An Analyst Receives a Time Out

According to an article from the New York Times, a Wall Street technology analyst has been forced to drop coverage of semiconductor leader Altera.

According to Times journalist Gretchen Morgenson, Tad LaFountain is “dropping coverage of the Altera Corporation, an industry giant, because its executives had told him they would not take his phone calls, would not let him ask questions on analyst conference calls and would no longer give him the information he needed to analyze its business.”

Altera’s Anna del Rosario responded: “We have 31 analysts who cover us. The relationships with the analysts are really a private matter.” The firm’s CFO reportedly stated that it was “not in the shareholders’ interest to facilitate (LaFountain’s) work.”

This spat is interesting for specific and generic reasons.

  • Specifically for Altera, shareholders are unlikely to agree that it is not in their interest for the firm to co-operate with a hostile analyst. More transparent firms are worth more. Without transparency, information asymetries build up which prevent shareholders from being able to correctly understand the businesses real prospects. More analysts following the business, if other things are equal, increases the value of the business.
  • Generically for analyst relations professionals, it will be interesting to see what the reaction is to these strong tactics. If they are tolerated, then the same tactics will become more widespread. However, if the SEC frowns on Altera’s tactics [as seems possible] this will place interesting pressure on analyst relations managers.
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