Merchant Innovation

Google’s New Analyst Strategy

Google’s new Chief Financial Officer Ruth Porat is changing the company’s relationship with Wall Street.

In a never-before-seen approach, the Internet giant is opening up to Wall Street analysts and investors about its business and expense data to offer a clearer insight under Porat’s management, The Wall Street Journal reported.

The new approach, being coined “Office Hours,” provides analysts with 15- to 30-minute briefings that provide details the company has previously withheld. For instance, in a call with the analysts earlier this month, the company revealed information on “unusually low legal expenses” observed in Q2, a suggested rise in company expenses from seasonal hiring of college graduates and more.

While transparency might not always work for different aspects of a company the size of Google, it does, however, seem to be working magic on the company’s stock value. In the last three months, Google’s share value has climbed up 15 percent as analysts and investors develop a better comprehension of its business model and are able to build financial models around it, according to WSJ.

Ruth Porat speaking at a Bloomberg conference. Picture: Jin Lee (Bloomberg News – Licensed under Creative Commons)

Ruth Porat speaking at a Bloomberg conference. Picture: Jin Lee (Bloomberg News – Licensed under Creative Commons)

Though Porat, who previously worked for Morgan Stanley as its CFO, is being more open about company details, the company also has to remain mindful of security laws governed by Securities and Exchange Commission — regulations which have deterred some companies from offering such intimate details.

Several companies recently stopped holding analyst calls after the SEC took action against them for violating its security regulations.

Regulation FD, which aims at preventing certain investors from gaining advantage over others, forbids companies from revealing non-public information to analysts and other professionals. The law is so strict that a change in body language or words of a previously released statement or addition of any new information could, in fact, be noted as a violation by SEC.

“If Google can remind analysts about certain things they’ve already talked about publicly then these meetings are perfectly OK and in fact common,” David Lavan, partner at law firm Dinsmore & Shohl LLP told WSJ.

For now, the company seems to be making the most of communicating with analysts and investors without stepping out of the boundaries.

“The company has made more effort with investors in just the last couple of months than they have in years,” RBC Capital Markets Analyst Mark Mahaney, who attended the company briefing, told WSJ. “That’s a personality thing with the new CFO.”

 

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