “ and I think it’s more or less what we need to say. The problem is, the street doesn’t want us to be conservative. They want us to be accurate. If it was the best data we had at the time, why didn’t we wait until we had better data? In hindsight, there was no reason to preannounce anything.”
“Of course there was,”
Roy snapped, crossing his arms combatively. “We were substantially below street expectations on license revenue.”
Ken sighed. “I know I sound like a broken record here, but we didn’t give guidance on license revenue, so we had no obligation to preannounce anything.”
“Are we really going to rehash this now?” Cliff asked. “The analyst call is going to start in . . . thirty-two minutes.”
“My only point,” Ken persisted, “is that we need to be ready when the analysts bring it up.”
“They’re not going to bring it up, Ken,” Roy said. “I plan to keep them focused on our new Calypso acquisition and the release of 6.1. What else? Monica?”
An hour later there were 72 lines open on the call, which meant a minimum of 72 analysts. The dozen or so Lumina people who remained in the boardroom were, as always, utterly silent as the moderator commenced. Cliff gave five minutes on the numbers, and then Roy provided ten minutes of color and background.
“Our first question,” the moderator intoned in her sing-song voice, “comes from Natalie Brickle at Deutsche Bank.”
“Thank you.” Natalie’s voice came clearly through the speakerphone. “I’d like to extend my congratulations to the company for the Calypso acquisition. That sounds like a very good match.”
“Thank you, Natalie,” Roy responded warmly. “We think it will prove to be so.” Well. Listen to Mr. Smooth.
“My question relates to the numbers you announced today and the preannouncement you released seventeen days ago,” she continued. “Why are they inconsistent? Is this indicative of some weakness in your financial reporting systems?” Very first question.
Roy glared at the phone over the rims of his narrow glasses, but his voice remained completely pleasant. “Well, Natalie, no, we think our financial reporting systems are very sound. We’re a pretty complicated company, and it takes a while to close and audit our books. We’re pleased that the final numbers turned out to be a little better than we expected.”
“Our next question,” the moderator intoned, “comes from Tony Fried of First Boston.”
“Thank you. I have two questions, if I may. First, I wonder if Mr. Tanco can comment on the product mix that made up the license revenue for the Americas, for Europe and for Asia.”
“Unfortunately, we don’t comment on that, Tony,” Cliff said, “because we don’t want that very granular information to get into the hands of our competitors.”
“Understood. Thank you. And my second question is for Mr. Zisko. If you hadn’t closed your books at the time of the preannouncement, can you say a little bit about why you timed the preannouncement as you did?”
“I’d be happy to, Tony.” Like he’d be happy to attend his own funeral. “We knew our results on license revenue were going to be disappointing compared to street expectations. We are a conservative company, and felt it was prudent to disclose as quickly as possible. It was the best data we had at the time.”
The next three questions went smoothly. Then the representative from Credit Suisse asked, “Mr. Zisko, you’re a business intelligence company. Does it worry you that you didn’t get accurate business intelligence from your own team on the quarterly numbers for the preannouncement?”
“My team and our software are only as good as the data,” Roy responded, a dark edge of annoyance creeping into his voice. “And the early data gave us some misleading indicators.”
“If that was a risk, why didn’t you wait until the data was more reliable?”
“As a conservative company, we felt it was important to share what we knew with our investors right away.”
“Even if what you quote ‘knew’ unquote turned out to be wrong?” Whoa. This guy was a real bulldog. She glanced at Ken, whose face remained politely neutral and attentive.
“It was fairly accurate on license revenue, and that’s where we had the biggest concern. I wonder if we’re ready for the next caller, please?”
Rod Bancott of Morgan Stanley asked about anticipated revenue from the 6.1. He then said, “I’d like to return to that issue of license revenue for a moment. Did you give guidance on license revenue for last quarter?”
“No.” Uh-oh.
“I didn’t think you did. Then why go out with a preannouncement on license revenue? Do you feel you had an obligation?”
“We didn’t worry too much about whether we had a legal obligation, Rod. We felt it was the right thing to do.”
“I see. So you felt you had a moral obligation?”
“Well, in a way, yes.”
Ken sat bolt upright and gestured to get Cliff’s attention, as the caller continued, “So we should expect to see more of these moral obligation type disclosures in the future?”
Cliff waved rapidly a couple of feet in front of Roy’s face and shook his head emphatically.
Roy acknowledged Cliff with a slight nod and responded into the speakerphone, “Not necessarily. We will evaluate every situation as it arises.”
“And one final question: Since you believe you have a moral obligation to help the street have realistic expectations for license revenue, will you now begin giving that guidance on a quarterly basis?”
