Original URL: http://www.theregister.co.uk/2006/12/12/analyst_nytimes/

NY Times rattles IT industry with analyst ban

Pay, no play

By Ashlee Vance

Posted in CIO, 12th December 2006 18:48 GMT

On Nov. 10, the New York Times declared a radical change in its editorial policy. The paper ceased quoting technology analysts in stories, if the analysts do business with the vendors mentioned in the articles. The policy shift has proved so radical that the Times has failed to adhere to it.

The Times needed only 121 words to ban cozy analysts from its sacred pages.

"An article in Business Day on Tuesday described a decision by Microsoft to offer movies and episodes of television shows for downloading through its Xbox Live online service in the United States," the paper wrote in an editor's note.

"The article quoted Rob Enderle, principal analyst at the Enderle Group, discussing the features that set Xbox Live service apart and its position in the market. But the article did not note that Mr. Enderle had Microsoft as a client, a fact later pointed out by a reader. Mr. Enderle does consulting work for several of Microsoft's product groups, though not for the one developing the Xbox; still, had The Times known of Mr. Enderle's work for Microsoft, it would not have sought out his opinion on the product."

A few months back, we documented a similar incident where Enderle appeared in an Economist story eviscerating Sun Microsystems. Enderle does count or has counted the likes of IBM, HP, Dell and Microsoft - all major Sun rivals - as clients - a fact the Economist failed to disclose. The analyst/consultant took exception with our approach to the issue by saying that his work for Sun competitors centers on PC technology, which has "nothing to do with" Sun's overall business - a statement made true only by Sun's ineptitude selling thin client terminals. [Ironically, in his letter to The Register, Enderle celebrated his contributions to a New York Times story about Lenovo being misrepresented by politicians and the press. The analyst has counted Lenovo as a client, although that's not disclosed in the story.]

The Times, however, appears to have similar concerns to us. The paper is not comfortable quoting the analyst on Microsoft matters even when he doesn't cover the particular product line in question.

(The Register tends to quote analysts far less than most IT publications. We do not require reporters to place opinions in the mouths of pundits as many organs do, and we spend a great deal of time critiquing the analyst community. That's not to say that we're perfect. We too quote industry analysts without disclosing all their ties to vendors.)

Technology analysts have escaped the same burdens faced by peers in the financial analyst racket. Following the recent corporate scandals, most financial rags now disclose the positions held by authors and quoted analysts at the end of stories. The editor's note from the Times would seem to suggest that the paper now feels a similar policy should hold for technology analysts or that they should not be cited at all when their clients are involved in a story.

Robbing Rob

It's curious to us that the Times has singled out Enderle here.

Since Nov. 10, the paper has plugged Gartner eight times, IDC once, Jupiter Media once, Forrester Research once, ABI Research once, the Yankee Group once and the list goes on. The phrase "an analyst" appears in close to 20 technology stories since Nov. 10 and almost always accompanies a quotation.

Speaking of which, let's see what triggered the Enderle/Microsoft ban.

In a story about Microsoft's XBox, Enderle described the direct relationship between the game console, download services and the TV.

"What makes this big is that there's no PC in the middle,'' he said.

The statement does little for the story other than adding a touch of enthusiasm.

Later, the Times added the following:

Mr. Enderle said that apart from simplicity, another feature that would set the XBox Live service apart is that it will be the first service to sell downloadable movies in high definition, at a resolution similar to or better than a DVD.

Until now, he said, most studios have been reluctant to allow cable channels to show movies in high definition for fear of piracy, but that would be less of a threat on XBox Live.

Let's compare those comments with some found in a Dec. 1 story on Microsoft's new Windows and Office software. The piece touched on Microsoft's Sharepoint collaboration software - a popular product, according to Michael Silver at Gartner. "That's a big lock-in factor and it helps Microsoft, at least for the next few years,'' he said.

Later, Jim Murphy, from AMR Research summed up Microsoft's new flagship products. "This is a better Windows and a better Office, and there is no feasible alternative for most companies,'' he said.

The story failed to disclose whether the analysts' firms maintain a relationship with Microsoft, although you can be sure they do.

The analysts' statements seem just as enthusiastic as Enderle's, and a similar - if not the same - relationship appears to exist. So why does Enderle get the rough treatment?

