Tag Archives: Company Coverage
Colleagues, Wall Street friends and readers remember Abelson
by Chris Roush
Barron’s has collected a series of remembrances about Alan Abelson, its former editor and longtime columnist who died last week at the age of 87.
Here is one from Rhonda Brammer, a former Barron’s contributing editor:
The Barron’s magazine I joined in the early 1980s, back in the days of ticker tape and martini lunches, was an astonishing place—chockablock with talent: fast, graceful, savvy writers like Jim Grant, Peter Brimelow, and Kate Welling. And at the helm was the inimitable Alan Abelson, the man whose column, Up & Down Wall Street, had single-handedly transformed staid financial journalism into rare verbal art. Biting and brilliant, his columns mixed borscht-belt humor and Shakespearean allusions with zingers from Twain, Mencken, and Wilde—though Alan’s own one-liners often trumped them all.
Me? I was a kid from Idaho, then just a couple of years out of Columbia J-School. I wasn’t a very graceful writer, and I sure as heck wasn’t fast.
Still, I was summoned.
Alan had read a cover story I’d written for a small magazine called Financial World that questioned the accounting of a highflying outfit, Baldwin-United. He’d decided he wanted to hire me on the basis of that one story. When I appeared in his office for my interview, I tried to explain that he was likely making a mistake—that the story had taken me forever to write. He seemed perversely delighted, insisting that skeptical stories took time and that he’d give me time.
Which he did. Over the next 2½ decades, I was able to write about financial shenanigans of all stripes—everything from the “aggressive” accounting of a Big Board company (whose shares lost a third of their value on the first trading day after the story) to a network of stock manipulators (who drew the ire of regulators and closed up shop) to an unscrupulous health-care outfit whose fraudulent machinations imperiled the lives of its patients (and whose stock virtually disappeared).
Alan was fearless, emboldened by an astonishing intelligence, uncanny market savvy, and extraordinarily good judgment. Pure and simple, he was a genius at what he did. And when companies howled, he was there for his writers—a veritable pit bull.
Alan’s ingrained skepticism, of course, was only part of the story. He also had a great eye for undervalued companies, a keen interest in unearthing undiscovered gems for his loyal readers. He delighted in perusing the new Standard & Poor’s sheets before they were filed away in binders. He encouraged us to do our own research, to pick up the phone and talk with companies to find story ideas. His enthusiasm, I confess, was infectious—a big reason, no doubt, I later began a column called Sizing Up Small-Caps.
Read more here.
Why we care about Wal-Mart earnings
by Liz Hester
With Wal-Mart Stores Inc. reporting “disappointing” earnings Thursday, it’s easy to shrug it off as not that big a deal. Many of Wal-Mart’s core customers continue to struggle in the current economy, making details about sales an interesting window into the broader U.S. situation.
Here are a few earnings details from the Wall Street Journal:
Wal-Mart Stores Inc.’s first-quarter profit and revenue edged higher, but same-store sales at its namesake U.S. stores fell for the first time in seven quarters. The retailer blamed a delay in income-tax-refund checks, challenging weather conditions, and the payroll-tax increase.
While Chief Financial Officer Charles Holley said the second quarter was off to a “healthy” start, he said employment remain customers’ primary concerns and “our consumer is still stretched.”
U.S. same-store sales fell 1.4%, when Wal-Mart in February forecast flat comparable-store sales. “When we provided flat comp guidance for the first quarter, we had expected, among other things, to recover a reasonable portion of tax refunds and had also assumed that customers would follow historical spending patterns with these funds,” said Wal-Mart U.S. Chief Executive Bill Simon. “This did not materialize.”
The importance of tax refunds to lower-income consumers (and to Wal-Mart) can’t be overstated. Here are a few more details from the Reuters story:
Consumers with lower incomes have been especially squeezed by higher payroll taxes, consistently elevated gas prices and a shaky employment recovery.