Cliff dropped all pretense and made the exaggerated gestures of a man trying to flag down the tanker before it hits a cement wall and bursts into flames.
“No!” Roy barked, causing a ripple of discomfort in the room. “That is to say, we’ll continue to evaluate that request.” He waved at Monica and raked his thumbnail backward across the front of his neck.
“I note,” Monica said brightly, “that we only have time for one more question.”
“And that question,” the moderator intoned, “comes from John Bignew of Morrow Hedge Fund. Mr. Bignew?”
Mercifully, Mr. Bignew had something other than the preannouncement on his mind. The call ended ten minutes earlier than scheduled. Roy disappeared immediately into his office and the group dispersed. Twenty minutes later Georgia heard Ken lock his door and head out. She glanced at her watch. Only 2:30. Maybe he was headed to that church service, after all.
By the next day the shareholders had lost another $500 million.
Georgia was speeding past Mark Balog’s office on her way to the kitchen when she noticed him at his conference table with his face in his hands, the comb tracks visible in his neat brown hair. She knocked on his open door.
“Hey, Mark,” she said to the head of customer support. “Can I get you anything? Lunch? Advil? AK-47?”
Mark raised his startled, hyper-alert eyes and barked a laugh. “Georgia! Come in come in! Didn’t realize my mood was so transparent.”
“You don’t have too many off moments, so they sort of stick out.”
“They’re becoming more frequent, I’m afraid. Have a seat.” His dark mood hadn’t tarnished his buttoned-up look one bit. His crisp aqua dress shirt matched the small aqua diamonds of his gold tie. A tiny black dot in the center of each aqua diamond picked up the black of his onyx cuff-links, and also, no doubt, his polished black shoes under the table. She’d be lucky to look that put together on her wedding day.
She accepted his invitation and sat down. “Don’t suppose it’s anything I can help with?”
“I was actually just thinking of looking for Ken, but I know he’s in meetings all day.”
“He’ll find time for you. Let’s ask Maggie.” She started to rise.
“No. I shouldn’t interrupt him. I’m just losing my mind again.” He reached over and pushed his door closed. “I had a conversation with Roy a few minutes ago.”
“Ah. About?”
“Well, you know this whole change in reporting structure, which I knew would be a disaster from day one. I managed to extract a promise from Roy that I could go to him directly if I ever felt tech support was in real danger. Knowing, of course, he’d hate it to death if I ever really did.
“So I didn’t. Even though I’m convinced the people on my team are going to start leaving in droves, Georgia. I have people who h
aven’t had a day off in twenty-six days, and these are people whose whole job is dealing with unhappy customers. Can you imagine?” His wide-stretched smile was once again distractingly at odds with his words. “Glen and I butt heads on this every time I bring it up, so this morning I finally went directly to Roy for help. I laid out my concerns, and he said, ‘Mark, I’m emotionally exhausted by the troubles with your tech support team.’ ”
She snorted. “Well, I hope you were able to comfort poor Roy in his moment of terrible exhaustion.”
His appreciative laugh was tinged with hysteria. “Oh, Georgia, am I crazy? He’s emotionally exhausted by tech support? He’s never spent thirty minutes thinking about it. My whole team has been living it day and night ever since we put out that miserable 6.0.”
“So he made this mess, and now he doesn’t want to be bothered with it. The good news is, you’re not losing your mind. You’re pissed, which is sane and healthy.”
Mark’s tight smile collapsed into a look of naked fear. “We have a catastrophe on our hands, and nobody’s listening.”
“I think you really should talk to Ken. When was the last time you had a day off?”
He propped his forehead on the heel of his hand. “I honestly don’t remember. It wasn’t this month.”
“So can you just leave for the rest of the day? I’ll get Maggie to set you up with Ken tomorrow morning.”
“How can I leave my team here, when they all need a day off more than I do?”
“What good are you here with your head in your hands? Your team needs you to take care of yourself. Your secretary can call you if there’s an emergency.”
He stared at her. “You know what? I feel like I am talking to Ken. That sounded exactly like him.”
She laughed, slightly embarrassed. “Yeah, well, he’s been busy lately, so we just channel him. Anyway, can you meet Ken early tomorrow? Maggie will confirm the exact time. Hang in there, Mark. The company needs you.”
Wow. That really did sound like Ken.
She felt amused and flattered as she continued on to the kitchen. Sounding like Ken, indeed. Sounding like Ken and thinking like her father, what kind of hybrid did that produce? Cross between Mother Teresa with Bernie Madoff. But she wasn’t a hybrid of anything. She was Georgia Louise Griffin, the only one there would ever be. Which meant she should be the finest one possible.