Thursday, May 22, 2003

Analyst reports and news stories have a lot in common: they are expensive to produce, they are expensive to publish, and they are expensive to distribute. In short, analyst reports are commodities. As commodities the acceptance and popularity of analyst reports largely depends on prevalent market forces.

News stories only provide the illusion of participation to the viewers; the stories generally support the hegemonic world view. By watching news on television, for example, viewers are engaged in a process of actively engaging in the culture. Viewers are cognitively rehearsing their role in society. Analyst reports, however, offer the audience a greater scope of participation by following the recommendation of the analyst and heeding their recommendations. The recommendation is generally to get involved in the market and purchase equities.

In general, media is polysemic and contains multiple meanings depending on the background of the audience. It has been noted by several researchers that news reports generally suppress discursive readings through exnomination techniques. These techniques often fail and resistive readings occur depending on the referential and proairetic narrative codes utilized by the reader. These discursive readings are often actualized by the appearance of non-hegemonic voices within the text of the news reports.

Analyst reports are devoid of discursive readings. They are also devoid of non-hegemonic voices. Analyst reports are assumed to be factual non-biased representations. This appearance of impartiality is supported due to the complete exnomination of character roles within analyst reports. The only characters that appear are the narrator (the author) and the company itself. The credibility of the report is supported by secondary texts that support both the analyst and the company.

Occassionaly the policy of exnomination is ignored. During the Internet bubble of the late nineties for example, analyst reports for high technology companies were widely read by investors and authors incorporated common narrative techniques. An interesting example is the portrayal of the database provider Oracle in analyst reports of that era.

Oracle (ORCL) was established in the late 1970s and introduced a revolutionary technology. This technology essentially established a disruptive force to the hegemonic Todorovian equilibrium. By the late 1990s, ORCL's technology had become the dominant industry force. In the late 1990s, however, the presence of new start-up companies was threatening this dominance. Essentially, the new Todorovian equilibrium that had been established by ORCL was being threatened by a new villain. This story of equilibrium, domination, and villainy could not be told within the typical analyst report framework so a many analysts adopted a new report section: Company History.

During the late 1990s the Company History section of most corporate reports included detailed descriptions of the CEO. Larry Ellison had founded the company and was elevated to the status of an epic hero by the reports. This status was widely supported by secondary texts such as the popular press. Authors claimed that ORCL embodied the attributes of Mr. Ellison and went on to describe him as an aggressive entrepreneurial hothead who had changed an entire industry and in the process had changed from a rapscallious young man who could upset the status quo to a paragon of capitalist ideals. His story is one of a bachanalian prodigal son. The inference made by the authors of the reports was that ORCL would do the same thing and make investors similarly wealthy. Analyst reports for companies that were not facing disruptive technologies generally contained no heroes, icons, defenders, or villains. They only contained brief industry descriptions and numbers.

ORCL is a slightly different story. Technology innovator that destabilized the existing forces. Story is retold as a narrative that recounts the entrepreneurily daring young men who started the company. Tale conforms to hegemonic expectations. New situation, threatened by young companies. “point providers” vs. integrated solutions. “pont providers” vs. “best of breed” Todorov stability

Ellison portrayed as a playboy with adversarial capabilities. Created as a hero who can defend. Personalized. Dissenting voice...

Among the more recent criticisms lobbed against 58-year-old Mr. Ellison is that he has neglected the company’s business with his yacht racing and that he has failed to groom a strong number two, concerns that Mr. Ellison dismisses.

ROK has a tradition as stable company, no characters are represented. Rather, the entire company is represented as the guardian of the economy. Analyst reports refrain from telling the company's history or talking about the CEO.

Reports are an open text. Retell the immediate past but also explore the near future.

Functions: functions largely absent. What does exist is the implicit recommendation... buy, sell, etc. Final outlook

Indices provide a certain stability and vertical intertextuality to other research reports. Boundary objects. Characters: recommendation. Current price. Target price. i.e., aspirations of the underlying character.

Bending of roles?

Mood: p/e (established due to activated audience)

Function:
nuclei (establish progress). Current price/ target price;
Catalyzers (fill in details [no consequences]): valuation parameters such as EV/EBITDA; P/Sales

Indices:
indices poper (agents, mood). P/E. Revenue and revenue growth
Informants (locate in time and space). Market cap, avg. daily volume, market history

Analyst reports contain many common elements with traditional narrative forms. Borrowing from Barthes's S/Z, it is possible to deconstruct an analyst report.

Barthes (1975) defines two 'Functions' within narratives: nuclei catalyzers. The role of nuclei is to establish the progress of the narrative. In the case of analyst reports, two metrics represent the nuclei: current price and target price. The current price enables the reader to understand where the company has been positioned in the overall market and draw inferences as to the general health and stability of the company. The target price, however, represents the analysts vision for the company. In Proppian terms, the target price represents the companies quest. The rest of the analyst report will establish the potential conflicts and resolutions involved in this corporate quest.

Catalyzers are function that act to fill in additional details about the company. According to Fiske's interpretation of Barthes (1984), catalyzers never result in consequences. Analyst reports provide additional details to readers that enable cross industry comparisons. These indices include market capitalization, average daily volume, and trading volume history. These catalyzers have little function in the quest described by the analyst but allow the reader to develop a picture of the corporation.

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