Shares of the world’s largest retailer were down 2.1 percent, or $1.72, at $78.14 after falling as much as 3.2 percent earlier in the session. The stock had hit a new high of $79.96 on Wednesday.
“We hadn’t seen the business turn around particularly in April,” said ITG analyst John Tomlinson. “That was a concern because at that point you would think tax refunds and lower gas prices would have started to help the business.”
Earlier this year, Wal-Mart said that delays in tax refund checks from the U.S. Internal Revenue Service would crimp shoppers’ spending on discretionary items. But the effects went beyond that, and the drop in refunds pressured shoppers and, in turn, sales at the company’s U.S. stores.
“We do know that the lack of IRS refund checks did hurt our consumers,” Wal-Mart Chief Financial Officer Charles Holley told reporters. “In fact, the IRS, I think, has said that they’ve estimated that there were about $9 billion less in refund checks, and we certainly cashed less of those checks.”
The company forecast earnings of $1.22 to $1.27 per share for its second quarter, which began on May 1. Analysts had been expecting $1.29, according to Thomson Reuters I/B/E/S. The year-earlier profit was $1.18 per share.
Payroll taxes were also to blame, according to Bloomberg’s story:
Unemployment remains “high on the list of concerns” of shoppers surveyed by Wal-Mart, Chief Financial Officer Charles Holley said on a call with reporters today. The U.S. unemployment rate was 7.5 percent in April.
Wal-Mart’s sales slowed in January and February after shoppers’ incomes were reduced by a 2 percentage-point increase in the payroll tax. They also were hurt by tax returns that were delayed because of forms that were shipped late and additional, federally mandated fraud scrutiny.
Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail obtained by Bloomberg News that month-to-date sales had been a “total disaster.” Murray left Wal-Mart last month. Holley said in March that those sales returned to normal by the end of February.
The picture wasn’t great overseas either, according to MarketWatch:
Overseas, a stronger dollar dented international sales by $1 billion. Wal-Mart cited slower personal income growth pressuring U.K. consumers as it cut prices on key food items to lure shoppers.
Without specifying the impact of Target’s entry to Canada, Wal-Mart said consumers there faced higher household debt levels. In its South African market, where it participates through a 51% stake in Massmart, the company also cited cautious consumers. In China, traffic dropped 8% as shoppers consolidated trips. In Japan, “cautious consumer behavior” also was observed.
Holley declined to elaborate on Wal-Mart’s thinking behind not endorsing the Europe-led accord on safety in Bangladesh.
“The key debate will be how much of Walmart’s comp [sales] slowing is temporary” because of weather and deflation or permanent because of such factors as payroll tax hike, said ISI Group’s Greg Melich.
Wal-Mart said it’s seen things improving this month and expects positive U.S. same-store sales this quarter. Investors appear to still need more proof.
It will remain to be seen if consumers and investors return to the company in the second quarter. But it is another piece of the economic puzzle. While some are excited by home sales, many at the lower end of the spectrum continue to struggle to get by and purchase what they need.
Covering the changing retail landscape
by Liz Hester
After the fire in a Bangladesh garment factory killed hundreds, several business news outlets have turned to covering where clothing comes from and the real costs of how it’s made.
The Wall Street Journal reported that retailers are having trouble sourcing clothing that’s made to higher standards:
The recent spate of garment-factory disasters in Bangladesh spotlights the poor working conditions in that country. But for big apparel retailers seeking better standards—without giving up low-wage workers—the prospects aren’t much better in other parts of the developing world.
The deadly apparel-plant fires in Bangladesh last year and last month’s building collapse, which killed more than 700 people, revealed safety hazards, labor-rights violations and unauthorized subcontracting of Western brands’ orders. But labor activists say the same problems are rampant in low-cost Asian countries, which produce most of the world’s clothing.
