11 September 2009

Sometimes things go wrong.

Dell is getting a lot of attention in IR land this month because of an accidental leak of their quarterly earnings release on their website.

Putting aside the fact that over 23 million shares of Dell were traded between the time of the leak and the eventual release over a newswire, what is also damaging is the hit to the IR department’s reputation.

Analysts and institutional shareholders make a living out of analyzing (some may say over analyzing) companies, situations, and scenarios.  As the investment community looks at the leak they will undoubtedly question the competency of IR management.

Believe it or not, I get asked a lot about the true need for a formal IR plan within a company.  Many believe that running an IR department in an ad hoc fashion has worked in the past, and therefore, will continue to work in the future.

This is true…until a mistake happens.

Please Don’t be Boring…Pretty Please?

29 July 2009

Members of management rarely get excited about investor marketing. It’s too bad because investor marketing can (and should) be the most exciting thing that IR departments and management teams do.

Too often, I have heard of senior executives saying that going on investor road shows is a “pain in the ass”.

I believe the main culprit (and there are many culprits) of this prevailing attitude is that companies are not being innovative when it comes to investor marketing.

How useful is it going to the same locations, meeting with the same investors, saying the same things, handing out the same slide deck, and collecting the same business cards?

There are endless ways to spruce up your investor marketing efforts. It’s not change just for the sake of change either. When you change and improve your marketing efforts your analysts and investors notice. They become interested. They listen instead of pretending to be engaged. They ask good questions instead of questions they already know the answers to. They buy your stock instead of waiting for a better entry point.

Rightly or wrongly, the market has rebounded handsomely since the March 2009 lows.

Rightly or wrongly, investors are deploying the cash they had on the sidelines.

Rightly, your company should want to take full advantage of this opportunity.

Wrongly, you’re likely doing the same old, same old when it comes to investor marketing. The result is, well, mediocre.

Do something new, fresh, and exciting. It will be appreciated by everyone involved.

It’s Only Your Credibility

22 July 2009

Readers of this blog and people who know me are aware of how frequently I talk about the importance of preparation. In the IR world, that means members of the management team being exceedingly prepared for public spectacles such as quarterly earnings calls and financial conference speaking engagements.

Preparation is an insurance policy on your credibility.

The next time your CEO is thinking about spending an extra 15 minutes, 1 hour, or 4 hours preparing for their next public appearance, point them to the edited version of Sarah Palin’s resignation speech (courtesy of Vanity Fair).

How Sick is the CEO?

22 June 2009

Shareholders want to know everything.

The inner workings of the income statement, the line-item details of the balance sheet, the next stage in the product cycle, and the intricate moves of the competition….they want to know it all.

They even want to know the details of the physical health of the CEO. This morning it was reported that Steve Jobs, soon to return as CEO of Apple after a 6 month leave of absence, had a liver transplant a few months ago. A debate is now going on as to whether the Board of Directors should officially disclose the severity of Jobs’ medical condition upon his return.

Should a company have to disclose this level of detail? Disclosure is more of an art than a science. To effectively answer the question you need to ask – “How important is the CEO to the current and future prospects of the company?”

In this case, many would argue that Jobs is important enough to disclose the specifics of his personal medical problems.

It doesn’t stop at a manager’s health either. I have personally witnessed institutional shareholders ask a CEO what kind of car he drives and what part of town he lives in.

Should we be surprised? I don’t think so. A CEO and senior management team is often thought of as the key elements of success or significant points of failure in a company. When you are CEO of a publicly traded company, investors will want to get personal.

Opportunities During Tough Times

27 May 2009

Yesterday, GM’s deadline for coming to an agreement with its bondholders came and went.  Bankruptcy is now a virtual certainty for the 100 year old car maker.

While tough times have hit companies like GM, opportunity is presented to others.  GM is a member of the Dow Jones Industrial Average – a group of the 30 most influential stocks listed in the United States.  With its impending bankruptcy, who will take GM’s spot on the Dow?

This is a big deal given the number of index funds that are required to hold Dow listed companies in their portfolios.  Whichever company gets added to the distinguished list will undoubtedly see a small pop in their valuation.

Some contenders include Google, Cisco, and Oracle from the technology world.  FedEx or UPS from the logistics services space, or maybe another prominent retailer like Target.

Expect the change soon after a formal bankruptcy announcement is made.

