Jul. 18--When Harrah's Entertainment announced on July 5 that its second-quarter earnings would not meet the expectations of Wall Street analysts, Harrah's shares plummeted 17 percent in value the following day. 

The financial community was apparently concerned that national economic woes and troubles at the Rio's table games had taken a sizable bite out of the casino giant's day-to-day business. 

But Harrah's executives viewed the stock slide another way. 

To them, the $6.15 single-day plunge to $29.64 a share reflected a powerful subplot, one that has the Securities and Exchange Commission hammering the analyst community. 

A casino industry source speculated that Harrah's bosses felt Wall Street might have overreacted. 

"Analysts are feeling a lot of pressure," the source noted. 

Las Vegas-based Harrah's is scheduled today to release its second-quarter results, with earnings per share ranging from 46 to 50 cents, or less than the 55 cents a share projected by 17 Wall Street analysts. But that would be up from the 40 cents a share the company reported in the second quarter of last year. 

Harrah's Entertainment shares were down 20 cents Tuesday on the New York Stock Exchange to close at $29.79. 

The pressure on Wall Street analysts -- the individuals who study the quarterly results of publicly traded companies and issue buy and sell recommendations on stocks -- has come in the form of criticism from the SEC and national media outlets. 

They charge that analyst pay is all-too-often based on the volume of stock and bond offerings underwritten by the analysts' investment banks. 

Write a negative report about a publicly traded company, the critics charge, and the offended company will turn to another bank for help with a multimillion dollar offering. 

Critics point to one telling statistic as being symptomatic of that dynamic. Of 28,000 stock recommendations issued by Wall Street analysts between 1999 and 2000, just 1 percent, or just 280, recommended that investors "sell" stocks, according to Wall Street investment watchdog Thomson Financial/First Call. 

The remainder called for investors to buy or hold a stock or some variation of that combination. 

"The rough rule of thumb is one third are 'strong buys' or whatever the equivalent is; one third are 'buy' or the equivalent, and one third a hold; and one third are left for 'sells' or 'strong sells,' said Chuck Hill, Thomson Financial/First Call's research director. 

"For the individual investor, you have to send your box top in to get your decoder ring." 

The SEC has ordered analysts to disclose business relationships their employers have with the companies they're reporting upon to ease investor fears of potential conflicts, and Harrah's executives believe the resulting hypersensitive environment led to the company's July 6 stock price tumble. 

That day, slightly more than 6.1 million shares of Harrah's stock were traded, or about six times the stock's average daily volume, as news of the Rio's two-year bout with bad table games luck was resurrected. 

"I think as a rule the gaming analysts are very ethical and pretty sharp, but I think they can't help but be sensitive to the criticism and be a little gun-shy," said the source. 

Thomson Financial/First Call's Hill, a former Wall Street analyst, offers a different explanation for the stock's decline: "The analysts took their numbers down for next year. Did they do it right or not? I don't know." 

The company's projected earnings for this year were lowered to $1.98 a share, from $2.14, by the 18 analysts who follow the stock, according to a survey by Hill's firm. The company's 2002 earnings were lowered to $2.30, from $2.52. 

They lowered this year's projected earnings to $1.98, from $2.14. 

"The analysts apparently feel whatever the problems are, they're going to see lower numbers next year," Hill said. 

And what's his reaction to the anonymous source who suggested a Machiavellian motive for the July 6 stock price decline? 

"I don't see where he has much of a leg to stand on," Hill said. 

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