Concerns about such problems have intensified as retailers—increasingly nervous about relying on Bangladesh—are looking to countries including Cambodia, Indonesia and Vietnam, where wages are often cheaper than in China, to potentially pick up some of the slack.
Many of these Asian countries don’t fare much better than Bangladesh in independent assessments of labor conditions. And critics worry that factory safety and worker protections won’t improve as long as apparel companies chase the lowest manufacturing costs.
The New York Times also had a story on Wednesday about the growing demand for items made under better labor conditions. Here are excerpts from the piece:
New research indicates a growing consumer demand for information about how and where goods are produced. A study last year by professors at the Massachusetts Institute of Technology and Harvard showed that some consumers — even those who were focused on discount prices — were not only willing to pay more, but actually did pay more, for clothes that carried signs about fair-labor practices.
Major retailers have long balked at disclosing the full trail, saying that sourcing is inherently complex — a sweater made in Italy may have thread, wool and dye from elsewhere. Another reason: Workplace protections are expensive, and cheap clothes, no matter where or how they are manufactured, still sell, as H&M, Zara and Joe Fresh show through their rapid expansion.
But labor advocates note that consumers’ appetite for more information may put competitive pressure on retailers who are less than forthcoming. In recent weeks, government officials, including Chancellor Angela Merkel of Germany, and labor and consumer advocates have cited the Bangladesh collapse in calling for the adoption of fair-trade standards or labeling. In direct response to what happened in Bangladesh, Everlane added information to its Web site about the factories where its clothing is made. “This factory is located 10 minutes from our L.A. office,” one description for a T-shirt reads. “Mr. Kim, the owner, has been in the L.A. garment business for over 30 years.”
“There’s real demand for sweat-free products,” said Ian Robinson, a lecturer and research scientist at the University of Michigan who studies labor issues. Consumers “don’t have the information they need, and they do care.”
The story also says that a variety of groups of working to develop ways for customers to evaluate where clothing comes from and if it’s manufactured in an ethical manner:
The Sustainable Apparel Coalition, which includes big names like Nike, Walmart, Gap, J. C. Penney and Target, has been testing an index called the Higg Index. It started last year with environmental goals, but the new version to be introduced this fall will include social and labor measurements.
The coalition was formed in 2011 to create one industry standard for sustainability and labor practices, rather than a patchwork approach. Some of the companies supporting this index have had sourcing problems — Walmart subcontractors were using the Tazreen factory, the Bangladesh plant where a fire killed 112 workers last November. Gap, Target and Penney produced clothing at another Bangladesh factory, where a fire killed about 30 workers in 2010. Nike, which faced a global boycott over sweatshop conditions in its overseas factories, was among the first major apparel companies pressured to disclose the factories it uses.
For now, the index is just for companies’ internal use. But Jason Kibbey, executive director of the coalition, said the goal was to give the information to shoppers, too, through a label or via the Web or apps. Labor advocates like Scott Nova, executive director of the Worker Rights Consortium, however, say that self-regulation may be ineffective.
As consumers band together and demand more information, the ability to change working conditions for those around the globe becomes real. And isn’t that worth a few extra dollars?
Covering these types of stories and chronicling the change in consumer patterns is an important part of good business journalism. As many outlets are cutting back on reporters and coverage, it’s good to see journalists continuing to cover these types of stories beyond earnings and general corporate announcements.
What’s wrong with Windows 8?
by Liz Hester
Microsoft executives were unusually candid with reporters about the growing pains of it new Windows 8 operating system. As always when a large company’s future is being staked on a specific product, it’s progress generates coverage.
Here’s the story from the Wall Street Journal:
A Microsoft executive is acknowledging what many tech-watchers already knew: The company’s Windows 8 software hasn’t gone off without a hitch, and Microsoft is turning itself inside out to respond.
Last fall’s launch of the new operating system was supposed to be a milestone to catapult Microsoft and its allies into the market for new kinds of computing devices–including tablets and convertible products–and help generally get consumers more interested in buying new PCs. Six months after the operating software’s debut, it isn’t yet a hit by the accounts of some PC executives and research firms.
