Q: How do you feel about the role of Wall Street analysts in taking stocks to unsustainable heights?
Kertzman: Everybody in the chain had a role. I don't think you can single out the analysts. Shareholders had a role. People who didn't know due diligence, people who only listened to the analysts on CNBC. But there's this thing that happened, which is relatively recent, of "price targets" being the analyst's job. When I started doing public companies, price targets were not what they did. They would do earnings estimates, but not price targets. And they would do primary diligence, meaning they would talk to customers, they would look at the market. That certainly went away.
Barrett: I've never understood how 90 percent of the companies could do better than average. The other aspect is, quite frankly -- and probably Intel's no different than a lot of other big companies -- we've lost some of our investor relations people to go become industry experts overnight. These are people that have been there for two years and never been through a downturn, never been through a eal product cycle. All of a sudden they're out broadcasting to the industry as experts on the semiconductor, computer industry, what have you. They're not held accountable in the same fashion that they're holding management accountable. We make projections. We miss our projections, we get hung out to dry. They make projections and they revise them the next day. And no one goes back and tracks, really, the accuracy of their projections.
Q: Analysts say that they don't put "sell" recommendations on stocks because companies then deny them access. Do you deny them access?
Schmidt: The answer is no.
Barrett: Dead no.
Q: Do you deny them investment banking business if they put out a "sell" recommendation?
Schmidt: The answer's also no.
Barrett: These are fallacious.
Schmidt: They're just false. And they're offensive. They are made in the industry and they need to be refuted. Companies are highly, highly regulated on how they operate for all sorts of good legal reasons. And the modern-day CEO is so highly constrained on what he or she can or cannot do precisely for that reason. It's a red herring. What I always worry about is when the business seems to be about marketing to its shareholders rather than to its customers. And having now gone through this a couple of times on a personal basis, and I've certainly borne my responsibility for talking about the Internet and its phenomena and so forth, so I share a responsibility as well, I hope we go back to a model where the product that we're selling is the product that the company makes, whatever it is, as opposed to the CEO, the brand, the executives, the shareholders, whatever. Because ultimately the stock price -- I learned this sort of the hard way -- the stock price is the tail of the dog.
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