Frankness Urged to Allay Jitters in Uncertain Times : Crises: Preparation, and openness cited as requisite behavior in dealing with shareholders, analysts during difficulties in a slowing economy.
JoAnne Martz, investor relations specialist at Emulex Corp., was listening intently Thursday as experts discussed how best to deal with Wall Street and shareholders during uncertain economic times.
The experts seemed to agree on some things: Times are tough; the economy is slowing; investors are jittery, and the near-term outlook for Wall Street is, well, anybody’s guess.
Martz and other investor relations specialists gathered in Costa Mesa on Thursday to talk about those corporate crises that arise more frequently in times of economic turmoil--layoffs, financial losses, falling stock prices and the like.
For Martz, the formula to successful dealings with Wall Street and investors is “honesty, openness and candidness. Keep analysts and shareholders well informed,” she advised, “and that should reduce a lot of volatility to a company.” Martz’s company, Emulex, makes computer components.
“The role of investor relations officers has changed over the years, from merely a company message-bearer to a more managerial role, and this includes crisis management,” Martz said. Bruce Edwards, chief financial officer of AST Research, said the Irvine computer maker has “learned that by preparing for a crisis, such as a proxy battle, a raid or a business failure, we reduce the volatility for the company tremendously.” AST, of course, has the good fortune of never having gone through any of the particular crises Edwards cited.
But AST has not been without its problems through the years, such as some financial losses and the departure of a co-founder. Those events have taught the company “that volatility occurs when the difference or gap between what the people expect and what actually happens is big,” Edwards said.
“If a company is doing something different, go out and clearly explain to the investment community and to analysts what it’s doing to allay any doubt about the company’s performance,” he advised.
When AST experienced its first quarterly loss two years ago, Edwards said the firm formed a damage-control plan to prepare key Wall Street analysts for what was to come. The analysts--with whom AST had tried to cultivate a relationship--were sent lots of literature about the company and “we made sure that we were at their beck and call,” Edwards said.
Several speakers at the one-day conference, sponsored by the Orange County chapter of the National Investor Relations Institute, said high-tech companies are especially prone to volatility during times of economic uncertainty. That’s primarily because their products are complex and their markets subject to rapid change.