One market-research firm, IDC, went so far as to say that Windows 8 did more than fail to revive the PC market–it actually turned off users with changes to basic elements of the widely used operating system.
In an interview with The Wall Street Journal last week, Windows co-head Tami Reller was more candid than other Microsoft executives in saying Windows 8 hasn’t come on like gangbusters, though she said the company is seeing steady if not steep sales progress. She said Microsoft has sold more than 100 million Windows 8 licenses.
Without offering many details yet, Ms. Reller outlined how Microsoft is working on changing software features, helping people overcome obstacles to learning the revamped software, altering the shopping experience for consumers, getting more of people’s favorite apps available for Windows 8 and making sure a wider array of Windows 8 computing devices will be on sale.
As someone who recently tried to navigate Windows 8 on my parents’ new laptop after nearly a decade of using Apple products, I found it nearly impossible to figure out. Apparently, I’m not alone, according to CNN Money:
Many users have found the new operating system difficult to pick up. Some of the top complaints: The lack of the “Start” button that had been around since 1995, hidden menu items and multiple locations for settings.
More than 2,400 different devices now run Windows 8, but many still lack touch capabilities that make the operating system really shine. The Windows 8 device lineup is also scant on smaller tablet options, including the seven-inch and eight-inch varieties popularized by the Apple iPad mini and Amazon Kindle Fire.
Microsoft said it has a plan to address all of those problems. Here’s the biggest piece: The company will launch an update to Windows 8, codenamed “Blue,” by this year’s holiday season. Microsoft was skimpy on details, but rumors include the return of the Start button and changes to make apps easier and more intuitive to use. The company said it will reveal more about that update in the coming weeks.
Microsoft defended the product’s sales and those of PCs while also moving to allow more devices to run the system, the New York Times said:
Ms. Reller said Microsoft’s own research on Windows 8 usage patterns showed that customer satisfaction with the system was on par with that of Windows 7, when the Windows 8 users being analyzed have tablets or other systems equipped with touch screens. Of people with conventional PCs, operated by keyboard and mice or trackpads, Ms. Reller said, “We need to help them learn faster.”
In another development, Ms. Reller said Microsoft was allowing its hardware partners to make Windows 8 tablets with screen sizes in the range of seven to eight inches, smaller than the nine-inch-plus tablets that have been available so far. That could give Microsoft a stronger answer to the iPad mini, which has been a strong seller for Apple.
Ms. Reller described Windows Blue several times as an “update” to Windows 8, though she wouldn’t say whether the software would be available free to people who have already bought Windows 8 computers. The company has already issued hundreds of smaller updates to Windows 8 that are automatically downloaded to users’ computers.
Ms. Reller said Microsoft had sold about 100 million licenses for Windows 8 since the software was introduced, roughly in line with the number of Windows 7 licenses sold in the comparable amount of time after its introduction. While research firms like IDC are showing double-digit declines in PC shipments, Ms. Reller said those figures reflected sales into retail channels, not to actual customers. She said Microsoft was seeing consistent growth in PCs going through the online activation process that everyone with a new PC has to do.
Either way, the launch and its subsequent problems isn’t helping Microsoft’s reputation or encouraging device makers to invest in the technology. The reputational damage may be more than it can overcome. At the least, it needs to make the technology more accessible on PCs. But if may be too late to salvage the system’s reputation as the next big innovation.
Mortgages are back in the news again
by Liz Hester
There were several stories Monday featuring Bank of America and the continued legal battles about the role the firm played in the mortgage meltdown.
On the positive side, the bank entered into a settlement agreement with MBIA over mortgage securities, eliminating a large legal risk for both firms.
Here are the details from the Wall Street Journal:
Bank of America Corp. and MBIA Inc. have agreed to a $1.7 billion settlement of a long-running dispute over who will pick up the tab for faulty mortgage securities issued during the U.S. housing boom, eliminating major legal questions for both companies.
