Corning is a corporate prism. The company refracted an old smokestack industry into a new economy paradigm – or at least the parts of it that work. Set up 150 years ago, the glass manufacturer named for its upstate New York birthplace, was always innovative. It made the bulbs for Edison’s electric lighting, and offered a clear view of cuisine and chemistry alike with its invention of Pyrex.
But as the last century drew to an end, Corning could see which way the glass was cracking. Five years ago, it began to transform into a developer and manufacturer of high-tech products in areas such as photonics – products which bear little resemblance to the fragile stuff in the windowpanes.
Katherine Dietz, Corning’s highly regarded IRO – winner of the award for most improved IR at this magazine’s US Awards at the end of March – moved into IR as assistant director in 1995, just in time to start explaining these developments to investors and analysts who had hitherto put the company to smolder on their smokestack back burner. Her arrival, which doubled the IR department’s staff, anticipated the demands the company’s transition would make.
Helped by her background in finance, which had given her a flavor of IR through dealing with acquisitions, SEC filings and annual reports for Corning, she learnt the rest of the trade on the job before taking over as head of investor relations in 1998. It was a pyrrhic promotion in some ways, however, since the department was reduced to just her at the same time. But the company carried on transforming, right up to the recent $4 bn acquisition of Pirelli’s optical technology division. ‘I was pretty busy 20 hours a day. We had more shareholders, more trading volume, and more active retail investors,’ Dietz declares. This year, in the face of surging demand for information, Ken Sofio joined to help as IR manager.
Of course, changing into an intensively technology-driven company means that investors often need to be led through the technical details, which in turn means that Dietz herself has been on a steep learning curve as the changes accelerated. ‘One of the good things about being in the IR department for five years is that I’ve had the advantage of learning the technology, as we focused more and grew in those businesses. I’m not an engineer, but I think I have a good enough grasp of the technology for me to explain it to the investors. Being a non-engineer, maybe I can help make it a little more understandable.’ She adds, ‘Since we place a high priority on IR in Corning, I’m always able to call someone on the phone and ask questions and get answers very quickly.’
What Dietz considers ‘one of the unique features’ of Corning’s investor education program is the company visits that last almost an entire day, giving investors access to a full range of senior management and a very extensive tour of major research and development facilities. ‘It’s been very beneficial for telling our story. People don’t always understand all the technology that we’re showing them, but they are very impressed when they see all the facilities and all the sites that we have.’
Changing investors
As the company changed, so did its investor base; and so did its share price, which went up almost 1,000 percent by early last year. However, the downside of being a high-tech stock became apparent when the price dropped 75 percent as the bears gnawed at Nasdaq and even at tech stocks on the NYSE, where Corning is listed. On the other hand, in late 1998 the stock had bottomed at around $10, and bounced back up. ‘We’re now at about $30, so we’ve certainly made progress and we are placing our investments into very high-technology industries for the long term.’
Corning assiduously wooed those technology stockholders, in part through a formal process of identifying the buy-side players that would count most. ‘Targeting was important to get the right investors, and our activity level wound up dramatically,’ she recalls. ‘We became much more proactive in telling our story, formalizing our presentations and communicating our strategy, arranging speaking engagements and allowing people to visit the company – much more of everything, really.’
Helped along by several large public offerings, analyst coverage burgeoned from seven to over 20. ‘Offerings absolutely helped to increase coverage. In some ways, the more popular you become, the more people follow you and want to include you on their coverage lists.’ She recalls ruefully that three years ago she had to practically beg the analysts to cover the company. ‘I’d visit them, try to tell them the story. Now it’s the other way round. I have almost more inquiries than I can handle.’
Institutions make up 72 percent of the investment base, and Corning doesn’t have a specific retail investor program. ‘Of course we return their calls equally, but in terms of allocating management time, and deciding where we make our presentations, it’s to the institutions, especially growth-oriented ones.’ While they are ready to backstop for each other to meet the top IR priority of answering calls speedily, Dietz concentrates on the institutions, Sofio on retail investors. A more aggressive use of technology helps in that work, with webcasts of conference calls and presentations, which give retail investors a much clearer vision of the key issues.
Corning’s proactive targeting effort has, in fact, itself been on target. The institutional share has risen from 60 percent five years ago and it has shifted from value to growth-oriented institutions, in terms of investor profile. Above all, those institutions have grown from 375 to almost 1,000, while average daily trading has swollen from under 2 mn shares to over 10 mn.
Of course the higher volume is also a reflection of the increased volatility that is part of the technology stock environment. ‘However,’ Dietz reminds, ‘having a higher trading volume and more shareholders should actually help minimize some of the swings in your stock price. Before, when we were much more thinly traded, if one significant holder changed their mind, it was much more dicey as to what potential buyers were out there.’ In addition, she explains, ‘We’ve aggressively targeted and visited so many more investors, and we are so much more widely known, which I think has minimized some of the day-to-day changes.’
