The Lure of Smooth Earnings

But while many conglomerates are succumbing to Wall Street's siren call to improve shareholder value, plenty of others are saying no thanks.

Smoothing earnings by offsetting cyclical vulnerabilities, a cornerstone goal of conglomerates, is exactly what Dynamic Materials Corp. (Nasdaq: BOOM), set out to achieve.

"We sought to diversify back in 2007, to counter the cyclical nature of our business, and that has proven to be the case," says Richard Santa, CFO of the Boulder, Colo.-based company. As its ticker symbol suggests, the company's original focus was on using explosives to shape and bond metals in industrial processes. The acquisition of a German-based company allowed it to expand its reach into explosives used in the oil and gas industry.

Another justification for conglomerates is that they can create opportunities for sophisticated tax management among competing regimes. "U.S. taxes are the highest of any country we have business in," notes Santa, whose firm also has operations in France and Sweden.