The pact, which comes as MBIA faced a rise in mortgage-related claims, will keep the Armonk, N.Y., company’s insurance unit out of the hands of the New York state financial regulator, said people familiar with the deal.
Bank of America will pay MBIA $1.6 billion in cash, along with some other compensation, and provide MBIA with a credit line of $500 million. BofA will also take a stake in MBIA’s holding company of roughly 5%.
The settlement follows talks that have been on-again/off-again for more than six months, said people familiar with the matter. The two sides worked through the weekend, as did New York Department of Financial Services Superintendent Benjamin Lawsky, to bring about the deal.
It is one of the last overhangs for MBIA, which was sued by more than a dozen banks over its split during the financial crisis into one healthier bond insurer that focuses on guaranteeing municipal-bond payments and another that insured complex financial instruments and mortgage securities that soured during the crisis.
But just as one legal issue is being solved, another is cropping up. New York Attorney General Eric Schneiderman plans to sue BofA and Wells Fargo for violations of the mortgage settlement, according to the New York Times:
New York’s top prosecutor plans to sue Bank of America and Wells Fargo over claims that they violated terms of a $26 billion mortgage settlement, his office said on Monday.
Eric T. Schneiderman, New York’s attorney general, paved the way for a lawsuit against both banks over what he said was “repeatedly violating” the terms of the National Mortgage Settlement, a sweeping pact brokered last year between five of the nation’s biggest banks and 49 state attorneys general over foreclosure abuses.
The move by Mr. Schneiderman is the first time that an attorney general has readied a lawsuit against one of the five participating banks for running afoul of the settlement. More attorneys general could follow Mr. Schneiderman’s lead.
Under the terms of the settlement, which was aimed at halting the housing market’s downward slide and providing relief to languishing homeowners, the banks had to improve their servicing standards. The guidelines outline more than 300 servicing standards that each bank must follow when working with struggling homeowners. Those terms include notifying borrowers within five days that the banks have received necessary documents to complete a loan modification.
Such servicing standards were heralded as much-needed relief for homeowners who were ensnared in a maddening bureaucratic maze when seeking foreclosure relief. Homeowners seeking help with their mortgage were often unable to get through to a bank representative. Other times, they were asked repeatedly for the same documents.
That’s not likely to be welcome news to BofA shareholders who are heading to Charlotte for the bank’s annual meeting this week, according to the Charlotte Observer. Many are looking to for a resolution to some of the current legal problems:
But, as Moynihan said, the bank can only put its focus on growth once its house is in order. The bank has put a lot of legal issues behind it over the past year, a fact the CEO repeatedly stresses.
A $2.4 billion settlement in September put to rest a long-running shareholder lawsuit over the bank’s acquisition of Merrill Lynch. A few months later, a $10 billion deal with Fannie Mae ended the bank’s exposure to loans sold to the government-sponsored mortgage giant.
Just a few weeks ago, the bank disclosed a $500 million agreement that would wipe out liability on billions in mortgage-backed securities.
But investors are still caught up on the exposure that’s left. Most notably, Bank of America is still awaiting court approval of an $8.5 billion settlement with Bank of New York Mellon over private-label mortgage-backed securities. It’s also still battling bond insurer MBIA over claims the bank misrepresented mortgage loans backed by the company.
In addition, the New York attorney general’s office is set to announce lawsuits against Bank of America and Wells Fargo, claiming documented violations of the sweeping mortgage settlement between states and five big banks last year, according to an announcement from the office.
While the stock might be up, it seems that Bank of America still has some work to do cleaning up their operations. Maybe eventually all the mortgage lawsuits will be settled, but for now it looks like once one is over the next one begins. And just when business journalists thought they could shift attention to writing about a housing recovery or more capital requirements, it seems they’ll be writing about mortgages once again.
