Wednesday, January 30, 2008

There is No Sentiment, Only Profit

John Murrell of Good Morning Silicon Valley had this to say about Apple (AAPL) and VMWare (VMW) in from toast of the market to toast
the same crowd of nervous investors who pummeled Apple after its great quarter (see "Market takes knife to Apple, determined to find worm") thought 50 percent growth sounded like too quick a drop-off from 70-80 percent rate VMware had been posting. Executives' explanations that the growth rate is slowing because the company is much larger now went unheeded, and by the time the last knife was put away, investors had cut the share price by almost 34 percent, to $28 -- right back where it debuted. There went $10 billion in shareholder wealth. And there was collateral damage. EMC, the company that spun off VMware and remains its largest stakeholder, saw its shares drop 6 percent despite reporting a strong quarter itself. At least The Motley Fool is accentuating the positive: "Here's your buy-in discount. Enjoy it while you can. It took 10 weeks for VMware's stock to go from a 52-week low of $51.50 per share to the high-water mark at $125.25. It can happen again, so don't get caught flat-footed." 

Why am I thinking "excesses of the market"?   One would think that in an environment where indicators are showing growth is slowing down, you'd at least stick to companies though not showing "super-stellar" growth you'd dream of, have at least proven they do deliver growth and shareholder value and are at least making their companies grow and delivering excellent products and services and have sensible executives at the helm to guide them through the storm. But hey--- i could never understand the fickleness of the market. One thing I'm sure of, sentiment has no place in the market.