She also knows the investors very much better. Thomson Financial/Carson provides a monthly and annual stockwatch report, and she is firmly proactive in her use of it. ‘If a significant holder who I expect to be long-term decides to sell, and if I have a good relationship, I’ll call them up and find out what their concerns are. But what I prefer to do is to have a strong enough relationship that they will call before making a decision like that.’ Sensing a skeptical eye directed at this investor relations version of the tooth fairy, she assures, ‘And some do, from time to time. That’s one of the benefits of being in the investor relations department since 1995. We’ve worked together with many of these people for years and we do have strong working relationships.’
Reaching outward
Last October saw the Rust Belt’s revenge when Corning mounted its first IR roadshow in Europe. That served the company well, Dietz reports. ‘When we did the equity offer in November we had a higher level of international interest than before. And we’re going again this year.’
In fact last year, as well as the usual suspects – London, Edinburgh and Frankfurt – they crossed the Alps to Milan, where Dietz had heard there was a reservoir of technology investors whose attention would be piqued by Corning’s Pirelli purchase. Maybe, but it’s early days yet. Overseas holdings are small – around 10 percent – although since most of them are held in Street-name in New York they are not easy to track. Asia Pacific is a step too far at the moment without the resources and time to build up and service a new field of investor relations operations there, although the region is not out of the question entirely.
One of the inhibiting factors on Corning’s IR program is the economical use of management time. Reporting formally to the CFO, Jim Flaws, and informally but frequently to CEO John Loose, Dietz finds them both eager to push the message of shareholder value to investors present and future. However, she admits: ‘I see myself as a gatekeeper. Our policy is that if analysts call anyone in the company then the call is routed first to me. We do that primarily to make sure we are all delivering the same message, but also to focus and prioritize management time.’
The gatekeeper role entails her making decisions on appropriate times and venues for senior management to talk to investors. ‘The CEO, CFO and the key business managers in telecommunications are probably the most active in the overall IR program, including the conferences we speak at, the visits to Corning and our own meetings that we host such as roadshows and site visits. But we sometimes draft in sales and marketing, scientists and engineers when the main interest is in the technology.’
Needless to say, for a company in the communications business, the IR and the corporate communications departments integrate their circuits for consistency and efficacy of message. But with the importance of the technical as well the financial press for investors, ‘We spend a lot of time going over the technology in joint briefings and joint strategies. And of course Reg FD has also brought us closer together, now that you have the media more frequently present at all the conferences.’
Apart from the increased media access, the primary change under the SEC’s Reg FD so far has been the demise of the relatively informal updating they used to give during the quarter, which has been replaced by more formal press releases. ‘But we haven’t limited investor access or stopped telling any people the story,’ Dietz notes.
Of course that includes people inside the company. Senior management is ‘very much interested in what’s going on in the market on a daily basis as well as the long-term trends.’ But Dietz also speaks to many of the employee organizations about IR and investor perceptions. Despite the technology plunge of the last year, she reports that no one in the company doubts the need for its change of direction. ‘We’re in the same swings as the other telecom companies, but the investors still see us a leader in that space. While we’re not happy with the space just now, the vast majority of people still believe in the long-term fundamentals for fiber optics and photonics.’ In addition, from an IR point of view the good news is, ‘There’s nothing specifically happening to Corning that’s not happening to the industry, so I don’t get investors calling and criticizing us.’
With its strong telecoms profile, recent events have definitely affected investor confidence in the company, but Dietz philosophizes, ‘Corning is a 150 year-old company, and while we focus on telecom, we have other businesses. Some dot-coms haven’t had strong business cases, and may not have been profitable, but I think we all believe the internet is here to stay and that we will be innovative with new products that will lower the cost of bandwidth for all of us. We are investing for the next 150 years.’
What the analysts say:
Steven Fox, Merrill Lynch
Fox hymns, ‘I would say Kathy Dietz is one of the true professionals of the industry. As far as investor relations people I deal with, she’s by far one of the best. She is responsive to our needs, extremely knowledgeable about the company she works for, and always very professional. She’s worked there for a number of years and she’s able to take many different perspectives on things. If there’s a question that she’s not quite sure of, she knows where to go to find the right answer and gets back to you promptly.’
Charles Wilhout, JP Morgan
‘Kathy Dietz is one of the most knowledgeable and better investor relations persons I work with,’ confirms Wilhout. ‘She comes with a heritage of working at Corning for over ten years, and in other departments as well, so she knows both the management team and the business inside out. As an analyst who needs to talk to IR people about data points on the company, I find her just as useful to talk to as some of the upper level management. And as a point of contact for investors, it makes it really useful when the IR person has the information to hand. She does a really good job of that. In fact, we took her over to Europe for a three or four-day road trip – on her own without management. She did a really good job. A lot of times investors don’t want just to sit down with the IR person alone, but with Kathy everyone was very pleasantly surprised.’
Lawrence Harris, Josephthal & Co
Harris reiterates, ‘The IR function at Corning is certainly one of the best. They provide good and timely information to investors in what is sometimes a very complex environment – the fiber optics industry. Kathy Dietz is extremely knowledgeable and very current regarding a wide variety of Corning’s businesses and the impact of different trends on the various product lines. She’s able to give investors very good and timely information. Of course, a lot of investors are familiar with Corning, but it has become more proactive in recent years as it shifted from a manufacturer of glass and consumer products to more high-tech, telecom equipment suppliers.’