TheStreet.com CEO received $1.3 million in 2012; Cramer received $1.47 million
by Chris Roush
Elizabeth DeMarse, who became president and chief executive officer of TheStreet in 2012, received more than $1.3 million on total compensation during her first year on the job.
More than $830,000 of that compensation was in the form of stock options, according to the proxy statement filed Tuesday by the online financial news company.
DeMarse receives a base salary of $400,000. She also received a $200,000 bonus for joining the company. She also has the option to purchase up to 1.75 million shares of company stock at a price of $1.80 per share.
John Ferrara, the company’s new chief financial officer hired in February, is being paid a base salary of $220,000. He received a $10,000 signing bonus.
TheStreet co-founder Jim Cramer no longer receives a salary or bonus from the company. But he does receive a royalty based on the revenue derived from the company’s Action Alerts PLUS subscription service. In 2012, Cramer received $1.47 million in royalties pursuant to the agreement and was also awarded a discretionary bonus for 2012 of $11,992.
The proxy makes no mention of the compensation of editor in chief William Inman, who joined last year.
Read the SEC filing here.
Reuters parent reports profit decline
by Chris Roush
Thomson Reuters Corp., the parent of the Reuters news service, on Tuesday reported a 7 percent decline in first-quarter operating profit because of severance costs and a decrease in revenue at its Financial & Risk division, which caters to banking clients.
Jennifer Saba of Reuters writes, “The global news and information company spent $78 million on severance costs in the period and also booked a tax charge of $235 million. It said in February there would be $100 million in severance costs related to about 2,500 job cuts.
“‘We are executing more effectively, launching better products, simplifying our systems and processes and managing with more rigor and discipline, which is why our confidence continues to build,’ Thomson Reuters Chief Executive James Smith said in a statement.
“The company is the midst of a turnaround after Thomson Corp’s $17 billion acquisition of Reuters Group Plc. The 2008 merger coincided with a financial crisis that prompted banks, which are core customers of Thomson Reuters, to slash costs and cut staff.
“Adding to the challenge was the premature roll out to its financial clients of its flagship desktop product Eikon.
“By the end of the first quarter, the company said that Eikon desktops totaled nearly 47,000, up 38 percent from the end of last year. That was a slightly larger increase than the 33 percent rise seen between the third and fourth quarters of 2012.”
Read more here.
Kodak turns over businesses to pension plan
by Liz Hester
In a move to settle a bankruptcy claim, Kodak has given two iconic business units to a U.K. pension plan.
Here are the basic details from the Bloomberg story:
Eastman Kodak Co., the bankrupt photography pioneer, will spin off imaging businesses to its U.K. pension plan in a deal that settles $2.8 billion in claims.
Kodak’s personalized- and document-imaging businesses will be spun off to the pension plan, Kodak’s largest creditor in the bankruptcy case, for $650 million, the company said today in a statement.
Kodak, based in Rochester, New York, plans to file tomorrow in court its plan to exit bankruptcy protection. The spinoff agreement settles about $2.8 billion of claims by the pension plan against Kodak, according to the statement.
Kodak’s hometown newspaper, Rochester’s the Democrat and Chronicle, added these details:
With those businesses, the pension plan would pick up roughly 3,200 full-time permanent Kodak workers — roughly a quarter of its 13,000 employees worldwide. Kodak on Monday declined to say how many of the 3,500 Kodak workers locally would be part of that sale.
Document Imaging revolves primarily around Kodak’s various document scanners. Personalized Imaging includes the businesses that made Kodak a worldwide household name — camera film and photographic paper.
Pension plan Chairman Steven Ross said Monday that the terms of the deal also include its rights to use the Kodak brand for those products.
In a statement Monday, Kodak CEO Antonio M. Perez said the sale “moves us past several key hurdles in our reorganization, resolving all potential claims worldwide … pacing our Personalized Imaging and Document Imaging businesses with a new owner that recognizes their value and is focused on their growth and success, and providing the remaining liquidity we require to emerge from Chapter 11.”
