A quick search on Nasdaq's and First Call's Web sites reveals that Corvis is expected to lose 8 cents a share in the second quarter. At first glance, it seems like a tremendous improvement over the first quarter, when the Maryland optical networking company reported a net loss of 29 cents a share. The difference can be substantial. Across the nation, technology companies are increasingly using pro forma numbers to calculate their financial performance. Executives say they're simply trying to provide investors and analysts with a more accurate picture of how their companies are doing.
Critics say they're really trying to disguise poor results.
The pro forma results would show how the combined entity would have performed in prior quarters. But the term has evolved to mean earnings excluding various expenses. Such expenses can include the amortization of goodwill, stock option charges, restructuring costs or payroll taxes, to name just a few. As a result, companies use different definitions of pro forma earnings, causing inconsistency and confusion. Some company earnings releases are straightforward, while others are highly complex with multiple, and sometimes questionable, omissions.