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Northern Telecom
Northern Telecom shares plunged Sept. 29 when the company's chief financial officer, Wes Scott, warned a select group of shareholders and analysts that revenue growth in Asia and Europe would be disappointing in the second half of the year. Scott made his remarks so close to the end of the four-hour session that many in attendance were no longer paying attention, according to analysts who were there. As investors compared notes, some whipped out cell phones to call in sell orders to their trading desks, those in attendance said.
Northern Telecom shares slid 12 percent, knocking $3.2 billion off the company's market value. Four hours after the stock started falling, the company issued a public statement confirming what the pros already knew. ''We were surprised with the reaction in the marketplace,'' said Chief Executive John Roth.
Another telephone equipment maker, Tellabs Inc., shocked big investors on a Sept. 14 call with news that third-quarter profit and sales wouldn't meet estimates. By the time small investors could listen to a recorded replay, Tellabs shares, which had risen rose as much as 7 3/8 to 52 3/8 before the call, plunged as low as 36, losing about $1.7 billion in market value.
''The minute he said this quarter would be a penny light, people started dumping the stock,'' said Scott Vergin, a money manager at Lutheran Brotherhood, a not-for-profit group in Minneapolis that provides financial services to members of the Lutheran faith.
Barnes & Noble Inc. fell 9.4 percent Nov. 20 after the largest U.S. bookseller told analysts on a conference call that costs to advertise the company's Internet business would be greater than expected. Barnes & Noble fell 3 to 29 in trading of 3.9 million shares, five times the three-month daily average.
Invitation Only
Big shareholders of Corrections Corp. of America and sister company CCA Prison Realty Trust learned in face-to-face meetings with executives in early November that the companies could get as much as $600 million in the next 12 months through stock purchases by HSBC Holdings Plc. It wasn't until Nov. 12 that D. Robert Crants, president of CCA Prison Realty, made the planned investment public in an interview.
The Credit Suisse First Boston conference at the Phoenician, thehotel that savings and loan executive Charles Keating built, provided a hit parade of senior officers from some of the hottest companies. Even Microsoft Corp., which has the world's largest market capitalization and rarely disappoints any of its shareholders, dispatched its chief financial officer, Greg Maffei, to Scottsdale this month.
BMC Software Inc. shares gained 8 percent on Dec. 2 after Chief Financial Officer William Austin said the software maker's current quarter looked promising. Micron Electronics Inc. lost 12 percent after an executive warned of a price war for personal computers.
Credit Suisse First Boston didn't invite all investors to the conference, and only a handful of journalists were permitted to attend -- CNBC, the San Francisco Chronicle, the San Jose Mercury News, Forbes ASAP magazine, Upside magazine and Fortune. All agreed they wouldn't do same-day reporting of company presentations, said Cheryl Popp, a Credit Suisse First Boston spokeswoman.
Speaking Freely
Credit Suisse First Boston excluded Bloomberg News, Dow Jones News Service and Reuters from all meetings because their real-time format requires them to share news with readers as soon as they confirm it.
The firm limited the press because ''the amount of freedom that an executive feels he has in speaking is very closely correlated to who's in the audience,'' said Michael Kwatinetz, director of research for Credit Suisse First Boston's technology group. ''The things a CEO is willing to say change.''
Experts say that in the age of the Internet, it would be easy to let all investors get a fair shot at market-moving company information. Opening up closed meetings such as the Credit Suisse First Boston conference would be the first step because it would give all investors the news at the same time, they say.
Letting reporters listen in on all conference calls would mean that news services could transmit important news instantly, said Thompson of the National Investor Relations Institute. Individual investors would have access to news via the Internet or cable television channels that cover financial markets. Companies also could let individual investors listen in to calls via their corporate Internet sites.
Integrity at Stake
Advocates for individual investors say companies also need to think about the timing of their announcements to ensure a level playing field. Ideally, companies should release information while the market is open, from 9:30 a.m. to 4 p.m. New York time, said John Markese, president of the 180,000- member American Association of Individual Investors in Chicago.
Many companies, including Intel Corp. and Amazon.com Inc., issue earnings reports and hold conference calls after the market closes. Big investors can absorb the news and then buy or sell shares on electronic trading networks such as Instinet that offer a market when the exchanges are closed. That's a service most brokerages don't offer to small investors.
Individual investors' after-hours stock orders generally sit with their broker until 9:30 a.m. the next day, when regular trading begins. ''The institutions have already traded on it and you're last in line,'' Markese said. ''It has to be more public, and broadly public rather than these conference calls.''
For Levitt, the SEC chief, nothing less than the integrity of the U.S. stock market is at issue.
''If some individuals or organizations are getting information that others are not getting, that means our markets are no longer trustworthy and no longer credible, and that can't be tolerated,'' he said.
Andrew Filipowski, chief executive of Platinum Technology Inc., who spoke at the Credit Suisse First Boston conference, agrees. ''There's only one conclusion I can make'' about why a CEO wants to limit his audience to money managers, he said. ''He's going to tell these guys (something) he doesn't want other people to know. There are gray areas that are going to be crossed.''
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