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Pfizer is doing it. Motorola said it will do it too. Companies like Citigroup, Google and General Motors already do it.

More and more companies are no longer giving earnings guidance.

Now senior corporate managers and corporate-governance activists are debating the pros and cons of issuing or scrapping guidance. Some say discontinuing updates boosts investor confidence in corporate accounting, since it removes the temptation to rearrange the books to meet earnings targets. Others criticize tight-lipped companies for keeping owners in the dark, highlighting the importance of providing as much information as possible to the marketplace.

To be sure, investors can extract a toll from companies who remain silent about their future prospects. Google, which has never issued forecasts, experienced a 7 percent drop in its stock price on February 1, when its fourth-quarter results didn't meet the markets' expectations. Some have argued that if the Internet search engine had issued forecasts, expectations would have been more realistic, according to McKinsey.

A number of companies, however, have managed to stave off negative investor reactions by putting a positive spin on their guidance cutbacks. In 2002, for instance, Coca-Cola explained that it stopped updating the market on its earnings projections as a way to focus on the company's long-term performance. Even though investors had been slamming Coke for its alleged lack of business progress and its declining stock price, they didn't react negatively to the news that no guidance would be forthcoming.

Similarly, when Intel's Otellini cited the company's intent to focus on the long-term, the market seemed to accept that explanation. The company's stock closed only pennies lower on the day Intel announced it would curb the frequency of its guidance.

Indeed, there's no evidence that frequent guidance positively affects valuation multiples, boosts shareholder returns, or curbs share-price volatility, according to the McKinsey study.

People love to blame the companies for the "quarterly earnings game," but how come no one blames the investing public?

A few years ago, employees at Cisco were madly loading boxes onto trucks as midnight approached on the final day of the quarter. If the boxes were on the trucks, it would then count as a sale. Despite their best efforts, the company failed and for the first time in 11 years Cisco had to report that they missed earnings guidance.

The next day, the stock plunged 13%. Cisco knew what it was doing. I don't blame them, I blame the investors.

Posted by edelfenbein at March 22, 2006 10:35 AM