ON MONDAY, Sun Microsystems, Inc. (NASDAQ: SUNW) will break with long-established tradition by not immediately announcing its earnings via a paid PR wire service.
However, Sun is not completely ditching the traditional PR wire service release. According to a blog post by Sun’s General Counsel Mike Dillon, the company will release the information to the “traditional private agencies and their paid subscribers” about 10 minutes after the information is posted on its website.
In other words, investors and others who want the information immediately it is released will have to get it either from Sun’s website or RSS feed/s, or from Sun’s SEC Edgar page. This is all perfectly legal under Regulation FD because an 8-K meets the current requirements.
However, it’s a marked departure from prevailing practice in the U.S., which is for companies to issue a news release via a paid PR wire service before or simultaneously to posting the information on their websites and filing the release with the SEC. If Sun’s process proves successful, many other companies will likely follow.
Although Sun said it would continue to issue a PR wire service news release, it’s not clear yet if the release will be a full-text release or an announcement about the availability of the full release on the company’s website. Since the wire service news release is being issued for convenience rather than compliance reasons, there would appear to be no need to issue a full-text release.
Press release distributors, including Business Wire, owned by Bershire Hathaway (NYSE:BRK.A), PR Newswire, owned by United Business Media plc (LON:UBM), and PrimeNewswire, owned by Nasdaq Stock Market, Inc (NASDAQ:NDAQ) earn vast sums from the typically per-word fees they charge companies to distribute their news.
“Sea change” follows discussions with SEC Chairman
This change flows from the correspondence Sun CEO Jonathan Schwartz and Dillon have been having with SEC chairman Christopher Cox about the continuing relevance of expensive PR wire services for information dissemination when companies have their own websites, RSS feeds and email alert utilities.
In his blog post about Monday’s events, Schwartz writes: “It may not seem like it, but this is a sea change in how Sun communicates with the world – and sets a path for other public companies seeking to drive greater transparency. I wonder how far off we are from ceasing to issue traditional press releases altogether… after all, no news agency could possibly suggest they reach a greater portion of the planet than the Internet.”
And in his post Dillon indicates that not everyone is comfortable with management’s plans: “This change may not seem major, but to be candid, it has some in our company a bit uncomfortable. After all, in the area of securities regulation, being “innovative” is not always considered positively. However, in this situation, our goal is very much aligned with the intent of Reg FD.”
But I do have one concern about how Sun is handling its release on Monday. According to Schwartz, the release will be posted at 1:00pm PST or 10:00am EST. That’s during market hours, and I would think that if you are going to try something new like this that you would do it before the open or after the close to allow time for the information to disseminate. Just a thought… Obviously, I need a longer holiday! A commenter correctly points out that 1:00pm PST is 4:00pm EST, which is after the close. Doh! So, I have no concerns about this. :-)
Update: The Financial Times is now covering the story… “Sun Microsystems said it would start to release important corporate news first over the internet, in what is thought to be the first time a US company has used the online medium as its main channel for price-sensitive information.” See Sun to release key corporate news first on web via MSNBC.
Update 2: Business Wire is in a tizzy over this (sorry, couldn’t think of another term for it). See the comments below. They’re even pointing fingers at me for not disclosing my supposed vested interests. Apparently, I stand to “reap financial rewards should Internet disclosure take root, and demand for [my] services increase.” I’m sorry to break it to them, but Internet disclosure took root in at least late 1999. The biggest financial rewards are for companies and their shareholders. No one needs a consultant to tell them how to do this. Just follow Sun’s example.
Update 3: Monday June 30, 7:52 pm EST — I am happy to report that Sun did as it said. The world did not end. Everything is still OK. The 8-K was filed at 4:01 pm EST. The release on the company site was live by 4:08, according to my clock. The PR Newswire release (full text) was out at 4:11. MarketWatch/Dow Jones and Reuters both had items within seconds of the wire release, so they must have used either the 8-K or Sun’s website. The execution was not perfect, but I don’t see anyone complaining.