Once, when I was hitchhiking from continental Europe to Britain, a Texan gave me a lift in his BMW. I suggested that he drive on the left when leaving the ferry at Dover. He boomed, ‘I’m from Texas, I can do anything,’ and drove on the right regardless. However, he changed his mind quickly when he saw the first 40-ton truck heading straight for us.
That combination of can do attitude, combined with the ability to learn rapidly from experience, characterizes Texas Instruments.
TI engineer Jack Kilby won last year’s Nobel Prize for physics for inventing the integrated circuit – but it took 30 years from the invention to the award. IR is, perhaps, more fast-moving even than IT, and TI’s investor relations team did not have to wait so long for recognition. Last year they won Investor Relations magazine’s US award for most improved investor relations. ‘They’ve improved how they provide information on a regular basis. They’ve been open, frank, direct, and to the point,’ claimed one of the happy investors whose rating helped win TI the prize.
Ron Slaymaker, VP of IR, and Terri West, senior VP of IR and corporate communications, claim the company focuses on integrated communications as well as integrated circuits. This applies equally to the third member of the team, Billie James, the company’s shareholder services administrator who ‘handles all transactions with our transfer agent, stockwatch service, and also a lot of individual requests and calls,’ as well as CFO Bill Aylesworth, who also plays a frequent and critical role in IR communications.
Indeed, harmony between IR and other communications is essential for a company in a field with a burgeoning technical press widely read by both buy- and sell-side analysts, all eagerly scrutinizing the sector to see who has the technological edge. Slaymaker and West note that more and more of the analysts are electrical engineers ‘who have a good grasp and understanding of the technology. They can ask very probing questions about our technology versus our competitors.’
West cautions, ‘When we’re developing communications, we emphasize that we must have an eye to all of our audiences. So I expect our communications people, even if they are not IR experts, to be well aware of the interests of shareholders and analysts, and to be in very close contact with Ron. For major announcements we put together a cross-functional team to make sure that all audiences – from customers to shareholders and employees – are covered.’
Crisis control
The last real bout of firefighting TI had to do was in 1996 when then CEO Jerry Junkins died suddenly on a business trip. West explains: ‘We halted trading in the stock temporarily and informed the stock exchange, while getting the message out to employees, customers, investors, and governments. We historically have had a crisis communications plan and a crisis team at the company level that communications is part of. You have to look at the crisis from a communications and business impact level.’
The integrated communications/IR working arrangements are not cast in silicon. Rather, Slaymaker points out, ‘Although we’ve formally coupled IR and communications, a lot of our success also depends on interpersonal relationships with other critical organizations, such as our many business operations and our finance department.’ West is on the management team to ensure that communications come straight from the heart – and of course to ensure that market news is channeled directly into the decision-making process. And analyst after analyst cites Slaymaker’s hands-on expertise gained from his time as an operational manager.
The communications effort has benefited from TI’s refocusing since chairman and CEO Tom Engibous took over in 1996. That has been widely welcomed by investors and analysts who have rewarded the company by rating it more highly than many of its peers in these parlous days for the tech sector.
One analyst attributes the high rating to the great job of re-engineering the company that has been achieved over the last few years. ‘Its valuation is driven primarily by the breadth of products, the favorable market exposure and some of the competitive advantages they have.’
As Slaymaker points out, ‘TI is not a dot-com; we’re less volatile and we’ve done relatively well.’ Obviously there has been some slowdown over the last year, but Slaymaker is pleased to differentiate: ‘Texas Instruments makes things and we have real profits and real business plans.’
Indeed he suggests that the investor shakeout caused by the market blips, accompanied by TI’s active investor targeting, has left the company with an attractive stockholder profile: growth and long-term investors who stick around long enough to understand TI’s products and technologies.
