How to get investors online.

Add investor communications to the list of good reasons to set up a home page. Read why Xerox and other companies put their quarterly and annual reports online and how they reach out to investors electronically.

For the first time ever, technology is giving individuals the same opportunities to instantly access information as professional investors have. This is contributing to faster investment decisions, leading to more trading volume and the potential for greater stock price volatility. A parallel revolution is now taking place in the way companies communicate with investors. Soon, getting a company's quarterly results will be a matter of a few keystrokes on your computer if - it isn't already.

For-hire wire services were the first breakthrough, allowing companies to fulfill their material information disclosure requirements without hand-carrying releases to prime media. Next came fax and online database services and then "blast" fax, enabling companies to reach key investors and analysts simultaneously. Meanwhile, corporate material began showing up in more databases, thanks to the commercial wire services and a host of specialty firms that were formatting the information to fit the models of professional investors - and, eventually, individual investors.

Vendors and companies have also developed software that lets investor relations departments manage their growing data. The software allows companies to create a thorough picture of their shareholder base and those of peers, so they can monitor changes quarterly. You can identify analyst, institutional and even retail broker targets, sort them by cities and send invitations to meetings. You also can log information on analysts' recommendations, stock positions and institutions' buy/sell patterns, and you can obtain institutional profiles, decision-making premises and corporate governance information.

Thus, today's technology-driven investor relations function sends information by newswire and fax, administering much of the daily activity with computer software. It also has a direct electronic link with investors through audio-based conference calls. Next: the company's own direct-access location in cyberspace and videoconference calls.

GET READY FOR THE NEXT WAVE

That next wave of technology is already upon us, promising even higher levels of efficiency, speed and quality in disseminating and receiving information. In fact, it's causing companies to rethink how they send information. The Internet is shaping up as the equalizer in giving individuals the information to make well-informed, timely investment decisions. Companies are flocking to the Internet to set up corporate home pages on the Worldwide Web, which can include a broad range of information aimed at selling products and services as well as stocks. According to Investor Relations Resources, at least 900 companies now have home pages, and the number is increasing rapidly.

These home pages have a variety of features that promote interaction with investors. For example, AT&T has "AT&T in the News," which it updates daily. The Eastman Kodak guest book encourages comments from investors. Nortel offers its information in four languages.

But before you jump on the bandwagon, think through the information you put on your home page. It should add value to investors seeking information for basic research and for making buy, sell or hold decisions. Timeliness is absolutely critical for these individuals because it can replace the need for them to phone, write or search for the key documents and information they need.

Xerox is one company that's experimenting extensively with online investor communications. The Xerox home page went up in early 1994; investor relations followed later that year. Investors can get quarterly financial results and commentary directly from the company in three ways. Investors with computers and Internet access can obtain the release and financials on the company's Internet home page the same day Xerox announces them and electronically send the information to colleagues or print it for their files. Or they can call an 800 number to have the material faxed immediately. Investors with only a telephone can call an 800 number to receive the release by mail. And, of course, the release can be found in a host of online databases.

The home page, Xerox Financial Information for Investors, includes quarterly earnings and other important press releases; the 10-K, 10-Q and 8-K reports; the annual report; common stock price information; names and numbers of contacts for analysts, institutions and individuals; the dates of future earnings releases; and a stock price chart updated every Friday night. Also included is the graph from the proxy statement comparing the five-year cumulative total return for Xerox, its defined peer group of companies and the Standard & Poor's 500 Index. This five-year-return graph, which will appear in the 1996 proxy statement, is already being computed and updated monthly for investors.

Quarterly financial earnings releases, 10-Qs, the annual report (the most recent addition to the home page), the 10-K and the 8-K will remain on file for at least a year. And in the future, the company is considering a section that answers investors' most frequently asked questions.

Xerox believes its Worldwide Web location is a very timely communications medium. Quarterly financial earnings releases are posted at 6 a.m. Eastern time, several hours before the company's customary conference call at 11 a.m. This means individuals can access the information at the same time as professional investors. The home page also performs an important archival function, making disclosure and other documents readily available as references whenever investors want them.

Making the home page easy to use is paramount. Xerox has established a hyperlink system that enables investors to move from one item to another by simply clicking on the desired subject with their mouse.

