It's a technological gold rush
IROs strolling through the exhibitors' hall at the National Investor Relations Institute's June conference could be forgiven for becoming glassy-eyed as they confronted a dazzling array of ways to distribute financial information. All those wires and screens and all that computing power. Is this really how an IR department should look? Has the IRO job description become a mix of computer jockey and TV director? What if this hot alpha-testing product does everything but never gets finished?
Not surprisingly, nearly every service provider has the word Internet on the tip of the tongue. And we've all heard that it has the potential to turn every computer user into a content provider. But what does that mean for IR? How can an IRO deliver the message through this technological maze?
The answer certainly does not lie in buying every gadget and software program in sight. Even the IR budgets of IBM, Microsoft and Xerox combined could never include all the new technologies; and no IRO should dream of following that route.
The key is to choose the technology that is right for the company. Telecom companies, Internet providers and software companies have no scruples about railroading IROs to the leading edge; but more than a few have approached their CEO to discuss the Internet only to be asked: 'What's that?'
Of course there's a desire to keep up with the Joneses, and IROs are looking to their peer group for leadership in grasping the information choices facing their investors. According to a spring survey by Interactive Telesis (ITI), a telecom company providing shareholder communications services, 41 per cent of US companies have stopped mailing quarterlies. And 42 per cent of the rest are planning to switch to alternatives.
'From the high tech of the Internet to audio-text using phone and fax, the search for alternative shareholder communications is on in earnest,' says Donald Cameron, president of ITI. He reckons interactive technology can shave 40-75 per cent off investor communications costs. 'To Web site or not to Web site? The answer is yes.'
The results of an international survey released in July by Inc Design of New York, a firm that produces annual reports for the likes of Rohne-Poulenc and SGS Thomson, showed 72 per cent of companies with home pages on the World Wide Web, and 63 per cent either already using them for IR or planning to. More than 60 per cent will put their 1996 reports on the Web. 'Many companies are wrestling with the technology, then trying to measure its effectiveness,' says Bill Ferguson, principal at Inc.
In Inc's next survey, Ferguson plans to ask if companies will put multi-lingual editions of annual reports on the Web. 'Companies are communicating with a global audience, but only in English,' he notes. 'It's an opportunity lost given the global nature of the Internet.'
All these companies may be loudly proclaiming their Web presence, but who is listening? Companies with a large proportion of retail shareholders see the Net as a way to give individuals the same comprehensive, timely information as professional investors. Yet a Bell Atlantic survey of 400 registered shareholders showed that only 5 per cent had access to the Internet.
As for institutional investors, some cynics claim that they are well served by traditional methods and do not care about the Internet. Nevertheless, they are bombarded with all that technology can muster, from desktop video to CD-Rom annual reports. 'I don't mind razzle-dazzle in a company presentation, but the technology has to be really good to impress me,' says a hard-nosed George Novello, managing director and manager of the $600 mn Special Equity portfolio at Greenwich Street Advisors, Smith Barney's fund management unit.
Novello says his fund managers regularly check the Web to see what is available, but he has few illusions about the depth of information. 'Honestly, companies only put what they wish on the Internet,' he says. 'They're not necessarily more open.'
There may seem to be a dearth of good reasons for going up on the Net. But what are the reasons against taking the leap into cyberspace? The entry cost is certainly small: 23 per cent of respondents in Inc's survey spent over $50,000 developing a Web site, but ITI's Cameron notes that the software needed can be downloaded free, and a home page can cost as little as $200 initially and $100 a month for Net access.
'Hot links' between Web sites are becoming the latest commodity on the Net, and companies should exploit the availability of such lures while they remain free - or at least cheap. Take Carlson On-line Services, a Vancouver company which is making a business out of links to companies on its Web site, charging up to C$600 a year. Carlson then goes after the investment community to make sure the links are seen.
Girded with hot links, armed with bandwidth and techno-savvy, IR marches relentlessly toward the 21st century. Investors will eventually be there as well. Like it or not, IROs must realise that much of their audience will soon be shopping, banking and even buying stocks on the Web. They had better find strategic communications from public companies there too. Microsoft: Paving the Way with Silicon
Professionals of nearly every description have come to regard Microsoft as a household word when it comes to technology solutions. As for investor relations, the pros at Microsoft are de facto leaders of the information revolution. Besides winning this magazine's US award for multimedia on the strength of its dazzling investor presentations, Microsoft's IR team sets the standard for using technology to communicate financial information.
