Bigness really doesn't matter. It doesn't.
Look at all the big things that fail. Really fail.
Try to find the original Dow 30 stocks, for instance.
Today, it seems, change is more important than size.
Changing markets, changing perspectives and changing expectations. Growing by 5% a year is no longer acceptable.
People want more things. And they want them faster. Instead of waiting two years to buy another pair of shoes, we want another pair today ... at lunchtime.
The never-ending quest for more drives companies to launch assaults on economic targets that are staggering.
Dell Computer Corp.'s shares took a major hit recently -- down more than 12% at one point -- after the House that Michael Built said sales weren't going to be as great as it had forecast earlier. For the quarter just reported, sales were up 25%, to $7.67 billion. Dell had previously announced sales goals for the quarter of 30%. The shortfall, if you can call it that, was about $200 million, or about 2.6%. This comes on annual sales of $25 billion for the year ended in January. Yet the stock dropped, and as it dropped, analysts rushed to the side of the patient, looking for signs of discoloration and bruises. Nothing grows by 30% on its own, after all.
But the appetite for more and more propels everyone - the employees, the salespeople, the analysts, the corporate executives and even the shareholders - to cheer on the attempts to "make the quarter." (Because in the end, making $7.67 billion is not enough to satisfy today's volatile investors.) For the record: Bear Stearns adjusted its fiscal 2001 estimates, maintained its fiscal 2002 estimates and maintained its Buy rating.
Dell's sales were $30 million short of the Bear Stearns' estimates.
The brokerage is recommending the stock now because it feels all the bad news has been factored in.
Bad news? When was 25% growth bad news?
We would all be happy with 25% growth each year in our own companies, but we know that isn't always possible.
The energy needed to maintain that kind of growth is taxing. You have to process many more orders, pack many more boxes and answer many more calls. But still we American investors want more. We want big. Texas Big! A couple of years ago (1996), The Economist published an editorial about bigness.
It said that "bigness marks America off from the rest of the world. America is home of the Big Mac; Britons came up with the Whimpy burger. The Germans are proud of their Mittelstand. The signature achievement of Japanese design is the niftily small Walkman. The French thinking being grande matters less than having a nebulous thing called grandeur. This is the source of endless tensions with Americans, who think bigness qualifies them to run the world." And running the world is peanuts compared with trying to run a technology company. The tech world is where your margins can disappear overnight because something smarter, better, faster and cheaper suddenly appeared. Employees can jump from one seemingly seaworthy vessel to another, stacking their pre-IPO options like so much booty. It is a churning world in which bigness justifies the means, and the ends are justified by market caps.
American investors might look at this year's market turbulence and be thankful for the returns that have been generated rather than weeping over those that haven't. Those days may well be ahead of us.