Time and cost are important factors to users, too. It can be time-consuming - and time really is money when the investor is using up phone lines and Internet minutes - to plow through voluminous electronic files for the desired information and then to download it to his or her computer and print it. In putting its annual report on the Internet, Xerox was careful to create sections that investors can readily access and transfer. Dividing information into "modem-friendly" chunks helps investors save time and money.

For those reasons, any company setting up a home page also needs to ask itself how much value charts and graphics will add. Financial presentations are highly useful, but the charts take longer for users to capture. The same is true for the charts and photos from annual reports.

It's also important to let investors know that information is available electronically. Xerox encourages investors to use its electronic information services in its annual report, in meetings, in phone conversations with both professional and individual investors and over the Internet itself. The company is confident usage will grow as more investors realize how easy, quick and inexpensive it can be to access information.

SPREAD THE WORD

If you're interested in establishing a home page, the first decision you need to make is whether to set it up yourself or link up with a service. With several vendors staking out investor relations corners on the Internet, participating companies stand to draw investor interest by being part of the group. Logic suggests investors will find that spot on the Worldwide Web and gather data from several companies by clicking from one to another. Investors will electronically "bookmark" the web site for future reference.

It will probably cost less to join a provider than set up a home page yourself. To date, the services of a provider cost up to about $10,000 a year. The costs of setting up the site on your own depend on how much information and access you provide, but the figure can easily top $100,000. Xerox estimates that maintenance costs for its investor relations page run about $5,000 to $10,000 annually, but that may not be typical; the company has an internal technical research group that helped set up the page.

Few companies have established web sites strictly for investor communication; the opportunity to promote the company and its products or services justifies the decision. Get your management information systems department to help you evaluate the best options for your company.

Accessibility and control also are considerations. Some provider web sites are so busy or have so little systems capability that analysts or investors may have trouble getting through. Once that happens, they may not try again. Some providers also limit or dictate content or format, which may be objectionable to certain companies.

Ultimately, the question for every company deciding to ride the electronic highway is its potential value, both to investors and the company. Some estimates show the number of cyberspacers growing at 10 percent a month, and individual investors increasingly use computers to help them select stocks and manage their portfolios. Witness the high number of subscribers to software and database investment services and the popularity of computer subgroups within the American Association of Individual Investors and the National Association of Investors' Corp.

Will professional investors turn more to the Internet? It depends on the value of the information and ease of access. Many analysts and portfolio managers already have e-mail addresses and CD-ROM players. Professional investors pay a great deal of money to data services for corporate information formatted to provide consistency and conform to their models. But the information isn't always accurate. Certainly, companies have the opportunity to supply accurate information at less cost to investors.

While a company's ability to measure usage of a home page is crude today, it will improve. Companies presently can rank the most popular information by counting how often people access their home page by subject. For example, Xerox is collecting the e-mail addresses of major institutional shareholders and analysts who follow the company. The company already delivers financial earnings releases to investors by e-mail. It can expand the program to include analyst and institutional prospects, even individual investors.

DINOSAUR DOCUMENTS?

Given the growing numbers of companies like Xerox with sophisticated home pages, and the fact that most of them are likely to be used for investor relations purposes, it's not surprising that some companies and investors are beginning to regard the printed quarterly report as obsolete. The report is expensive and almost always tardy, typically arriving about 45 days after the quarter ends.

And what about the future of the annual report? At this time, no one believes its end is near. Paper files are still the preferred, user-friendly method of retaining and using information. Much of what is obtained electronically is printed for further study and reference.

However, interest in electronic annual reports is rising, and more and more companies are tackling them. Plus, at least a dozen CD-ROM versions were said to be produced this year. IBM reports that 25,000 people ordered the CD-ROM version of its annual report last year, while more than 18,300 people tuned into the company's basic annual report, modified for Internet digestion.

The next development likely to capture investor relations interest is videoconferencing, enabling a CEO in Chicago to meet with an analyst or portfolio manager in Boston. Although videoconferences won't be commonplace for a while, Xerox is already planning to take the next step by posting on the Internet the audio files of its quarterly teleconferences with analysts on the Internet. The technology revolution rolls on.

Mr. Mahoney is editor of Investor Relations Update in West Chester, Pa. You can reach him at [phone]. Mr. Wessendorf is manager of investor relations at Xerox in Stamford, Conn. He's at [phone].