Take the online 'chat' forums that Microsoft holds after its quarterly conference calls. Introduced this year, the chat session draws some 25 analysts allowing them to send cyberspace messages back and forth to management.
Separately, around 125 employees take part in a similar conference. 'Luckily, the IR team doesn't have to argue the multimedia case at Microsoft - it's religion here,' remarks Tony Dirksen, communications manager for IR. 'We have the philosophy that technology saves time and money, so it's natural to move in that direction.'
Like many companies, Microsoft lately took a hard look at the cost of printing and mailing quarterly reports and decided to quit. The process used to cost around $800,000-$1 mn a year, and in today's frenetic information climate, the traditional delivery process took much too long. Alternatives were near at hand with the World Wide Web and fax-on-demand.
Any tour of investor relations Web sites would be incomplete without a stop at Microsoft's comprehensive offering (www.microsoft.com/msft). All the bells and whistles are usually found on this site first. 'We try to add extra value for the shareholder in our Net information,' says Dirksen. 'Rather than just duplicate printed materials, we make it much more interactive.'
Interactivity is a word that might as well have been coined by Microsoft. The e-mail culture spawned at its Washington State headquarters is legendary, and investors are catching the wave. Dirksen communicates by e-mail with over 200 of the 450 analysts and fund managers on his mailing list, and with around half of the 45 sell-side analysts publishing research.
Dirksen finds e-mail more efficient than phone calls when communicating with the investment community, and he is easily able to respond to his 50 e-mails a day that need an immediate answer.
However, he cautions that managing e-mail takes discipline because analysts can reach anyone within the company, so communications may be happening out of IR's scope.
The Microsoft Web site features a direct e-mail link to the IR department, used heavily for everyday questions from shareholders and students. Dirksen remarks that the Web site relieves the communications burden, and saves time and money by increasing the amount of information that is e-mailed or referenced. The IR team's impressively titled interactive media designer, formerly presentations manager, manages the information flowing onto the Web page along with the Microsoft Web master.
One interactive feature lets users type in any date and get the value of the stock for that day, both pre- and post-split, while a stock ticker shows the close of day price with a link to the Nasdaq Stock Market for a current price. No doubt this is popular with cyberserfs checking the value of their Microsoft stock options. Charts from Microsoft's 1995 online annual report are also interactive, giving the user different financial figures, while the 1996 version will use Microsoft's new Active X technology to generate graphs on the fly. The end result is a greater depth of information.
In contrast to most IR Web sites, Microsoft posts its own SEC filings as well as a link to the SEC's Edgar database. This has two advantages: a formatted version looks better, and the Microsoft site doesn't lose the user. Even earnings reports are available in Word format for downloading, and these are rushed online within 30 minutes of official release to meet the demand of several thousand immediate hits.
Soon to appear on the site will be a ten-year summary of Microsoft financials to use as a baseline reference source. Eventually, Dirksen hopes the print-based annual report will be partially phased out in place of an enhanced, Web-based alternative: 'We still have to mail out annual reports, but they could be abbreviated versions based on the glossy online edition.'
Another idea is to run a Web slideshow simultaneously with a conference call, allowing the audience to access one or both parts of the presentation. Dirksen notes that one day the audio portion of a conference call might be sent over the Net; and he predicts that the Internet will become a primary way of communicating with shareholders, including institutions, by the year 2000.
Dirksen notes that Microsoft investors naturally have a technological bent, and a large proportion already have access to the Web. 'Right now our Web site is more useful for retail shareholders,' he says. 'But we're building it for the day when institutional investors will use it more.' Telus: conquering Technophobia
When Richard Rysak was invited to moderate a panel discussion on technology at the Canadian Investor Relations Institute's conference in May, he saw a chance to 'walk the talk', merging the medium with the message. Dubbed CyberPanel, the resulting presentation was a multimedia montage of taped videoconference interviews with nine IROs combined with a computer-generated slide show. Rysak's session was hailed as a 'ground breaking paradigm shift' and a 'new standard in conference delivery' by many of those present.
