Does “under promise/over deliver” work in IR?

Hi boys and girls... I'm back after two weeks on the shores of South Carolina (or what I like to refer to as my own version of a medicine lodge). When not reading a mystery or trying to eat my weight in fried shrimp, I did allow my mind to wander and reached some important conclusions:

• Unless the name on your birth certificate reads Thomas Lee Bass, you should not get a tattoo. Believe me, I will have nightmares about what I saw on the beach for years to come.
• Apparently, LL isn't the only one who can't live without his radio. I was shocked at the number of folks who thought it was better to listen (and to have those around them listen) to the endless commericals on local terrestrial radio stations than simply enjoy the roar of the surf.
• The old business adage of "under promising/over delivering" does not work for 99.9 of publicly traded companies when it comes to investor relations.

I actually started thinking about this last point when I read the piece Matt Egan did for FoxBusiness.com called "Why No One Should Believe Apple's Earnings Guidance." (Interesting piece - despite the tabloid-y headline and the fact that Matt interviewed me - about Apple's long-standing guidance practice.) Obviously, Apple is one of those special-exception companies that fall into that rarefied fraction of a decimal point of a percentage for whom it does work... or perhaps more accurately said, it doesn't hurt. In other words, Apple is to guidance what Tommy Lee is to tattoos.

Why doesn't it work for the vast majority of companies? I'm glad you asked. It doesn't work for the vast majority of companies for the simple fact that it does nothing to build management's credibility. In fact, some might argue it actually hurts management's credibility. At the end of the day, wouldn't it be better for managment's credibility - which is a major influencer of a company's valuation - for management to simply do what it says it's going to do rather than to easily clear a bar investors perceive/know to be set artificially low?

I think it would. What do you think?

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