By Dominic Jones | Published: July 25, 2007 | 
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Sun Microsystems dumps PR wires for Reg. FD — Update 3
By Dominic Jones
ON MONDAY, Sun Microsystems, Inc. (NASDAQ: SUNW) will break with long-established tradition by not immediately announcing its earnings via a paid PR wire service.
Instead, the company will post its earnings announcement on its investor relations website, in its RSS feeds, and in an 8-K filing with the Securities and Exchange Commission (SEC).
However, Sun is not completely ditching the traditional PR wire service release. According to a blog post by Sun’s General Counsel Mike Dillon, the company will release the information to the “traditional private agencies and their paid subscribers” about 10 minutes after the information is posted on its website.
In other words, investors and others who want the information immediately it is released will have to get it either from Sun’s website or RSS feed/s, or from Sun’s SEC Edgar page. This is all perfectly legal under Regulation FD because an 8-K meets the current requirements.
However, it’s a marked departure from prevailing practice in the U.S., which is for companies to issue a news release via a paid PR wire service before or simultaneously to posting the information on their websites and filing the release with the SEC. If Sun’s process proves successful, many other companies will likely follow.
Although Sun said it would continue to issue a PR wire service news release, it’s not clear yet if the release will be a full-text release or an announcement about the availability of the full release on the company’s website. Since the wire service news release is being issued for convenience rather than compliance reasons, there would appear to be no need to issue a full-text release.
Press release distributors, including Business Wire, owned by Bershire Hathaway (NYSE:BRK.A), PR Newswire, owned by United Business Media plc (LON:UBM), and PrimeNewswire, owned by Nasdaq Stock Market, Inc (NASDAQ:NDAQ) earn vast sums from the typically per-word fees they charge companies to distribute their news.
“Sea change” follows discussions with SEC Chairman
This change flows from the correspondence Sun CEO Jonathan Schwartz and Dillon have been having with SEC chairman Christopher Cox about the continuing relevance of expensive PR wire services for information dissemination when companies have their own websites, RSS feeds and email alert utilities.
In his blog post about Monday’s events, Schwartz writes: “It may not seem like it, but this is a sea change in how Sun communicates with the world - and sets a path for other public companies seeking to drive greater transparency. I wonder how far off we are from ceasing to issue traditional press releases altogether… after all, no news agency could possibly suggest they reach a greater portion of the planet than the Internet.”
And in his post Dillon indicates that not everyone is comfortable with management’s plans: “This change may not seem major, but to be candid, it has some in our company a bit uncomfortable. After all, in the area of securities regulation, being “innovative” is not always considered positively. However, in this situation, our goal is very much aligned with the intent of Reg FD.”
So will the world end on Monday? No, but these folks here, here, here and here will be watching nervously. Because the next step is to dump the paid earnings wire release completely.
But I do have one concern about how Sun is handling its release on Monday. According to Schwartz, the release will be posted at 1:00pm PST or 10:00am EST. That’s during market hours, and I would think that if you are going to try something new like this that you would do it before the open or after the close to allow time for the information to disseminate. Just a thought… Obviously, I need a longer holiday! A commenter correctly points out that 1:00pm PST is 4:00pm EST, which is after the close. Doh! So, I have no concerns about this. :-)
Update: The Financial Times is now covering the story… “Sun Microsystems said it would start to release important corporate news first over the internet, in what is thought to be the first time a US company has used the online medium as its main channel for price-sensitive information.” See Sun to release key corporate news first on web via MSNBC.
Update 2: Business Wire is in a tizzy over this (sorry, couldn’t think of another term for it). See the comments below. They’re even pointing fingers at me for not disclosing my supposed vested interests. Apparently, I stand to “reap financial rewards should Internet disclosure take root, and demand for [my] services increase.” I’m sorry to break it to them, but Internet disclosure took root in at least late 1999. The biggest financial rewards are for companies and their shareholders. No one needs a consultant to tell them how to do this. Just follow Sun’s example.
Update 3: Monday June 30, 7:52 pm EST — I am happy to report that Sun did as it said. The world did not end. Everything is still OK. The 8-K was filed at 4:01 pm EST. The release on the company site was live by 4:08, according to my clock. The PR Newswire release (full text) was out at 4:11. MarketWatch/Dow Jones and Reuters both had items within seconds of the wire release, so they must have used either the 8-K or Sun’s website. The execution was not perfect, but I don’t see anyone complaining.
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July 25th, 2007 at 7:56 pm
1PM PST = 4 PM EST: after market
July 25th, 2007 at 9:52 pm
If they’re “dumping” PR wires, as you say, why are they still sending the information on the wire 10 minutes later?
July 25th, 2007 at 10:12 pm
Graham,
Good question, and it is not really explained by Sun in any of the posts I’ve seen.