Rysak, the IR manager at Edmonton, Alberta-based Telus Corp, the third largest Canadian telecommunications carrier, seems to see technology opportunity in just about everything he tackles. And it is natural for the telco, capitalised at C$2.6 bn, to show off its videoconferencing, Interactive Voice Response (IVR), fax-on-demand and Internet technology. After all, Telus sells all this to customers, so why not bring it online for shareholders?
Nevertheless, Rysak confesses to a measure of 'technology anxiety'. This is a symptom suffered by many IROs who think they are falling behind the times. 'I didn't really know how far technology had advanced in North American IR and whether it was really being used properly,' he says. 'After CyberPanel, I realise things have not moved as quickly as I thought. No-one should consider themselves far behind in technology as the costs of using it are quite reasonable.'
Telus is definitely not on the dull side of the cutting edge. Consider an audio feed from its April annual meeting sent live over the Internet to around 20 participants. Or an analyst meeting planned for second quarter results using videoconferencing for the first time, with sites in Toronto, Montreal, Vancouver and Calgary.
Still, Rysak views the Web with more reserve than some IROs with a technological bent. 'Many people are mesmerised by the Internet,' he says. 'But only one in five Canadians use it. For those who don't, IVR and fax-on-demand fill in the gaps.' He adds that Telus does not plan to issue its annual report on CD-Rom; in Rysak's opinion, this medium is static and merely a stop-gap bridge to high-speed Internet.
Starting this year, Telus is only sending its quarterly reports to shareholders who request them. By offering fax-on-demand and information on the Web, the company prints and mails one-tenth the number of reports, saving up to $100,000 a year. Many shareholders use the services to get information on Telus's dividend reinvestment plan.
Almost half of Telus shares are held by individuals, who the company sees as the real beneficiaries of technology. 'Technology puts individual investors on a level playing field with professionals,' affirms John Wheeler, assistant VP of IR. 'Many institutions have not latched on yet.'
For future roadshows Rysak envisions using the CyberPanel model. Produced on the cheap using taped videoconferences instead of film crews, the computer-edited presentation crammed ten excellent panelists from across North America into the time usually allotted to three or four. Rysak suggests a mix of live and pre-recorded remarks from management culminating in a multimedia tour of the company. Eventually, Rysak says dreamily, all this can be on the Internet too. Severn's Cyber Solution
Looking for a decent IR-oriented corporate Web site? No problem. But the chances are that the sites your browser hits on will originate from the US.
Silicon Graphics, IBM and Dell Computer - to name just three - have all made a point of strutting their IR stuff on the Web. Try looking away from the technology companies, though, and good IR sites get a little thinner on the ground. Leave the US out of the equation and your surfing material is in danger of drying up.
That's why the Severn Trent site comes as a bit of a surprise. It's not a high-tech company; it's not even based in the States. And the site is almost exclusively dedicated to telling the company's IR story. The UK-based water and waste services company has been live on the Web since February with the goal of communicating with its growing pool of international investors - particularly those in the US.
Brian Pegler, IR manager, says that the Internet appealed as a quick and efficient way of getting information out to the investment audiences. The idea of an IR-dedicated Web site was initially brought to Pegler and corporate communications director, Stephen Pain, by Quant IR late last year. The London-based agency had been doing some shareholder analysis work for Severn and, having just set-up its own Web site, thought that Severn's investor relations would benefit from an Internet presence.
'We were aware of the Internet's potential, but neither of us had any experience of using it,' admits Pegler. That soon changed. And with the help of Quant, they set about finding out what the competition had to offer the cyber world.
Initial searches found two other UK-based water companies on the Web, both with little IR content. That was in stark contrast to what Pegler and his colleagues intended to do: 'We wanted to use the medium for communicating with international investors.' Mark Hill from Quant IR adds that the function, content and navigation of the site were all designed to make it easy to access information relevant to investors.
It's certainly easy to find what you're looking for. And it's quick, too. The site uses a minimum of graphics and photos to ensure that it springs up quickly on your browser even if you've only got a slow modem. The first thing to hit the screen is a six line profile of the company followed by options to click and find out more on specific subjects. These include the preliminary results for the last financial year, recent announcements, a screen-friendly copy of the annual report and other shareholder information goodies.