Kodak pension fund spokesman John Kiely said the pension fund won’t run the businesses directly, but will put together a management team to run them.
Kiely said specific plans for the DI and PI businesses — including how to grow them — still have to be worked out. But the U.K. pension plan, having talked with current management and looked at projections, is confident DI and PI can grow, he said. Pension fund managers “obviously gone through an exhaustive due diligence process,” Kiely said.
The Wall Street Journal added this context about the ongoing back and forth as Kodak tries to reorganize:
Kodak put the camera-film business and other businesses, including kiosks that develop digital photos and heavy-duty commercial scanners, on the block in August as part of a downsizing effort aimed at focusing on commercial printing, packaging and functional printing.
The $2.8 billion in pension obligations and the sale of the businesses were among the final outstanding issues keeping Kodak in bankruptcy court. The U.K. pension plan includes roughly 15,000 members.
A bankruptcy judge earlier this year approved Kodak’s deal to sell a portfolio of 1,100 digital patents for $527 million. Though a lower price than Kodak hoped, the deal also involved the buyers—including Apple Inc., Google Inc. and Microsoft Corp., agreeing to end contentious patent litigation.
With the transfer of its traditional camera-film business and other enterprises, Kodak will cement a long fall from a technological titan included in the Dow Jones Industrial Average from 1930 until 2004. Despite inventing the digital camera, Kodak has been slow to adapt to new technologies and ended up filing for bankruptcy protection in January 2012 amid a cash crunch.
What I’m left wondering is how many pension funds have responsibility for company operations at this point? Is this something that’s done regularly or a novel way for manufacturers to use physical assets and businesses to settle liabilities.
And what of the implications for the pension funds? Fund mangers will have to divert time and attention away from making money for investors while they search for the people to run Kodak. How is this going to help pensioners in the long-term?
While many pensions have private-equity investments and other alternative assets, does this mark a whole new era in what types of assets they’ll hold?
I find the situation incredibly interesting and I look forward to the follow-up stories that will hopefully address some of these issues. I, for one, would like to hear what Calpers has to say about the deal.
The changing face of public relations
by Liz Hester
Fleishman-Hillard is rebranding and shifting the company’s strategy. First, they’re deleting the hyphen from the name (since that will be effective as a rebrand) and moving to offer other services like social media planning.
Here are excerpts from the New York Times story:
Truth be told, the changes at FleishmanHillard — with worldwide revenue of more than $500 million and 2,500 employees in 84 offices — are meant to signal how it is striving to become an integrated marketing communications agency that offers services like advertising and social media marketing in addition to public relations.
FleishmanHillard will seek to be “channel agnostic,” Mr. Senay said, an industry term meaning to be objective about the various forms of communication, whether paid, owned, earned or shared, to reflect “how the public consumes media today.”
To that end, the agency is hiring a former longtime journalist, Pat Wechsler, as senior vice president and director for editorial and corporate content strategy, working in realms like content marketing, which provides consumers editorial and entertainment articles and video clips that marketers sponsor.
He was hired after FleishmanHillard had brought in scores of the types of employees who are more typically found at consultancies, brand identity businesses or ad agencies, among them analytics specialists, planners, copywriters and art directors.
It’s interesting to note that like journalism, public relations is trying to find different ways to remain relevant to their audiences and clients. As many journalists work to make their own brands and use social media to promote their work, many large corporations are still struggling to determine the best way to answer questions and reach customers via these new, non-traditional channels.
Here’s more from the Times:
Reflecting the broadening of the services offered by FleishmanHillard beyond public relations, the agency last year placed more than $1.2 billion worth of ads in paid media, compared with $250 million in 2011.
