Annual Reports Take Back Seat to Instant Data

These days, investors can get minute-by-minute stock updates on their electronic organizers or TV networks devoted exclusively to the market. They can track their portfolios on the Internet, keeping as current as Wall Street’s analysts.

So, who needs those annual reports that are arriving in the mail?

“To tell you the truth, I throw them away as soon as I get them, right with the junk mail,” said Ted Lyon, of Cincinnati, who follows the companies he owns on America Online.

In an age of cell phones, high-speed Internet, when folks prefer e-mails over faxes and when even the 209-year-old New York Stock Exchange is converting to computerized, paperless trading, annual reports are becoming passe.

“I get all my stock information on my Palm Pilot,” said Randy Gavorin, a Grand Rapids, Mich., investor who said he never reads annual reports. “I want to be able to read it in a matter of seconds.”

One reason Gavorin ignores annual reports is that the financial data, which federal law requires companies to release to shareholders, is old. By now, he knows business was dismal in 2000. And he’s already seen weak first-quarter results and heard a litany of profit warnings for this year.

Even investment experts aren’t sure if shareholders should bother.

“You have to ask yourself, other than the glossy pictures, what are you missing? The answer is, probably very little,” John Markese, president of the American Assn. of Individual Investors.

Still, annual reports are a big deal to businesses.

About 14,000 companies last year spent a total of $8.5 billion and up to four months to produce their reports, according to a survey by Roper Starch for the Potlatch Corp., a paper manufacturer. Many reports also are posted on company Web sites.

“It’s about image at this point,” said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach.

It can be money and time well spent, particularly in years such as 2000, the worst for the Nasdaq composite index.

“To a degree, it offers comfort” to investors who read a report, Lydon said.

Annual reports also are criticized for how they’re written. Some investors say the writing is sparse and vague, while others say it’s confusing.

Companies should do more to make their annual reports easier for investors to understand, said Margaret Blair, a Georgetown University economist and law professor. She would like to see them better explain the worth of a company.

“Microsoft has [about] $250 billion of market value and $5 [billion] to $10 billion of assets on the books. What the heck makes up the difference?” Blair said.

Still, she said, those who buy stocks can still find some value in annual reports.

“You may read it and say it’s all hype and puffery,” Blair said, “but in many cases, it’s the only window you get into the thinking of the company.”