Hewlett-Packard Co.’s ubiquitous ad campaign plugging its proposed acquisition of Compaq Computer Corp. underscores the rise of investor relations marketing, formerly a backwater technique, as a mainstream tactic.
In late November, the Palo Alto, Calif.-based tech giant launched the campaign, which is meant to sway institutional investors, in publications including The Wall Street Journal. It came four months after Computer Associates International used a high-profile investor relations ad campaign as part of its successful effort to fend off billionaire investor Sam Wyly’s attempt to take over its board.
Meanwhile, dot-coms, struggling to stay afloat in the grimmest financing marketplace in a decade, are increasingly using investor relations marketing to reach spending-shy venture capitalists.
Efforts demonstrate big change
These efforts underscore a sea change in investor relations marketing, which traditionally has been handled in one-on-one sales calls and road shows for institutional investors, analysts and major customers. It remains to be seen whether investor relations marketing will gain widespread acceptance as a technique that works.
Playing to investors
Hewlett-Packard’s campaign stands out not only for its bravado—HP, the patrician of Silicon Valley, has usually favored subdued advertising—but also for its directness.
"Why it makes sense," reads bold type on the left side of the two-page spread ad. The right-hand side ticks off HP’s explanation of why buying Compaq makes sense, ending with: "Because in our industry, to stand still is to fall behind. Because this is the exact opposite of that." The text is arguably a direct shot at the Hewlett and Packard families, who oppose the deal.
Hewlett-Packard’s campaign is an attempt not only to directly influence powerful institutional investors—such as Bank of America Corp., Barclays Bank plc and State Street Corp.—but also to reach investment banks, big insurance companies, brokerage firm analysts and retail investors, whose opinions can influence institutional investors.
HP’s approach is shrewd because it portrays the company as confident, said Steve McKee, president of Albuquerque, N.M.-based McKee Wallwork Henderson Advertising. "Running ads in the type of publications they’re using adds a level of credibility," he said. "It’s big, it’s expensive, it’s bold, all of which imply confidence. The bottom line is this deal will succeed or fail not on merit but on confidence. If the investment community is confident, shareholders will be confident, and things will go HP’s way."
The ads are a forceful rebuke to the merger’s powerful opposition, said Roberta Silverstein, CEO of San Jose, Calif.-based marketing firm BraintoFingers. "The ads show strength as a reaction to the HP kids’ vocal anti-merger campaign," she said. "It’s a smart branding move in a show of strength."
HP is also making a big effort to reach institutional investors and analysts via traditional methods, playing off years of good will it developed with Wall Street.
HP viewed as desperate
In recent months, however, some analysts have begun to question HP’s management strategies, in part because of its bungled attempt to buy PricewaterhouseCoopers L.L.P. last year. Indeed, some industry insiders questioned whether the campaign smacked of desperation. HP did not return calls by press time.
At least one industry watcher thinks HP’s campaign may not work.
"HP has already tried to appease specific audiences individually and in private but was rebuffed," said Rob Gelphman, president of San Jose, Calif.-based Gelphman Associates. "Thus the campaign will probably backfire. It now puts the investors and customers into a position of ‘for me or against me.’ This could actually force HP’s most important audiences to decide before they are ready."
While HP’s high-profile campaign is aimed at the investment community to support its planned acquisition, other companies are using investor relations to launch new businesses and enter new equity partnerships.
Dave Morgan, president-CEO of Tacoda Systems Inc. (formerly True Audience), New York, said he learned a valuable lesson when founding Real Media, an ad-serving and technology company that launched in 1995.
"We did basically no IR with Real Media," Morgan said. "When stories were written, journalists would go to key industry analysts and financial analysts, and they didn’t know anything about us."
After two years, Morgan realized Real Media had not done its job educating the investor community. Yet it didn’t address the problem until late 1999, when it began to put together an IR strategy to prepare for an initial public offering. It filed for an IPO in February 2000, but two weeks before Real Media was set to launch its pre-IPO road show, the dot-com market crashed. Real Media withdrew its filing in December 2000 and instead sold itself to PubliGroupe.
Morgan said the lessons he learned have helped him develop a communications strategy for Tacoda, which creates audience profiles of Internet customers based on their interactions at Web sites.
"Now I recognize that it’s very important at the beginning of the company to start communicating with people who will help define our business success in the long term," Morgan said.
That audience includes potential customers, trade publications and investors. Morgan said he’s personally spending about 20% of his time meeting with the investment community, including venture capital funds that specialize in early-stage companies.
Another technology company, EyeWonder, is focusing on equity relationships with customers and other partners. "There has been a large pendulum shift in the last 12 months," said John Vincent, CEO of the Atlanta-based rich-media technology company. "The capital markets have effectively frozen. People have taken their largest customers and morphed them into investors."
For example, EyeWonder has a strategic relationship with News Corp., and Vincent said he’s in contact with three or four people who have a direct relationship with News Corp. Chairman-CEO Rupert Murdoch.
"That’s the relationship we are trying to generate," Vincent said. "You have to make sure you have something critical enough to get the attention of top-level execs who can help execute strategic initiatives."