An Address by
Roger S. Pondel, President
Pondel/Wilkinson Group
Before the Spring 2000 Conference,
American Electronics Association (AEA),
Monterey, California


I must begin by sharing a story that I, and my partners and colleagues, found very humorous, very amusing and professionally, very sad with regard to an IR strategy that a prospective client asked us about.

Without naming the company, I will tell you that it is in the technology services arena; it is not a dot com; it has sales of about $200 million and a market cap of about half that amount.

The prospect, after hearing our presentation, said in a hushed, whisper like tone of voice, "The ideas you shared, and the annual reports and publicity reprints you showed us are great. But can you also give me some examples of the types of messages you write, the fictitious names you use and the Web chat rooms that you typically leave those messages on about your clients? Isn't that how it's really done these days?"

I, of course, thought he was kidding and started to laugh. Then he laughed at me, winked, and said, "I really didn't expect you to answer that, but I heard your firm is great at it!"

We shook hands and said goodbye. Two days later he called to say we were hired, and I felt compelled to tell him we weren't the right firm. True story.

It's tough these days to find IR strategies that work for the small cap company. Two months ago it was a lot easier. You really didn't have to do too much.

The sell side analysts, unless they are your underwriters, are generally too busy. The portfolio managers and buy side analysts -- present company excluded -- tell you your market cap is too small (the sell siders, of course, say that, too). And you can almost never get anyone to answer the telephone, anyway.

So what's a small cap company to do? While there's no magic formula, solid growth as well as value stories still abound and there are audiences that will listen. Focusing on basics, we believe, will go a long way. I will share with you six important strategies to think about when telling your story:

First and foremost, concentrate on real economics -- meaning, that once dirty old word, profits. While just a while back, stocks seemed impervious to traditional yardsticks, that is definitely not the case today. Don't be afraid to tell your shareholders that even if there are no profits yet, the company is in business to make money. This is the mantra you'll be hearing and reading a lot about.

Even in this morning's USA Today, the mantra was there. In a story about e-infrastructure, there was a line that read, "...Such newfound focus on fundamentals is why some infrastructure stocks are headed for the turbulence that has hit other Net sectors..." So focus on fundamentals. It's an important message that somehow got lost over the past couple of years. But guess what, it's back.

Second, befriend the sell side analysts who follow your competitors, and if you don't have any head-on competitors, identify analysts who follow your closest peers. Meet them if you can, help them do their jobs better, stay in front of them on a regular basis, don't necessarily expect a research report, and above all have patience. At least, try.

Third, do the same with portfolio managers who own your competitors and peers. It's relatively easy to learn who they are, and over time, it usually pays off in often surprising ways.

Fourth, stay in front of all those groups through the news media, not through the chat rooms. The traditional business press is alive and well. The Internet press is alive and still very well even in traditional magazine formats that are so thick they are starting to give anxiety to readers who have no time to read them. There are more business broadcast media today than every before, both television and radio. And, of course, the online business media are hungry as ever for content, one of the newer words in our industry. So stay in front of these folks.

Fifth, use your own Web site. It's a great medium, as long as people know it's there. Be sure you have an IR component. And be sure it is current, easy to read and complete.

And alas, Number six, a strategy that is very much coming into vogue, but often overlooked -- maximize the value that your customers and vendors place on your company by making it attractive and easy for them to become shareholders. We are utilizing this approach with a number of our clients, and it is working very well.

Granted, it is easier to do if your products and services ultimately are used by consumers, because it is generally easier to reach them, and by definition, the size of the audience is much greater. But it can work in the pure B2B arena and even in an OEM environment.

With one of our B2C clients, for example, we are rolling out a very interesting program. At the retail store level, customers are given a simple, snail mail reply card thanking them for their purchase and for being part of the customer family. The card also invites them to explore how they may become a member of the company's shareholder family as well. It, of course, asks for their e-mail address, which is used in future correspondence and for marketing purposes. The number of returned cards is significant, as is the number of customers who have become shareholders.

At a technology client in the B2B arena, we dug a little deeper and wider than customers alone, extending thanks to vendors, consultants and others for their support and close relationships to the company. At the same time, we also invited them to become shareholders.

In all instances, at least extending such invitations via your Web site is easy and efficient.

I also should mention that particularly for the small cap company, rather than selling shares directly, establish an arrangement with an online brokerage. Selling shares directly is costly and time consuming and requires special filings that the typical small company just doesn't have time or resources for. We also believe that the prospective shareholders, be they customers or vendors, can monitor their holdings more efficiently and from a more comfortable distance by going through a brokerage.

So concentrate more than ever on the basic tools of investor relations, get outside help if you need it. Use the Internet to extend your communications. Reach out to those constituencies who are closest to you, namely, your customers. Focus on real economics, remembering that profits isn't a dirty word. And although it's not easy, try to have patience and not watch the grass grow. Good things will happen. Guaranteed.