5471047557_4dc13f5376_nPeople wind up on the Schnitger Corp. website for all sorts of reasons: links from other sites, search engines, the fact that an ancestor was a famous organ builder in German (yup. Didn’t inherit that gene.) …

For some reason, today’s visitors got here via several variations on “Why do companies pre-announce good results?”. It’s a good question, so let’s take a moment to do a broader Q&A on preannouncing.

First of all, what is it? Publicly traded companies are required by regulators to announce their financial results every so often — every quarter is common in the US.

A preannouncement is when that regularly scheduled announcement happens at an unusual time. When things are really bad, companies may announce this right after the quarter ends. That way, the bad economy or whatever caused the revenue miss is fresh in people’s minds and, perhaps, the stock won’t be punished as much.

It works the other way, too: if a company is rumored to be in trouble and its stock price is suffering, the company may put out a press release saying something like “We met our targets” to quell speculation and give its share price a boost.

In most cases, preannouncement are driven by a simple problem: the more people who know a secret, the less likely it is to stay a secret. So companies get the news, good or bad, out there to avoid running afoul of insider trading rules. Remember Martha Stewart? Acting on information that isn’t public is risky. Putting the news out means that business can take corrective actions.

It’s possible that Stratasys’ earnings preannouncement this week was designed to make the news public, take the punishment and move on. A year ago, the company issued a press release at about the same time — but that one simply said that Stratasys would releasing earnings in early March. If we’re feeling really cynical, we could say that Stratasys hopes that competitor 3D Systems’ earnings release on February 26 might take away some the sting Stratasys undoubtedly feels, but we’re not quite that cynical.

That brings us to the competitive sport of earnings releases. Ever notice that DS and PTC often announce results on the same day? They’re arch rivals and want to take every opportunity to put their own spin on any comparisons and distinctions. They want to explain why their results should drive a higher stock price, that they have better products and are smarter in their go-to-market. If they get in a couple of digs, so much the better.

I hope this A to your Q was helpful. If not, ask again in the comments below!

Image courtesy of flickr contributor Damián Navas.