The breakdown of investors is otherwise fairly standard for a US company with institutions holding about 70-75 percent and overseas investors 5 percent. Catering to the latter involves regular trips to Europe. In domestic terms, TI is geographically well placed in Dallas, about three hours from the stockholder centers of gravity on either coast. Perhaps reflecting the Silicon Valley effect, ‘We have more analysts on the west coast than the east.’
TI’s IR staff spend ‘about equal amounts of time’ with sell-side and buy-side analysts, but like many IROs, now tend to spend much more time with the buy side than was typical in the past. Slaymaker cautions, ‘This is not to discount the sell side. But there are increasing numbers of buy-side technology analysts. And from talking to the buy side we get a pretty good idea of which sell-side analysts are most influential. If they are good and really understand what we are doing, then they’re invaluable in helping the buy side understand TI and helping us get our message across.’
Tech bent
As befits a company that makes electronic communication feasible for others, TI uses technology to maximum effect to communicate with investors. However, West still finds there is little that can replace phones and face-to-face interaction. That involves some two dozen industry conferences a year, usually growth or technology oriented events, at which they display the CEO, CFO, COO and different business managers. ‘Senior management see communicating with shareholders as part of their job. Given the broad insight that both buy-side and sell-side analysts have into high-tech markets, the conversation is always lively and stimulating.’
While disclaiming any particular programs or targeting for the retail investor, Slaymaker insouciantly details a wealth of programs – such as web access to conference calls and presentations, web pages and a concern for equal access – that all pre-dated the SEC’s strictures. This suggests that what TI does as a matter of course is more substantial than the effort of some other companies that claim great retail interest.
Whoever they’re dealing with, according to West, ‘The first thing you need is honesty and integrity. If you don’t have those, you don’t have anything.’ Slaymaker adds: ‘I think you have to understand what’s going on with the company, where the company is headed. My sense is that when investors are talking to their IR contacts, they need to have confidence that they are going to get accurate answers. It doesn’t mean you’re going to answer every question, but you should be able to answer 90 percent of them. And that only happens if the position is appropriately regarded and well connected inside the company.’
Slaymaker and West both admit to being relative investor relations novices – the beginning of their direct involvement coincided with Engibous’ reinvention of the company. However, they both attribute their fast adaptation to apprenticeships with previous IRO Max Post of six and 18 months respectively. ‘It was probably the best IR 101 course that ever existed. He was in the job for 20 years and was highly regarded and respected. Usually companies don’t expend so much effort in on-the-job training. He even put together a book on What happens when… and included financial terms and definitions. He was a fantastic teacher.’ In fact, they confess, ‘We still call on him from time to time for advice.’ Post, now retired, is president of the TI Alumni Association.
Often new IROs learn from colleagues in other companies,’ admits Slaymaker. ‘When I do it, it’s very valuable, but frankly I don’t do enough of it. Seeing what other companies do, even those outside our industry, is very valuable. But like everybody, we’re so busy that we can’t always make the time.’ That does not diminish investor respect for him, however, since they feel his time as head of one of TI’s divisions more than compensates.
Of course, investors frequently judge a company by the company it keeps – namely, its customers. And when a customer delivers bad news to the market, it sometimes also affects the stock of its suppliers. When asked whether they keep the identity of TI’s customers secret from investors, Slaymaker’s response is unequivocal: ‘Those aren’t secrets you can or should keep. Investors need to know who buys a company’s products – it’s part of understanding the potential value of a company. Sometimes our stock does move on news from major customers. But informed, knowledgeable investors are, on the whole, longer-term investors.’
The partnership between West and Slaymaker clearly works. ‘We’re both pretty much of like mind. Part of the value investor relations can add for shareholders is in reducing the uncertainty. That means being as transparent as we can about who TI is, where it’s going and how we’re performing along the way. That reduces uncertainty, and frankly, uncertainty shows up as a negative in your stock price. We subscribe to three basic principles: be honest, know your business, and treat your shareholders as the owners of your company – which is what they are.’