Here’s my understanding from speaking to Sun’s IR folks a while back:
They’re not relying on the PR wire service release for Reg. FD. Instead they’re relying on the 8-K, and then making the information even more broadly accessible by posting it on their website and adding it to their RSS feed.
The PR release, which goes out 10 minutes after the news breaks, is a compromise for those investors and information services that are accustomed to relying on the wire services to receive information. Sun is sending a wire release as a voluntary add-on for those folks and services, which I think is a responsible thing to do.
However, in time I expect that most Sun investors and information services will subscribe to the Investor Relations RSS feed or visit the company’s website. It will be the fastest way to get the information.
That’s my understanding of why they are still sending a PR wire release. Perhaps someone at Sun will explain this.
July 26th, 2007 at 5:15 pm
SUN’S SOLAR ECLIPSE: A Return to the Dark Age of Disclosure
The concept of full, fair and simultaneous disclosure will be taking a giant step backwards on Monday.
In case you missed it, Sun Microsystems CEO Jonathan Schwartz has announced that Sun will post its fourth quarter and full 2007 fiscal year earnings announcement on its web site, submit an 8-K filing and will make it available to its RSS subscribers. Ten minutes later, the release will be broadly disseminated via a commercial news service.
Sounds great in theory, and Sun’s approach is in compliance with Regulation FD. The problem is that while Sun is living up to the letter of Reg FD, its actions run counter to its spirit and intent, and threatens to do investors a tremendous disservice by setting a bad precedent.
Schwartz has adroitly positioned himself as a modern day champion of the people, proclaiming that Sun is making market-moving information available to the masses for the first time.
The reality, however, which Schwartz either doesn’t understand or chooses to ignore, is that price-sensitive information is universally available–simultaneously, in real-time, and at no charge– right now, and has been since the dawning of the Internet age.
Schwartz writes on his blog that Sun’s decision “will place, for the first time, the general investing public–those with a web browser or a cell phone–on the same footing as those with access to private subscription services.”
Very noble, certainly great PR, but flat out wrong.
Anyone, anywhere, can access Business Wire and its competitors at no charge on dozens of free financial portals and websites, in addition to many other traditional and online platforms. With Business Wire’s patented NX delivery platform, time-sensitive news is available at the same split second to investors worldwide.
Sun’s decision to disclose via the web and RSS feeds, followed by broad wire delivery, is disclosure deja vu–a return to the bad old days before Reg FD made an earnest attempt to level the playing field.
Prior to Reg FD there was a 15-minute delay that, for all intents and purposes, enabled those with privileged access to corporate information to make market decisions before the same information was disseminated to the general public.
In September 2000, Business Wire made a bold and unilateral decision to end the 15-minute delay, and to make market news universally accessible to everyone without reservation. We remain strong proponents of Regulation FD, and the principles of full, fair, and simultaneous disclosure. That’s why we are speaking up, as others seek to erode it.
Schwartz’ grandstanding masks several important substantive issues that Business Wire has addressed previously.
RSS feeds are not simultaneous given the Internet’s architecture. Steve Messick, our chief information officer, recently blogged on the subject, explaining in layman’s terms why RSS feeds fail to meet the disclosure litmus test. Steve attempted to arrange a meeting with Jonathan to discuss the issue, but his invite has thus far gone unanswered.
Given Sun’s core business, server capacity is unlikely to be an issue when Sun posts its earnings Monday. After all, Sun is the world’s fourth largest maker of server computers.
For thousands of other listed companies, server capacity is likely to be a real issue, especially given the anticipated spikes in volume that usually accompany material news announcements.
Sun’s potential to derive commercial benefit from companies ramping up their server capacity begs the obvious question: does Jonathan Schwartz have a hidden agenda in promoting Internet disclosure?
Others have been quick to jump on Schwartz’ bandwagon, including Dominic Jones, who writes IR Web Report. We think that people who preach disclosure should practice it to the extent that they clearly spell out how they conceivably could benefit from a major policy shift.
Jones is an IR web consultant; he, too, potentially stands to reap financial rewards should Internet disclosure take root, and demand for his services increase.
It is worth noting that the European Commission rolled out its Transparency Obligations Directive [TOD] this past January in an attempt to introduce harmonized, pan-European disclosure standards across its 27 Member States.
The EC, the Committee of European Securities Regulators, and others literally spent years studying various disclosure models. After all, they were starting from scratch, and they were anxious to do it right.
At the end of the day, they decided upon what is often called the “North American Disclosure Model,” which is based on a push delivery, multi-channel platform that serves as the backbone of the U.S. and Canadian financial markets.
The U.S. Securities and Exchange Commission, whose commitment to protecting the interests of individual investors has recently come under attack, should take a stand and unequivocally declare its firm support for a disclosure model that guarantees simultaneous, real-time, and unrestricted access for all investors.
Sun should live up to its name and illuminate the path to greater transparency, instead of promoting a return to the dark days of disclosure.
Neil Hershberg, Senior Vice President, Business Wire