Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Luddites in technology company finance departments

I was fascinated by yesterday’s fiasco in which Google filed its draft earnings statement with the SEC prematurely – the principal giveaway was a press release that said right at the top “PENDING LARRY QUOTE”. Several newspapers reported a statement from Google stating:

Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization. We have ceased trading on NASDAQ while we work to finalize the document. Once it’s finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT.

Interestingly, this statement is nowhere to been seen at the Google Investor Relations web site or in the SEC filings. Obviously, Regulation FD does not cover everything!

Footnoted.com raises the very interesting question as to why Google would use RR Donnelley to file its financial statements. This was the same thought that came to my mind – surely, a company whose software can navigate driverless cars, or translate automatically from one language to another, or find almost anything that there is on the vast world wide web should not find it too hard to click the “Send” button.

But Google is not alone in this. Some of India’s largest technology companies who make money by running the most challenging business processes for their clients, turn to RR Donnelley to file their financial statements with the SEC. This is part of a broader phenomenon that I see all the time. Technology companies which use very sophisticated information technology in their core operations often have a fair share of Luddites in their corporate finance departments.

I am reminded of an episode almost an eternity ago, when some of my coffee loving colleagues and I were stuck in one of India’s largest coffee plantations. My colleagues spent the better part of a day driving around the whole place in search of a cup of fresh coffee. It was all in vain; the management of the coffee plantation had not yet given up the old colonial mindset in which tea was the beverage of choice, and coffee was only something that you sold to make your money. The attitude in technology company corporate finance departments is very similar – technology is something to be monetized and not necessarily to be used.

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