* The stock market is a mystery
I don’t understand the stock market. Well, that should be obvious – if I did understand it, I wouldn’t still be working for a living, would I? The problem is, no one really understands the market.
Last week Novell reported its first quarter financials, and to me they looked very good – as one periodical put it: “Novell reported a whopping $392m profit and a swollen balance sheet in its first fiscal quarter.” (from the U.K.’s Computer Business Review, https://www.cbronline.com/article_news.asp?guid=485A54C1-B646-4C4B-B3C4-5FC0E6EB00F8) Now that looks pretty good to me, but what happened the next day on Wall Street? Right, the stock price dropped more than 5% and has been steadily sinking ever since.
Unfortunately, Novell’s revenue was greatly inflated by a one-time settlement payment from Microsoft to end an earlier legal suit. Take out this and the other one-time items and Novell’s revenue was only $10 million, which is down $1 million from the previous quarter. (The Computer Business Review’s headline for its article was “Novell profit wobbles without Microsoft boost”.)
Still, the stock gurus had predicted that Novell would deliver 2 cents a share in income (after deducting the one-time items) and the company actually delivered 3 cents per share. It outperformed the predictions, and the share price dropped anyway! Does that make any sense?
The company got more bad news last Wednesday when (as reported by the Salt Lake Tribune, https://www.sltrib.com/business/ci_2582932) a judge accepted a settlement between the company and some shareholders over a suit first launched in the late 1990s. As a result, Novell will pay out more than $13 million to the plaintiffs. Without a big boost from somewhere, the company could be in the red for the quarter in which that payment is made. But given the way Wall Street treats news like this, the stock price will probably go up.
I just don’t understand. I don’t own any Novell stock, and I really don’t want any. That market fluctuates too much. I’ll just keep collecting Novell memorabilia that I’ll be able to sell on eBay to finance my retirement. (An early edition of my book “Mastering Novell Directory Services” was recently going for 99 cents!)
