Financial ads seek a bigger audience

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Last month, computer disk drive manufacturer Seagate Technologies ran a four-page spread in The Wall Street Journal that featured the highlights of the company’s recent 10-K filing with the Securities and Exchange Commission. Seagate’s ad is a prominent example of a small but growing trend of companies using print media to advertise their financial results to an audience beyond their shareholders.

"We felt the Journal gave us the most bang for the buck," said Forrest Monroy, Seagate’s executive director-corporate communications, whose department produced the ad. "The primary audience for an annual report is the investment community, so that was the best way to get at that audience."

Other companies using print media to promote their financial performance in the past few months include:

• Thomson—the parent company of RCA, Technicolor and other video image brands—trumpeted its growing profits during the first half of this year in the Journal.

• Rolls-Royce Group discussed its progress in cost-cutting programs during the first half of 2003 in the Journal and Barron’s.

• Faurecia, an automotive supplier, boasted about its improving operating margin during the first six months of 2003 in Barron’s.

Cutting out the gloss

The goal behind these advertisements is to mine the marketing value of positive financial results. Like most companies, Seagate formerly was content to use its 10-K, the detailed annual financial report that the SEC requires publicly traded companies to file, as a chance to market the company to shareholders. At great expense, Seagate created sleek annual reports and distributed them to shareholders.

This year, however, instead of sinking hundreds of thousands of dollars into the production of a thick, glossy annual report, Seagate produced a bare-bones 10-K that met SEC requirements but featured minimal design and was printed on inexpensive paper.

The company took the money it normally would have invested in producing a slick annual report and bought space in the Journal. A four-page spread in Dow Jones & Co.’s global edition of the Journal costs $986,396.64 at noncontract rates and with no frequency discount, according to the newspaper’s rate card.

Of the cost for the Journal spread, Monroy said, "I would say it’s probably roughly the same [as producing a high-end annual report], maybe a little cheaper."

He added: "Instead of spending all that money to produce this glossy, very expensive piece that would go just to Seagate shareholders and probably not make it beyond that audience, we could use our resources and do something like we did in The Wall Street Journal and reach a greater audience of people who may or may not be familiar with Seagate."

Seagate first used the media to promote its annual report in 1999. After going private when acquired by Silver Lake Partners, Seagate went public again in December 2002. After releasing the 10-K for its fiscal year 2003, which closed on June 27, 2003, Seagate revived the practice of advertising its financial results.

Signed by Seagate Chairman-CEO Stephen Luczo and President-COO William Watkins, the ad in the Journal pointed out three main areas of financial improvement: Revenue increased to $6.5 billion in 2003 from $6.0 billion in 2001. Units shipped jumped to about 68 million in 2003 from about 43 million in 2001. And income from operations increased to $691 million in 2003 from a loss of $74 million in 2001.

The day the ad ran, Sept. 9, Seagate’s share price dipped 9 cents to $25.16. But the company’s shares had climbed to $29 as of last week.

The four-page design for the Journal ad was also used for a folder containing the 10-K that was mailed to shareholders.

Ads enhance transparency

Gary Holland, publisher of Barron’s, said that overseas companies place many of these ads in an effort to make U.S. investors aware of their American Depositary Receipts (ADRs). He said that more domestic companies, in the wake of the Sarbanes-Oxley law and the current emphasis on "transparency," could make this sort of advertising an attractive marketing alternative.

While acknowledging that financial results advertising is a mere sliver of his magazine’s business, Holland said he expects to see more advertising of this sort in the near future. "I think it can be a growing trend," he said.

Scott Schulman, senior VP-global sales and marketing for the Journal, said boosting the number of financial results ads in Dow Jones’ properties was a priority.

"We are definitely promoting the fact that the Journal is an excellent way for companies to get their message out to a broad spectrum of business people and investors," he said.

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