“A lot of things have changed in consumer product marketing, especially the multiplicity of channel options,” said Mike Brooks, executive director at the William K. Busch Brewing Company in St. Louis, which hired FleishmanHillard to create television, radio, outdoor, online, retail and social-media ads to introduce two beers, Kräftig Lager and Kräftig Light.
Asked to assess the work, Mr. Brooks paused to declare, “I’m not on a P.R. campaign for FH,” then said: “I am happy to report thumbs up in every regard. The creative and the messaging are well received. And we have one quarterback of all the disciplines, Tom Hudder, an executive creative director, ensuring everything is consistent.”
FleishmanHillard is, of course, not the only agency reassessing its operations in light of the profound changes in marketing and media. Large competitors like Edelman, part of Daniel J. Edelman Inc., and Weber Shandwick, a unit of the Interpublic Group of Companies, are also reworking their service offerings.
Because of innovations like social media, the model has evolved from “trying to connect people with brands” to “trying to connect people with people to connect with brands,” he added. “Agencies that have made an effort to bring in fresh talent are getting hotter.”
As traditional media outlets now compete with Twitter, Reddit and Facebook to disseminate news, public relations executives are also grabbling with how to use these tools. As more people turn to social media to ask questions, comment on products and complain about service, firms have to find a way to answer consumers without provoking their ire.
A corporate executive once told me that one of his biggest fears was having a social media boycott or campaign against his firm. He said once allegations are out on the web, it’s much harder to tell his side of the story. He said it was hard to find advice that was actionable and from people who knew how to run a social media campaign. Integrating new outlets into communications plans is now imperative.
It looks like firms such as Fleishman are beginning to shift to adapt to the new landscape.
Getting lit up: How PR people become the story
by Frankie Flack
Every now and then my email will suddenly become inundated with emails from friends and colleagues in the PR industry all emailing me one story. Before evening opening any one of these notes I know exactly what the content of the story will be — a story featuring some PR person doing something stupid.
Sometimes it’s just poor a quote or subtle reference to tension between PR and reporter but most likely it’s a full story focused squarely on something a PR person did to irk a reporter. For an industry dedicated to speaking with reporters on a daily basis, it’s a little ironic how paranoid we can be about ending up in a media story. I wonder if the people who juggle flaming sticks are equally amazed when someone in their field inadvertently sets themselves on fire.
The best story I’ve seen lately where a PR “pro” metaphorically set themselves ablaze was when Beyonce’s PR rep emailed the infamously snarky BuzzFeed to request they take down less-than-flattering photos of the superstar. (Note: I have no way of knowing exactly how the Beyonce issue was handled. All commentary below is not specific to any particular situation).
It’s a situation in which almost every PR pro has found themselves dealing with at one time or another. An important client calls up incredulous at what a media outlet has decided to publish and demands a change. Instead of taking a few minutes to think through how best to handle the request, the PR person does exactly what they were told and fires off an email to the outlet.
No one likes corrections. PR people don’t like asking for them, and reporters almost never like changing their story (unless it’s a simple mistake like misspelling a name). Because both sides aren’t going to enjoy the conversation, it’s human nature to avoid conflict and opt for email. This is a fundamental mistake on the PR person, especially when dealing with a publication that publishes stories incessantly and on almost any topic.
While uncomfortable, a simple phone call is critical. It will give the PR person a sense of how the reporter reacts to the request and, most of all it will not give the reporter a chance to turn the request into a standalone story.
Not every reporter is looking to turn a PR person’s email into a story. We’re just not that interesting. However, there is a certain line where a reporter is almost required to put pen to paper and let the world know what we are up to behind the scenes. In my opinion this almost always happens when a PR person mixes pushiness with a genuinely bad idea.
As PR people we need to defend our clients and push back against reporters from time to time. But we also need to consider the reporter, understand the media outlet and most of all, evaluate the clients demand.
Now that BuzzFeed is launching a business vertical, I would caution my colleagues in the field to think twice before asking them to take down embarrassing photos of their hedge fund clients.