Motorola's Inc.'s July 9 announcement of lower-than-expected
earnings resulted not only in a dip in its stock; it also dragged down
the entire technology sector.
After a torrid six months in which technology issues had led a
roaring bull market, the market reaction placed investor relations
professionals at technology companies in a delicate position. At the
end of trading last Wednesday (July 31), some major technology stocks
such as Motorola and Hewlett-Packard Co. still were trading well below
their highs for the year.
But despite the significant drop in market valuation that many
companies experienced, investor relations professionals at technology
corporations should not necessarily step up their communication with
the investment community, according to some experts.
Companies should "maintain a consistent and steady program" of
communication, advised Lou Thompson Jr., president and CEO of the
National Investor Relations Institute, Washington, D.C., a membership
organization for corporate investor relations professionals. Noting
that the fundamentals of many high-tech companies have not changed,
Thompson said companies should get this point across in the course of
their normal communication with analysts, investors and the media.
Rather than reflecting uncertainty or doubts about the prospects
of particular high-tech companies, the sell-off of some companies'
stock reflects the way the stock market works, said Robert Amen,
president of Amen & Associates Inc., Greenwich, Conn., the investor
relations arm of Ketchum Public Relations. "Institutional money
managers and individuals will always try to take their profits, to
protect their gains," he said.
While the dip in stock prices cannot help but give IR
professionals pause, Amen advises his clients to keep up a steady
level of communication that focuses on longer-term prospects.
Stepping up the level of communication even could result in increased
volatility for a stock, he said. Moreover, companies should not
over-react by communicating anything to the market that could be
construed as "forecasting," said Amen.
Even recently enacted "safe harbor" legislation that allows some
discussion of future prospects (PR NEWS, Dec. 22, 1995, p. 8) may not
protect a company from liability for statements which could be
construed as projections made to keep investors from selling a
company's stock.
(NIRI, 703/506-3570; Amen, 203/629-2244; Financial Relations
Board, 312/266-7800)