Who Reads This Stuff?

06 May 2009

As the IRO of a publicly traded company, you may be tasked with producing the annual report every year. Have you ever wondered who actually reads that annual report?  After all, the bulk of an annual report these days is historical information that has already been made available to the public.

I can tell you one thing – sell-side financial analysts certainly aren’t waiting in line to receive their copy, hot off the press.

How do I know that?  I recently embarked on a scientific initiative that studied the topic.  I called the scientific initiative “Let’s ask a bunch of analysts if they actually read annual reports”.  Impressive, isn’t it?

I asked 24 analysts, who cover various sectors, if they actually read the annual reports of the companies that they cover.

8 out of the 24 admitted that they don’t refer to the annual report at all.  A whopping one third!  And that’s only the analysts who would admit it.  The vast majority of the remaining analysts mentioned that they only “skim” the annual report for any new or relevant information.

Something to keep in mind the next time you are evaluating the time, energy, and money spent on your annual report.

Technology, the Flu, and Investors

29 April 2009

The recent outbreak of Swine Flu and its spread throughout the world has taught us a lot. Many are drawing parallels between the recent outbreak and the pandemic flu of 1918. However, a lot has changed since 1918.  Aviation technology has meant the spread of the actual virus is faster and more widespread. On the other hand, information technology has allowed for information about the virus to move around the world more efficiently and effectively than in 1918.

Websites, internet news feeds, Twitter feeds, Youtube videos, 24 hour television news reports, cell phones, instant messaging, and much more. It has all made us more aware of the situation and more equipped to make individual and collective decisions.

Now, imagine for a second that you as an IR executive were able to effectively use technology to get important information to investors and analysts in a timely and consistent manner.

Let’s say your CEO resigned today….unexpectedly.
You have hundreds of calls from people asking thousands of questions.
You and your team issuing a press release, returning emails, and answering phone calls is not a scalable approach in today’s world. Someone, somewhere is going to be left wondering why they never got a call back (and it’s usually someone important).

Technology, and specifically social media, is all about scalability. A consistent message can be issued by one person (the IRO) to thousands of people (analysts and investors) at the same time. Rumors can be addressed, questions can be answered, clarifications can be made, and even mistakes can be quickly corrected.

In today’s IR world, technology matters.

The Juiciest Part of the Call

07 April 2009

What is the juiciest part of a company’s quarterly earnings call?
It’s not the financial detail.
It’s not the CEO’s prepared remarks.
It’s not reiterating a story that has already been told in the earnings press release.

It’s the question and answer portion call.

It’s unscripted.
It’s not staged.
It’s where you get to hear what analysts (the Street) really want to know.
It’s where you get to hear what management really thinks.
It’s where you get to hear how good (or bad) management really is.

Now, ask yourself, how long does your company’s management team spend on preparing for the Q&A? Perhaps more importantly, are they preparing in the right way?

As one analyst put it – the prepared remarks is where I find out how good the company’s writers are. The Q&A is where I find out how good the management team is.

Lying, Cheating and Stealing

06 April 2009

The current economic crisis has many investors angry.

They feel lied to.
They feel cheated.
They feel as though someone, somewhere, has stolen something from them.

It was Wall St. that did all this lying, cheating, and stealing – right?
What made those people on Wall St. do this?
How could they have done it?

Was it malicious or was it just people on Wall St. making bad decisions?

Dan Ariely, author of the book Predictably Irrational, has done some interesting analysis on the topic. Here’s a presentation that delves into why humans think it is ok to cheat and steal (sometimes).

Some Companies Just Get It

20 March 2009

Oracle gets it.

Oracle announced its Q3 earnings on Wednesday.  They surprised the Street by exceeding expectations and issuing guidance that at least one analyst referred to as “prudently cautious”.  But that’s not what stands out for me.  What stands out for me is the introduction of a dividend.

Typically, growth oriented companies hesitated to introduce dividends because if often signaled that a company was moving away from growth and more towards maintenance of its current revenue streams.  One may argue that Oracle traditionally thought of dividends in this way.  But times have changed and Oracle is changing along with it.

Investors these days are clearly looking for safety and income.  They wanted a dividend from Oracle and that’s exactly what Oracle gave them.

Let us never forget that the investors of our companies are the owners of our companies.  Sometimes, just sometimes, it’s a good idea to listen to them.