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The dog & pony show.

Ready for Wall Street? The leaders of Oregon's public companies should be, because their job today is as much about raising dollars as it is about making management decisions.

It is early morning at the Embassy Suites' Muitnomah Hotel in downtown Portland, and business men and women are scattered throughout the lobby -- their suit jackets off, ties loosened, laptops glowing. A middle-aged woman in a coral blazer speaks hurriedly in a thick German accent into a cell phone. Clusters of men in gray suits stand around sipping coffee and bottled water -- appearing much more relaxed than the young man on a couch poring over bar charts while his boss hovers with last-minute presentation tips.

They've gathered for an Internet and technology stock conference hosted by the investment research firm First Security Van Kasper (which recently purchased Portland-based Black and Company). And, in effect, they're going through a routine that's become commonplace for public companies large and small in Oregon and the U.S.: Over the next two days, each of their 36 companies will vie for the investment dollars of the high networth individuals and money managers in attendance. Think of it as a beauty pageant of sorts, where contestants with the prettiest balance sheets and smartest business plans win. And while the CEOs, CFOs and investment managers would rather it not be referred to as a competition, it's clear they share a common objective: to generate the buzz necessary to woo investors.

So, throughout the day, these investors will rotate between several small conference rooms that each hold up to 24 people. With four presentations going on simultaneously, they'll have some choices to make. They carry research reports on each company, thick yellow manuals that will help them decide which presentations -- perhaps RadiSys or Mentor Graphics, Barrett Business Services or RealNetworks -- seem worth their time.

But none of this seems to bother John Labbett. If any nerves are bubbling beneath the surface, you certainly can't tell by looking at him. Despite having just flown in from Burbank, the 50-year-old Labbett is relaxed and smiling -- answering questions with ease and cracking the occasional joke, his British accent still apparent after more than a decade in the United States. His navy suit hangs comfortably on his lanky frame. Labbett is the CEO of the new Egghead.com, and his more than 30 years working in finance have taught him how to be comfortable now and when, in a few hours, he steps into one of these rooms, takes a drink of water and begins his pitch for investors' dollars.

"When I first started doing this and was in front of 200 people with the spotlight blinding me, I did get a little nervous," he says. "But we do several of these a year, and I feel prepared."

Egghead made headlines in 1997 when the technology products retailer made one of the first radical moves of the Internet economy, announcing it would close all 195 of its Egghead Software brick-and-mortar stores nationwide and take its retail operations online -- Egghead.com -- to try to end run around competition from computer superstores. The company opened a customer service center in Vancouver, Wash., and closed its last retail store in late 1998. Last November it merged with the auction site Onsale.com and now employs about 600 workers.

With $515 million in sales in 1999, Egghead was the third largest Internet retailer behind Aniazon.com and Buy.com. The company's gross margin for the first quarter of 2000 was up 46% from the fourth quarter of 1999, and it increased its customer base by 11%. Clearly, it's moving in the right direction.

So why isn't Egghead making money? The company lost $25.1 million in the first quarter and doesn't expect to reach profitability until early 2002. Profitability is a must for any company, of course, but more so now for public e-commerce companies like Egghead in the wake of the spring's stock market shakiness. Tech investors who once looked for potential now look for profits.

Still, Labbett believes in Egghead -- and as any salesman will attest, you can't sell a product you don't believe in. He feels it is the overall wariness surrounding high-tech investments that has caused Egghead's stock price to tank (it traded as high as 47 1/2 in 1999, but finished June 2000 at 2 15/16) and has kept the company in the red.

"We think it is more related to segment and investor sentiment than anything to do with Egghead," he says. "All the other companies we consider direct competitors have gone down very, very substantially."

Labbett is cautiously optimistic that the negativity surrounding e-commerce will subside by year's end. Until then, Egghead will persevere by not focusing on daily stock prices and keeping investors and analysts abreast of the company's financial plans, including how it plans to raise enough cash to stay afloat and how it envisions its growth. Egghead's forecast of 40% to 50% revenue growth over each of the next two years looks good on paper, but whether those attending today's stock conference will be impressed remains to be seen.

"The best-case scenario for us is to have some intelligent questions after the presentation that translate into some buying interest," Labbett says as he prepares to return phone calls and grab lunch before his 1:30 p.m. presentation.

And the worst? "The worst," Labbett laughs, reaching beneath his chair to grab the recharging laptop he nearly left behind, "is that nobody shows up."