The annual is split into 13 quick-to-the-click areas including financial highlights, the chairman's statement, directors' biographies, the balance sheets, notes and a five-year summary. Various sections of the report can also be downloaded in a Microsoft Word format while the statutory reports are available in PDF format. Other shareholder-friendly information available on the site includes a breakdown of the company's shareholders by size; a financial calendar to help investors plan ahead; and a direct e-mail link to the IR department.
Pegler says that since the site went live the company has been sending out less paper and directing interested parties to the Web address. The preliminary results announcement is a case in point. 'In the past we would have sent it out by mail or faxed it to US institutions and others,' says Pegler. 'This time round we've relied totally on getting it up on the Internet. The preliminary announcement was up within ten minutes of it being on the stock exchange screens.'
Pegler and his colleagues have now made it a policy that any stock exchange announcement is also posted on the Web site the same day. He believes that this dual service obviates the need to use any other online service provider as they will pull the main information from the stock exchange screens anyway.
Although the company has not gone out of its way to publicise the site, it has ensured that all the water analysts and Severn's top 100 institutional investors are aware of its existence and what it has to offer. Pegler believes that if the IR department had not set up the Web site it would probably have had to introduce an interim announcement to satisfy the thirst for information from US institutions. As it is, the site is easily accessible; it gives the IR department flexibility in maintaining the information flow; and it keeps the costs down.
'All the financial information is up there for anybody with an Internet connection to access,' says Pegler. 'I can't really see any downside from our point of view of having the site. It's so easy. We transmit a file of information to Quant and they upload it for us. It's a service to our investors that gives them bang up-to-date information.' Capitalising on Hot Links
The great equaliser' is how Simon Langdon, director of business operations for Dow Jones Investor Network (DJIN), describes the Internet. 'With a far reach and low distribution cost, the Internet has levelled the information playing field,' he remarks. 'Now anyone can be a content provider and compete with the likes of Dow Jones.'
DJIN announced the world's first audio financial news service on the Internet at the end of June. Now any Net surfer can follow the same breaking news events, interviews and company presentations as DJIN's high-end institutional clients - albeit with a four minute delay and in audio only.
The DJIN site (www.djin.com), free to users until this fall, has links to and from The Wall Street Journal Interactive Edition, and will gain further leverage with links to the new Barron's Online as well as WBIS+ news channel, acquired with partner ITT Corp in early July. The new channel will start programming later this year.
Converging with Dow Jones from the other end of the media spectrum is NBC, which after several delays is planning to launch NBC Desktop Video on the Internet this fall. NBC's Private Financial Network (PFN) delivers live and on-demand CEO presentations, interviews and industry conferences; NBC Desktop Video offers companies access to its authoring tools, dubbed NBC Producer, to prepare multimedia presentations for easy broadcast over private networks and the Web.
NBC Desktop Video supplies more than just snazzy technology. Again, Net strength comes with links, and with Microsoft as a partner NBC could hardly be stronger. MSNBC Cable, their 24-hour cable news channel due for launch as we go to press, along with an online news service to be carried on the Internet and Microsoft Network, will be intertwined with NBC Desktop Video, showing the way for wandering Net users.
Cashing in on all this is a dynamic Toronto-based company Capital Idea, James Inc. With two niche products, SmallCap StreetSmart and ADRoit, and four more on the way by the end of the year, Capital Idea offers a low-cost way onto the multimedia bandwagon. For a flat fee, companies get their profiles on NBC Desktop Video, the Web and a CD-Rom mailed out to 1,000 portfolio managers.
SmallCap StreetSmart clients fill in a template with company information along with video and graphics. The new ADRoit, aimed at issuers of American Depositary Receipts, is similar but has greater depth of information. The standard pattern not only keeps the cost at rock bottom, but lets investors quickly navigate familiar pathways to the information they want.
'Using only the Web does not give a lot of bang for the buck right now,' points out Nancy Nightingale, president and CEO of Capital Idea. 'Individual investors are there, but other channels like CD-Rom and Desktop Video get to the institutions.'