Daily Earnings Per Share

I'm not sure what to make of this idea.

A real-time enterprise (RTE) has computer systems that are so intimately inter-linked that information flows among them almost instantaneously. Many firms are trying to set up such systems so that they avoid nasty shocks. GM is keen on the idea, to such an extent that its boss, Rick Wagoner, is said to know the firm's bottom line some two weeks before it is revealed to outside investors. Others, such as Wet Seal, an American retailer, are today gathering most cost and revenue data daily.

In "Heads Up" (to be published in April by the Harvard Business School Press), Kenneth McGee, a vice-president of Gartner, a research firm, describes a "large services company" whose fixed costs are so stable that it can predict its profits for the current quarter, within a 1% margin of error, on the basis of the number and type of customers in the early part of the quarter. Its boss is thus able to spot business icebergs well before they hit him. These days, says Mr McGee, "there is no such thing as a legitimate business surprise."

Mr McGee's enthusiasm for RTEs comes from the power they give managers to anticipate problems. He also believes that by the end of this decade high-performing RTEs will be publishing their earnings per share on a daily basis. This, he claims, will give them a competitive edge in raising capital. Most accountants, however, remain sceptical. Baruch Lev, professor of accounting at New York University's Stern School of Business, points out that earnings figures are based on more than raw facts. They involve estimations and assumptions about things like losses from bad debts. Calculating those will always take time. So perhaps Citigroup will not, after all, announce its 2103 results any earlier than the third week in January 2104.

I haven't seen it before. I think it could lead to good things from a management perspective, but it could make Wall Street worse because the market could become more volatile. Truth be told, I'm not sure it will become feasible until we move to a simpler accounting system in this country.