Monday, November 12, 2007
Two fascinating examples of the advantages, and pitfalls of CEOs going online in internet forums.
First Jonathan Schwartz - the CEO of Sun Microsystems. His blog is famous and voraciously read by our users. Meaty, good content, and giving insight to how he sees his industry.
Now - cut to his blog posting on Nov 8, 2007 - 3 days after Sun's earnings call. Jon comments on the quarter and how he feels about it and, for the most part the data is the same. However, it is not identical - and that's where the learning is.
Examples of color and information in the blog and not on the earnings call:
- that blades sales in the X64 product line were about $40M
- that the volume systems business only grew 3% so the total systems business grew only 0.5%
- and at a softer level, but just as interesting, that Sun really doesn't know why the US growth is so anaemic. On the conference call they initially said there was strength in financial services, then in the Q&A John talks about slowing in financial services due to the subprime markets. And then again there is an inconclusive mixed message on the blog.
Clearly the Sun legal team did a good job ensuring that most of the information was the same - but as is always the case when executives speak in any forum, in person or online, there is information for the investor to glean. As blogs expand these discrepancies will grow and investors will be able to read between the lines as a result.
It's well known to seasoned investors that you can learn a lot from the unspoken messages a CEO gives out. I have one customer - a large mutual fund manager - who invested in a portfolio company when the CEO was not smoking, and sold when the CEO was smoking. Smoking was a proxy for stress - and the strategy worked well for many years.
But not everyone will be allowed to give the markets the new style of information channel. In contrast to Sun's leading edge blogging strategy, Whole Foods now bans it's execs from participating on line - as reported by the WSJ. I guess if you get burned because your CEO is posting anonymously online a new policy is probably required!