Communicating IT Value: How to Talk to Wall Street

By Ben Worthen

January 01, 2002 — CIO — On Feb. 27, 2000, Robert Toomey and a number of other stock analysts listened to Nike executives explain via conference call that the company had missed its third-quarter earnings estimate partly because of a botched i2 Technologies supply chain software installation. A day later, on the recommendation of those analysts, Nike shares lost nearly 20 percent of their value. "Their manufacturing and deliveries got all screwed up," recalls Toomey, a Seattle-based stock analyst for brokerage company RBC Dain Rauscher. "They probably had to take back inventory, and that affected gross margins." And while the strength of the dollar and slower than expected domestic sales were also factors in Toomey’s lower valuation of the company, the technology implementation figured prominently in his assessment. "It was like ’Wow. You screwed up i2?’ [i2 is] supposed to be the leader in this," he says.

Toomey might have thought differently had Nike Vice President of IT Robert Tabb been available to explain the supply chain project’s long-term impact. A technology expert like Tabb might have convinced analysts that the problem with i2 wasn’t a threat to Nike’s long-term stability and softened the stock market’s blow, Toomey says. But Tabb wasn’t part of the team making the company’s case to investors. In fact, stock analysts almost never hear from CIOs about what IT is?or isn’t?doing for a company’s bottom line. And more of them, such as Toomey, are starting to think that’s a mistake.

When CIOs do talk to analysts, their interactions take different forms. They speak at breakout sessions during company-sponsored analyst conferences, answer questions during conference calls brokered by their investor relations departments or chat one-on-one with analysts about general technology questions. In every case, the interactions help establish the company as a technology leader and the CIO as a leader within the business. The same opportunity is available for other CIOs who want to be seen as strategic leaders and help their companies to build a better reputation on Wall Street.

Here’s what CIOs need to know.

1.have a message.

Every company has a story to tell Wall Street, and that story is determined largely by the CEO and CFO. Before talking with analysts, CIOs need to consult with their fellow senior executives to understand the message the company wants to deliver, and how information about the company’s IT projects supports that message. By the time Victor Hawley, senior vice president and principal for Reed, Conner and Birdwell, an investment management company in Los Angeles, gets a CIO on the phone, he’s talked to as many as 10 other executives. "I have a good idea of what the company strategy is by then," he says, "but I ask [about it] anyway to see if there is a disconnect." He wants the CIO to deliver the company message and say what the IS department can do to further the company’s primary objectives.