An invitation to present at a stock conference such as this one is a coveted opportunity for public companies large and small. The money managers and individual investors who gather to hear them tell their stories have much influence in the market, with millions under management. And they're practically a captive audience, gathered in one room at the urging of one or more investment analysts. The information a company can convey to them in this forum could have a significant impact on that company's stock and, by extension, its business. So the presenting company needs to funnel the important parts of its story, culled from weeks of management retreats, board meetings and financial analysis, into this single, hour-long meeting.

Obviously, establishing solid relationships with respected analysts who run such conferences is critical to companies like Egghead.

"When I joined Egghead, we had something like 13 analysts [following our company]," says Labbett. "Frankly, some of them were not high quality. We can't control who covers us, but we can encourage them to do other things. I think we are down to five or six analysts -- First Security is one of them -- and we get invited to all their conferences." Labbett figures Egghead presents at 10 such conferences a year.

First Security Van Kasper basically plays matchmaker at these conferences by introducing its clients -- the individual investors and money managers -- to the companies it believes are poised for growth. Its analysts, including Jennifer Jordan and David Duley, research companies and make recommendations to clients on which organizations look good and which don't. And come conference time, they're onstage as well.

"I'm betting my reputation on them," says Duley. "If I smoke my reputation, then it's tough for me to get paid."

Everyone at the conference seems to know the gregarious Duley's name. His quick laugh and slightly disheveled appearance put both the public company executives and investors at ease. He moves from one group to another during breaks, shaking hands and keeping the mood casual.

But he's working. During the presentation of RadiSys, which he rates as a "strong buy," Duley listens attentively and takes notes. Like a coach directing from the sideline, he raises his hand often, asking questions to ensure the audience gets the necessary information.

Duley's colleague Jordan is also working the crowd. In tennis shoes and a casual pants suit, she moves quickly from room to room. Fifteen minutes before Egghead's presentation, she is eating grapes in the conference room with Labbett and Egghead CEO Jerry Kaplan, discussing Egghead's financial performance and how the two will present it. She believes that the company is undervalued, and rates Egghead a "buy."

"They have significant brand presence and sales presence online," she says. "They've also budgeted $30 million for advertising, giving them the discretion to cut the sales and marketing budget to reach profitability sooner, if necessary."

It's now nearly 1:30 p.m., and the desserts have been moved to the break area outside the conference rooms. The crowd has thinned noticeably -- just a few investors pick over the pastries and fruit -- and the atmosphere is less boisterous than this morning, before the pasta buffet was opened. "Your positioning within the conference has a lot to do with attendance," says Labbett. "Ideally you want to be scheduled between 8:30 and 11:30 or 2:30 and 4:30, and early in the conference. You can also hope for a light lunch."

Three investors trickle into Egghead's conference room.

Labbett, firmly planted behind the podium, fires up the laptop as Kaplan launches into the company's history. He explains the rationale behind the Egghead/Onsale merger, saying each company was an industry leader with large customer bases that overlapped by just 15%.

Two more people slip in and take seats in the back of the room as Kaplan discusses the marketing plan. He draws a laugh by mentioning an Egghead gift certificate will be a featured prize on the game show "Wheel of Fortune."

Labbett, much more reserved than earlier in the day, offers derails on Egghead's financial projections, ticking off derails of the plan that will move Egghead to profitability. In February Egghead raised $23 million in equity financing through the sale of three million shares to Acqua Wellington North American Equities Fund. It recently signed a reseller agreement with e-NITED Business Solutions, North America's largest business products wholesaler. He also promotes this year's $30 million advertising budget.

The presentation lasts just 25 minutes.

There are questions about brand recognition, Egghead's marketing plan and whether the company plans to become a general merchandise reseller -- questions easily fielded by Kaplan and Labbett and mostly pitched by Jordan and two public relations specialists working on behalf of First Security.

Afterward, Labbett pauses in the lobby before heading to the airport for a 3:00 p.m. flight back to California. He believes the presentation went well, he says, but he's disappointed that only five people showed up to hear it -- an anticlimactic finish to a day filled with expectation.

"I would prefer to see more people. I like Jennifer [Jordan]. She's been very helpful," he says. "But we would like to have seen more."

Was it really worth it? This is the gamble the presenting companies make. Labbett has flown 650 miles to promote his company to an audience of five. It's simply the reality of public company executives today -- when the opportunity arises to talk with potential buyers, you take it.

"If it helps get our message across to investors and encourages them to invest in Egghead," he says, his chin up before he heads for the door, "then I'm happy to do it."
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Title Annotation:Internet and technology stock conference
Comment:The dog & pony show.(Internet and technology stock conference )
Author:Stevens, Suzanne
Publication:Oregon Business
Geographic Code:1USA
Date:Aug 1, 2000
Words:1863
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