The Squawk Box Goes Public

Companies open up their Wall Street chats

Joe Helmig says that in his neck of the woods deals are sealed with a handshake. "I like to look a guy in the eye and think I know whether he's lying to me or not," says the cattle farmer, who owns a 296-acre spread in Linn, Mo. But how does Helmig gauge the trustworthiness of companies that aren't local, like the corporations in which he invests? The best source of information about EMC (EMC), Network Appliance (NTAP), and a handful of other technology companies in which he owns stock, Helmig says, has come to be the conference calls that these corporations hold for Wall Street analysts after releasing their quarterly earnings. "When I buy shares in a company, I don't have the opportunity to look the CEO in the eye," Helmig explains. "But I can listen to what he says and how he says it on a conference call, which is the next best thing."

It's just in the past few months that Helmig and other investors have been widely admitted to what was once an exclusive Wall Street forum. A year ago, only a few hundred companies--mostly tech firms--let the public listen to their quarterly information sessions. But not even these companies offered total access. Often, only replays of conference calls were available, and their availability was rarely publicized. Now, however, thousands of companies allow individuals to listen to live calls, and more are doing so each day. Robert Adler, president of, a Boston-based business that runs the investor areas of corporate Web sites, says his company provided Webcasts of conference calls for some 2,500 firms during the third-quarter earnings season, up from 300 a year ago. Overall, Adler figures that more than 4,000 companies will provide public access to these calls during the fourth-quarter earnings season that's now under way.

Why the sudden openness? Investors can thank the Securities & Exchange Commission's Fair Disclosure Regulation, which took effect on Oct. 23. The measure, known as "Reg FD," requires companies to provide the public the information that was previously afforded to select analysts and portfolio managers. Many Wall Streeters predicted that Reg FD would cause companies to clam up to analysts and investors alike, rather than run the risk of accidentally disclosing information selectively. John Markese, head of the American Association of Individual Investors, thinks just the opposite has happened. "This has been a great development for individual investors, and it's only going to get better," he says.

TOLL-FREE LINES. Indeed, since Reg FD took effect, companies have begun piping all kinds of information through Webcasts. Investors can now listen to presentations that company executives make at exclusive investor conferences held by brokerage firms as well as breakfast chats that executives hold with analysts who cover the company. Corporations are also scheduling public conference calls to unveil new products or release monthly sales data.

Right now, most of the sessions relate to fourth-quarter profit reports. During these calls, which last about an hour, top executives review financial data in their latest earnings release and may provide forecasts of their sales and earnings. Analysts from brokerage houses and investment management firms then ask them questions. These meetings are usually broadcast over the Web via a corporation's Internet site, and some are also available through toll-free telephone connections. Most companies now send advance e-mail notices of upcoming calls to shareholders who request them. The calls are typically held about an hour after a company issues a press release announcing its quarterly earnings. Anyone who misses a live event can usually listen to a replay that remains available for at least a week afterward.

Charles Hill, director of research at First Call, which tracks analysts' earnings estimates, says Reg FD is causing companies to provide a relatively greater amount of information during their conference calls. Increasingly, he says, companies are providing earnings projections for the year ahead or for the next few quarters, rather than just focusing on the current quarter. Another recent development: Companies are holding mid-quarter conference calls to offer fresh earnings guidance or to reiterate earlier forecasts. Before Reg FD, companies would give that guidance to analysts privately.

"EXTRA DIGGING." Mark Coker, who runs, a Web site that lists upcoming conference calls for more than 3,500 companies, says these calls can be less important for what's said than for how it's said. Whether the tone of the call is upbeat or dour can be telling, Coker notes. For instance, if a company is firing on all cylinders, analysts typically congratulate management for a job well done. And when a company stumbles, a conference call can turn grim.

That's what happened during Newell Rubbermaid's (NWL) Oct. 24 conference call following the release of its third-quarter earnings. During the call, executives lowered their earnings projections for the fourth quarter. Analysts then chided managers for being unable to deliver on their promises and for the company's stagnant stock price. Shortly after the call, two stock analysts downgraded their ratings on the company. A week later, Newell Rubbermaid's board of directors ousted then CEO and Vice-Chairman John T. McDonough.

First Call's Hill says conference calls are a great way for novice investors to get a financial education. "By listening to the questions that professionals ask, you'll get to know what's important to Wall Street," he says. For instance, analysts are likely to care more about sales growth than earnings growth at a young company that is plowing back most of its profits into expansion. At a mature company, cost-cutting might be their focus.

Sometimes, too much information can cloud the picture. Hill warns that investors might be confused by the financial minutiae analysts demand to make earnings forecasts. That's why Hill suggests that investors also listen to company presentations at investor conferences, if available, to get a broad overview.

Be skeptical about what you hear at conference calls and investor sessions, since executives try to spin even bad news into good. Fred Hickey, editor of High-Tech Strategist, a newsletter based in Nashua, N.H., suggests looking to sources beyond the company by listening to the conference calls of its competitors and suppliers. "A company will rarely tell you the truth, so you've got to do some extra digging," he says.

If you're a buy-and-hold investor, you probably don't want to make an investing decision based solely on what you hear at a conference call. But at the very least, these calls can help you to understand the forces that may affect your investments. There's also the satisfaction of knowing that Wall Street doesn't have the inside skinny before you do.

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