Software Sense: Making the Case for the Long-Term View

Abstract

Beth Collins, CFO of Software Sense, an American multinational computer hardware and software developer, contemplated various ways that her publicly traded company could embrace a more long-term orientation in its quarterly reports and throughout its reporting ecosystem. Like other publicly traded companies, Software Sense faced constant pressure from investors and analysts to increase short-term financial-performance metrics, particularly in its quarterly earnings calls. Many in business were concerned about the deleterious effects of short-termism, which referred to the practice of focusing on short-term rather than long-term performance and results; these effects included less attention paid to long-term value creation and innovation, strategy, and fundamentals; less RD and the implementation of high-risk strategies that could threaten the company's health. Recently, Collins had read about and heard presentations by Chief Executives for Corporate Purpose (CECP), an initiative encouraging business leaders to reframe investor calls away from short-term reporting and toward a more long-term strategic approach and orientation. As she researched CECP's recommendations and strategies, Collins could see the benefits of this approach—but also the potential problems. Excerpt UVA-E-0436 Rev. May 29, 2020 Software Sense: Making the Case for the Long-Term View Beth Collins, CFO of Software Sense, stared at her computer screen, trying to gather her thoughts about the upcoming meeting with other top-level management, including the company's CEO. Like many other public companies, Software Sense faced constant pressure from investors and analysts to increase short-term financial-performance metrics. Like most other public companies, Software Sense held quarterly earnings calls that outlined company performance. However, Collins and other management had long chafed at having to prove the company's worth four times a year and thought the focus on short-term reporting and results was hurting not only Software Sense but other major companies and capital markets in general. Recently, Collins had read about and heard presentations by Chief Executives for Corporate Purpose (CECP), an initiative encouraging business leaders to reframe investor calls away from short-term reporting and toward a more long-term strategic approach and orientation. Collins could see the benefits—as well as the concerns—of this approach, but she anticipated pushback from others on the management team. At the end of the week, she needed to be ready to present her case for Software Sense embracing a more long-term orientation in its quarterly reports and throughout its reporting ecosystem. Software Sense Software Sense, an American multinational computer hardware and software developer specializing in database-management systems and cloud computing for businesses, was based in Spokane, Washington. Founded in the early 1990s, Software Sense had gone public in 1996, and despite some ups and downs over the years, the share price had fared well. In addition to selling database software and technology, Software Sense specialized in enterprise software products (including its own brands of database-management systems) and cloud-engineered systems. In 2019, Software Sense was the eighth-largest software company by revenue, with a market value of $ 1.8billion. See Exhibit 1 for financial data and Exhibit 2 for stock history. . . .