Dreamworks' (ticker: DWA) stock fell nearly 17% over two days (5/10/05 - 5/11/05), including the 5% drop before its news were officially released on May 10, 2005. Here are a few tips for the company:

1. Under-promise and over-deliver, especially if you are a newly public company.  Q1 was DWA's second quarterly earnings release since its IPO.  In the first few quarters after an IPO, investors are especially sensitive to earnings shortfalls.  While consistently low-balling numbers is not recommended, companies should set very achievable targets in the beginning.

2. Pre-announce bad results:  DWA had numerous opportunities to warn investors that it would miss numbers, including when it filed an S-1 form on 3/28/05 and its analyst meeting on 4/5/05.  Considering how badly DWA missed its numbers ($0.44 vs. $0.58) it had to know that there were problems.

3. Respect investors:  DWA's results should not have leaked out early, irrespective of whether it came from company insiders or a Newsweek reporter.  Furthermore, DWA does not make its conference call transcripts available on CCBN Street Events, meaning that investors who missed the call must waste time listening to the replay.  Most companies of DWA's size make their conference call transcripts available on this service.  Copies of investor presentations on the company web site wouldn't hurt either.

Here is a look at DWA's 5-day stock chart:

• Emmis Communications Corporation F2Q09 (Qtr End 08/31/08) Earnings Call Transcript  »
• Amazon, Rhapsody Gain in Digital Music Market ; iTunes Still Top Dog  »
• Netflix May Dominate The Online Video World, But With What Business Model?  »
• Sirius Shares Priced Like Stamps  »
• CBS's Pure Play Status: No Buffer During Down Times  »

David Strahlberg

• Bio & more articles