Google Shakes Up Investor Relations

Google changes some key IR processes, ditching the newswires and putting its CFO in charge of quarterly calls.

Google’s announcement last week that it is revamping some of its investor-relations processes may well open the way for other companies to streamline their own.

A key feature of the revamp: Google will no longer distribute financial news through newswire services, such as Business Wire and PR Newswire, but instead will post it solely on its own investor-relations Website. “We felt it made a lot of sense, given that we’re a technology company and that we announce virtually all of our company news on our blogs,” says Google spokesperson Jane Penner.

While this type of change has been legally permissible since August 2008, when the Securities and Exchange Commission (in an update to Regulation FD guidance) approved company Websites as acceptable disclosure vehicles under certain circumstances, few companies have made the switch. Reis, a real estate data firm, and online travel company Expedia are among those that have done so, according to the blog IR Web Report.

Now, though, more companies are likely to at least consider releasing financial news via Website only. “This is another example of where Google is on the leading edge of the marketplace, and I think you’re going to see more companies adopt similar practices over time,” says Michael Littenberg, a partner with Schulte Roth & Zabel.

What qualifies a company’s Website as a “recognized channel of distribution” according to the SEC? A number of factors are involved, including whether a company normally posts news to the site, keeps the site current, and makes the news prominent and easily accessible to a broad audience. Site traffic and media attention are also considerations, as is the use of “push” technology, such as RSS feeds, that can alert the public to the presence of a new posting.

While cost savings was not a primary driver for Google, the price of newswire announcements can add up. Sending out a 400-word release nationally costs around $700 for the major newswires, with additional fees nearing $200 for each additional 100 words. Adding graphics or video is extra, as are a host of ancillary services and features.

Also last week, Google CFO Patrick Pichette announced during the company’s first-quarter earnings call that the search giant would eliminate an additional Q&A session with analysts that it had been trying out since last year (because questions often duplicated those in the primary call) and that CEO Eric Schmidt would no longer participate in earnings calls, leaving Pichette to lead them.

While that second bit of news provoked questions from analysts — including whether or not there was tension between Schmidt and co-founder Sergei Brin over Google’s recent decision to defy the Chinese government and stop censoring Web searches for users in that country — Pichette was quick to say that it was a purely practical decision.

“It was simply an issue of streamlining [the earnings call] and making [it] more focused on the financial results,” said Pichette. “[It] doesn’t mean Eric is not available, and he is clearly leading as spokesperson of the company.”

Google is not the only company to have its finance chief leading quarterly earnings calls without a CEO present. Apple CFO Peter Oppenheimer, for instance, heads up that technology company’s calls, minus Steve Jobs. AT&T CFO Rick Lindner is often the only executive on the telecom giant’s quarterly calls, aside from the IR head, while Costco CFO Richard Galanti conducts the retailer’s earnings calls solo.

Still, the practice is far from the norm. “A lot of companies don’t do that, because they want people to see that the CEO is strategic, and doing a good job,” says Mary Beth Kissane, a principal at investor-relations consultancy Walek & Associates. “But if you have a good CFO and [he's] doing the job — why not?”

 

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