Alcatel, Rhone-Poulenc PR Fumbles Mar Company Images
By John Carreyrou
PARIS (Dow Jones)--French companies are supposed to be growing more savvy in handling public
relations. But you wouldn't know it from two high-profile blunders last week.
Alcatel SA (ALA) drew fire for disclosing its operating profit for 1998 would come in well short of
analysts' forecasts, just days after the company closed its $4.4 billion acquisition of DSC
Communications Corp. (DIGI).
Rhone-Poulenc SA (RP) aroused similar resentment by refusing to comment to the press for hours on
a report that it was forced to close down the Illinois factory of its Centeon subsidiary even though
angry analysts who called the company were able to get instant confirmation of the shutdown from
Rhone-Poulenc managers.
Investors sent both stocks reeling. Alcatel shares fell 38% in one day, while Rhone-Poulenc shares
closed 9% lower on the Tuesday the Centeon news broke after being down as much as 11% at one
point.
Alcatel and Rhone-Poulenc insist they did nothing wrong.
But public relations specialists and traders say the companies might have averted the uproar - and
much of the stock declines - by more deft handling of the news. They say the steep declines reflected
not only the facts but a loss of trust in the companies. Observers also blame lax oversight by French
regulators, who rarely censure companies for failing to make information available quickly.
"In France, there is still a disconnect on the part of too many managers about how to inform
shareholders and about who their shareholders are," said Seth Goldschlager, a public relations
consultant with Publicis Consultants in Paris. "My hunch is that, in both these cases, the companies
weren't really trying to hide anything, but they aroused suspicion by not handling their communications
properly."
In Alcatel's case, timing was the issue. DSC Communications shareholders have alleged Alcatel
withheld the warning until after the DSC deal was closed. Some have since filed lawsuits. Serge
Tchuruk, Alcatel's chairman, insists he was briefed of the deteriorating profit outlook Sept. 8 - the
day Alcatel completed the DSC purchase.
Observers say the incident highlights the lack of oversight in the French stock market.
"French companies would be more careful about the way they communicate if there was an incentive
to do so," said the head of a U.S.-based private investment fund. "But I've never seen the COB
(Commission des Operations de Bourse) take strong action to punish a company."
As far as the Centeon plant shutdown is concerned, Rhone-Poulenc told Dow Jones in a written
statement that "maintaining good relations with the news media, our shareholders and the investment
community is of primary importance."
It adds that "in the fast-moving situation on Sept. 15, we can assure you that we made every effort to
provide an accurate statement as quickly as possible."
Still, traders fault the company for not understanding the rules of the disclosure game as it's played in
today's financial markets. When it confirmed to analysts that the plant had indeed been shut down,
Rhone-Poulenc should have briefed reporters simultaneously, they say.
"The corporate financial folks will say, 'I will brief my financial community,' not realizing that they need
to inform the media too because the press is talking to financial analysts all day long and the info will
get out regardless," says Goldschlager with Publicis Consultants.
"If you brief person number one, you've got to brief everyone," he said. "You can't compartmentalize
information anymore. The world is too small."
-By John Carreyrou; 33 (0) 1 53 00 03 03; jcarreyrou@ap.org
(Please disregard the fourth paragraph in the item that moved at 1542 GMT headlined "Alcatel,
Rhone Poulenc -2: Lax Oversight, Unclear Rules". The text was garbled and contained incorrect
information.) |
