If You’re a Public Company, Here’s How Not to Do Media
When you run a company and do press, you — obviously — want to come out looking good. You answer questions to quell uncertainty and message a clear path forward, particularly when investors comprise the target audience. If you run a company that’s under-performing amid chronic ambiguity, even more so.
Either The Wall Street Journal left out a lot of what AT&T CEO John Stankey said in the interview he did with the paper or Stankey had little of substance to say.
Stankey’s WSJ Q&A appeared online Sunday and hit Monday morning’s print edition. Stankey offered very little except be patient:
That is not an error. There’s nothing populating the space where you’d normally find a quote excerpted in a Medium article.
I didn’t include a quote in this article’s introduction because I believe in strong introductions.
I couldn’t find anything from Stankey worth including in at the outset of this article.
In the WSJ piece — AT&T CEO Says HBO Bet Will Pay Off in Long Run — Stankey barely even said that much. Again, maybe much of what Stankey said hit the cutting room floor, but WSJ reporters tend to be competent. If he said anything of substance, they would have included it. They would want to include it. This is how you get and keep readers.
I own AT&T stock.
The CEO’s — let’s face it — lame interview adds a level of concern to my optimism for several reasons.
I trashed CEOs for a living in my early days writing about stocks nearly a decade ago. I had unconditional love for Steve Jobs and Jeff Bezos. Other than that, I routinely trashed Mel Karmazin, Tim Cook, Reed Hastings, and Elon Musk. There was a period when I turned on former Pandora CEO and co-founder, Tim Westergren. I regret most of it.
So when I take a CEO to task these days, it comes out of genuine concern for the investment case. This is what I’m doing here. Stankey needs to come out and say more. Now.
The Two Most Alarming Things About Stankey’s WSJ Interview
#1 Stankey said nothing
Here are the words — quoted and paraphrased — Stankey spoke and the WSJ included in its interview:
But deal making is in AT&T’s DNA, and Mr. Stankey said recent results have done nothing to change that. He called deals the first step in a “wash-repeat cycle” that company leaders have used effectively for decades to build a constantly evolving cash generator.
“The balance sheet has always been used as a strategic tool,” Mr. Stankey said. There are “times when you choose to use it for what it’s there for, which is to extend it a bit to do something that’s opportunistic. Sometimes you walk away from an opportunity, but you did it knowing that the best bullet you could put in the chamber was the transaction you did.”
“There’s nothing that’s sacred anywhere in the business,” Mr. Stankey said, referring to the company as a whole. “WarnerMedia is no exception to that.”
That high yield “doesn’t make sense to me, and I can only conclude we must not have carried the day in people believing in that regard,” Mr. Stankey said. “But the decision to get to this place was a conscious one.”
A WSJ reporter spoke to AT&T’s CEO and this is all they had to go with?
We can only hope a full-length Q&A is scheduled for a future date, assuming one exists. Maybe more is coming. If there is, hopefully the WSJ is saving the good stuff for it. However, there is no indication this is the case.
We already know what AT&T’s approach to M&A and cutting fat is and has been. It’s quite clear. Investors want to know why it isn’t working. We’re getting very little, if anything, in that regard these days.
#2 AT&T still isn’t on a clear path to integrating Time Warner and HBO
We all know HBO Max (still not on Roku) has been an unmitigated disaster. Stankey seems to indicate AT&T will have to trim fat from WarnerMedia. And he also has the DirecTV debacle to deal with. The crux of the title of the WSJ piece— that the HBO acquisition “will pay off in long run” — essentially tells investors it’s not quite working yet.
This isn’t news. And it’s great to see the CEO owning up to it as opposed to treating us like fools and claiming HBO Max, for example, has been a success. It’s just that, as an investor, I would like to hear a plan alongside Stankey’s admission of his company’s shortcomings.
For example, this section of the WSJ article really alarmed me:
AT&T has said it plans to bundle HBO Max’s movies and TV shows with wireless and broadband packages to keep cellphone users happy and to attract new home-internet customers.
Makes sense. But shouldn’t AT&T have figured this out before the deal?
AT&T completed the acquisition of Time Warner more than two years ago. They’re still working on what is probably the most appealing reason for buying the media company in the first place? AT&T decided it wanted to make this deal in, at the latest, 2016. They probably talked about it long before 2016. CEO change or not, this isn’t the type of commentary we should be seeing from the company as 2020 quickly turns into 2021.
Outside of the substantive critique, it’s equally as alarming that AT&T doesn’t think of these things prior to doing media. It’s bad enough the company can’t execute on any thing other than maintaining its dividend. It’s worse to fail at sending a message of confidence to investors. Admit failure — this is great. But explain where and why things went wrong alongside specifics on how you’re going to fix it.
I read AT&T’s earnings conference calls and this information really isn’t in them either. Seeking Alpha has them all. Take some time and go through them. There’s lots of good stuff, but very little that inspires confidence in AT&T’s ability to integrate the Time Warner behemoth into its content and delivery powerhouse. The company says a lot about what it has to do and that it is, apparently, doing it, but it doesn’t get into details.
It could start by discussing marketing and brainstorming ways to get people under 40 to even know what AT&T is and that it bought HBO in the first place. AT&T has zero mindshare. Netflix (NFLX) and, to some extent, Disney (DIS) have it all.
I hesitate to even publish this article on Medium, a platform that skews young. Does the average reader even know — or, better yet, care — what AT&T is?
The Investment Conclusion
When you’re an investor, it’s nice to see stocks you own pop up in the media, particularly if the appearance is high profile and has the chance to be positive. You especially enjoy hearing from the CEO. If I’m a Netflix investor, Reed Hastings’ recent WSJ interview would have made me happy. Stankey’s interview in the WSJ did anything but. It raises more questions than answers. And it reaffirms investor concerns that AT&T management isn’t up to what is, to be fair, an enormous task.
I own AT&T stock because I love and am confident in the dividend. I hold out hope for the company. AT&T has all of the pieces in place to take on everyone from Verizon to Netflix and Disney. It remains unclear if it has the people in place to get the job done.
I am not selling AT&T. In fact, I continue to incrementally add shares on a regular basis.
Here’s my concern — as time passes and little of value or substance happens at AT&T on the execution front, the line of “I own the stock for the dividend” or “I can’t resist that yield” will get old and, at some point, increasingly absurd and downright risky. I’m a dividend growth investor. I’m on record as saying I don’t worry about share price appreciation as much as dividend income. I’m also not an idiot.
I’m not going to be happy to see AT&T trading between, say, $20 and $25. This won’t work for most people, no matter how good the dividend is. A good dividend isn’t the product of yield. It’s the result of a solid balance sheet. A growing dividend at some point requires organizational execution outside of sound financial management skills. Stankey appears to have said as much himself. AT&T cannot execute poorly forever. If it does, this poor performance will eventually catch up with its financial metrics.
In other words, if AT&T fails to execute on its encouraging long-term narrative, at some point, the dividend will be in peril. It won’t happen this year and probably not next. But it will happen. AT&T shareholders need a CEO who will make them believe rather than leaving them wanting and worrying more.