We had some long discussions with Enderle about our story earlier this year. During one chat, he charged that our "tabloid like approach" to reporting on him put smaller analysts at a disadvantage. The big firms such as Gartner and IDC can handle some bashing, but a one-man shop like the Enderle Group could suffer greatly from even an unsophisticated, small-time smear campaign.

Enderle has a strong point.

The Big Rub

IDC and Gartner have been more wrong than right over the years with their wild future sales predictions. And yet no one really holds the firms accountable for their mistakes.

In the case of Itanium server sales, for example, IDC has revised its forecasts more often that Madonna has changed her image, and its initial sales forecast ended up being 1,900 per cent too high. The analyst firm has never addressed its misses with the Itanium server reports and, in fact, continues to issue glowing papers on Intel's 64-bit chip - papers which spend a heck of a lot of time talking about HP (funny that).

IDC and Gartner use their size and brands to wield tremendous power over the technology industry. In fact, you'd be hard pressed to find another industry so ruled by analyst firms. The companies' sales forecasts and sales figures are treated like gospel, even though the vendors, behind closed doors, say the sales numbers are far from accurate.

According to our sources, at least two CEOs at major IT companies - one has three letters and the other has more - have considered dropping their contracts with the analyst firms but have declined to do so in the end, fearing that the analysts will punish them.

(For some, the vendor/analyst relationship is very friendly. Your reporter once penned a hard-hitting story on IBM's life sciences business that quoted an analyst from IDC. That analyst's boss complained about the story to my editor, saying the analyst had been misquoted and that my reporting was off base. She then joined IBM's life sciences business a short time later.)

The size of IDC and Gartner also lets them escape other problems faced by the likes of Enderle.

Enderle, for example, describes himself as both an analyst and a consultant. He has a "counterpoint" service that "provides consulting services during the review process of a poorly founded negative piece on a vendor or its products and, should it be needed, showcases the research errors, statistical mistakes, and unfounded conclusions that often define such a piece." He also has a "certified reference account" service which "acts as shield for a qualified reference account from unwanted exposure and attention by press and other IT managers. Enderle Group can provide the documentation, press contact and quotes about a product success while maintaining the integrity of the reference."

We're not really sure what that last service entails, but it sounds above and beyond box counting.

Enderle also pens articles for a number of publications, including this one about Vista and this holiday shopping guide.

The best Enderle story, however, has to be a Jan. 2004 review of Acer's AMD-based Ferrari laptop. The piece starts with a bang: "Every other notebook I have ever had pales in comparison to my new Ferrari-branded notebook from Acer." It also contains other gems such as, "One impressive piece of execution is that when you fire the machine up it plays a WAV file of a Ferrari race car revving its engine. That alone is worth the relatively low $1,899 price of admission."

Put that WAV file up on eBay!

Enderle counts AMD as one of his largest clients and goes to the F1 races with the vendor every year. You can read about his exploits here. The races have left a strong impression.

Do the likes of IDC and Gartner really play the game any differently?

If Only Times Reporters Read the Times

Analysts, like non-US reporters, take flights, hotel stays and other perks from vendors all the time. The Register relies on such junkets to provide you with coverage of a broad set of events given that we don't have a budget comparable to the New York Times or Wall Street Journal. (Incidentally, we also disclose who pays the bills around here with large banner ads plastered all over the site. The majority of our largest advertisers either currently have bans in place or just recently lifted bans on cavorting with our editorial staff.) So, Enderle is not the lone racer.

Beyond that, Enderle actually tosses out quite negative statements about his clients on occasion - harder-htting statements than you'll find from most analysts at IDC and Gartner.

So why has the Times picked on Enderle and not the analyst community as a whole? Why has it not set a clear policy about quoting analysts?

To be sure, Enderle walks a finer line than the large analyst houses. He's an analyst, consultant, and writer who does not do much on the disclosure front. But analysts at the likes of IDC and Gartner often take on similar roles. Their only defense is that they're larger and one analyst's ties to a vendor don't necessarily carry over to someone else at the firm. The vendor love is spread among many.

The sad part is that there's no muscle behind the Times' analyst policy. It seems like a one-off shot at Enderle that popped up just because some reader (not me) pointed out the analyst's relationship with Microsoft - one that is clearly listed on his web site.

Every year, an article or two comes out knocking technology analysts, but nothing ever changes. And nothing will change until reporters start demanding that the analyst firms disclose their ties to vendors or the vendors start pulling their contracts with the analyst firms. Until that happens, leave Enderle alone. ®