From the EDITOR.

Wall Street's earnings expectations are a critical determinant of how a company s stock fares, and dramatic swings often stem from earnings movements of a few pennies one way or the other. Needless to say, that puts tremendous pressure on financial executives to satisfy the Street or become dead meat in the eyes of the investing public.

This relentless focus on earnings and growth forms the backdrop for two of the stories in this issue. Gregory Millman's powerful cover story looks at how capital allocation decisions can be impacted by a desire for short-term earnings gains, even at the expense of building economic value. Executives at Ryder System, Herman Miller and Briggs & Stratton reflect on the situations they faced, their decisions -- and the eventual outcome.

Paul Sweeney's look at accounting fraud is probably an even stronger reflection of the all-consuming attention on earnings. When those fall short, some companies have unfortunately resorted to falsifying the numbers, sometimes pumping them up with a form of financial helium. Publicly identified miscreants like Cendant, Sunbeam and Rite Aid have seen their shares, and their reputations, plummet, costing shareholders billions. Forensic accountants and other experts interviewed for the story assess some of the actual problems and point out suspicious or dangerous practices that companies should avoid like the plague.

Also in this issue are two stories on business-to-business exchanges and e-commerce. The first story, by freelance writer Vanessa Drucker, examines the emergence of new B2B networks involving longtime competitors joining hands in "co-opetition," where they pool resources in key areas like procurement or open up vast supply networks to buy-and-sell exchanges. Much of this has been fostered by the notion of reengineering the supply chain to wring out costs.

Already, the Big Three automakers have set up such a network, as have the material handling industry and major consumer packaged goods companies like Coca-Cola, PepsiCo, Unilever and Nestle. (This last network has spawned a separate company, Transora, that is profiled in the article.) Oracle has announced another upcoming B2B project involving the aircraft parts industry. But this new phenomenon isn't all potential upside for traditional rivals. Regulators are looking closely for evidence of collusion or price-fixing, and companies examining these arrangements fret about losing existing margins, relationships -- even trade secrets.

The other e-commerce story, by Dun & Bradstreet executive Daniel Rucker, raises a critical issue in cyberspace: Whom do you trust? As he points out, it's easy for Internet players to position themselves as reliable and experienced entities, while they may be nothing more than babes in cyber-swaddling clothes. Rucker strongly advises turning to certificate authorities to verify e-commerce transactions, especially when dealing with overseas companies. On the Web, it seems a verdant business oasis may be little more than a mirage.

Jeffrey Marshall