SUN SPOTS: Blinded by the Light

“Sun spots” was a term used in the days of satellite transmissions to explain periodic outages that mysteriously knocked out news delivery to network recipients. It is perhaps poetic justice that Sun Microsystems’ CEO Jonathan Schwartz has given the term new meaning in the Internet Age.

Sun ballyhooed that it would meet disclosure of its quarterly earnings via a web posting on its own site, accompanied by RSS feeds to registered subscribers. Ten minutes later, Sun broadly disseminated the news release via a commercial wire service. The evidence suggests that Sun’s high-profile experiment had decidedly mixed results; in our view, it was clearly not the great leap forward that Schwartz had touted for months on his blog.

Not Simultaneous, Not Fair, Not Instantaneous
I eagerly tried to access Sun’s earnings at precisely 4 pm/Eastern. Unfortunately, I kept getting a “Page Not Found” message. It wasn’t until 4:06 pm that I was finally able to view Sun’s results. Given Sun’s enormous server capacity–after all, servers are Sun’s core business–Sun’s seeming inability to accommodate the demand speaks volumes about the real downside of web-only disclosure.

In other words, if Sun can’t handle the load, what are the realistic chances of smaller companies, with more limited server resources, to deal with spikes associated with material news announcements? Casual observers may dismiss a six-minute delay as minimal. However, in today’s financial markets, six minutes is an eternity. Program trading now drives the markets, and the new mantra on Wall Street is that milliseconds matter.

The numbers tell the story best: Reuters didn’t move its first take until 4:16; Yahoo! Finance posted Sun’s press release at 4:11 (after it moved on a commercial newswire). As for those accessing via RSS feeds, those times were all over the map and that’s because RSS feeds are not push technology, nor are they simultaneous. This means that the material information was not received simultaneously by all market participants. So what’s “full and fair” about that?

In our view, this isn’t what the U.S. Securities and Exchange Commission had in mind when it implemented Regulation FD in 2000 to “level the playing field.” We think these results fall far short of the investing public’s desire for full, fair and simultaneous disclosure.

Business Wire News: Secure, Free & Simultaneous
Business Wire has a secure (independently audited in multiple jurisdictions worldwide) real-time network that allows investors anywhere in the world to access news at no charge. For some unknown reason, Jonathan Schwartz continues to harp on the misconception that commercial news wires are only available via proprietary services. NOT TRUE. Anyone, anywhere can access Business Wire and its competitors via the world’s most popular financial portals, news sites, online services and databases–again, simultaneously, in real-time and in multiple languages.

Everyone has equal, unrestricted access to material news announcements under the current disclosure model. The playing field is indeed level. Further, Business Wire’s presence on the internet, in conjunction with its myriad distribution channels, far eclipses any individual company’s web posting. And yes, we even offer RSS feeds at no charge.

An Accurate, Third-Party Historical Record
Another key issue that has thus far been ignored is archival capabilities. All news releases transmitted over Business Wire are permanently stored in Lexis-Nexis, Factiva, and other popular databases for future reference. Further, the lack of a central clearinghouse for material news announcements under Schwartz’ web-only framework raises all sorts of interesting questions that the SEC and class action law firms, among others, will need to address.

Disclosure Innovators & Experts
Business Wire is clearly not resting on its laurels and is constantly evaluating all new technologies. Just ask our CIO, Steve Messick, who was named one of the Premier 100 IT Leaders by Computerworld Magazine in 2003. The reality is that Business Wire has and will continue to push the envelope when it comes to disclosure, from its patented NX news delivery technology, to its leading role in providing public companies with turnkey XBRL solutions worldwide. But we’ll do it in a way that enhances transparency.

As the leading disseminator of material information for 46 years, this is our “circle of competence.” We are passionate about what we do because we believe strongly that broad and simultaneous dissemination of the press release remains at the heart of the disclosure process. We trust that all the other “commentators” have the experience and credentials to speak intelligently about this important topic.

We salute Jonathan Schwartz on Sun Microsystems’ strong quarterly performance. But with all due respect, we think the CEO of Sun should “stick to his knitting” and leave the important business of disclosure to the experts.

–Cathy Baron Tamraz, President and CEO, Business Wire