Novell unveiled its $60 million-plus marketing campaign in the form of a 30-second television advertisement during Monday Night Football. The ad couldn't have come at a better time. After a number of disappointing earnings reports, the company has been in dire need of an image shake-up. Now, a revamped marketing effort coupled with excellent technology suggests an improved business model.
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The ad portrayed a group of colorful fish trapped in individual bowls. The fish represent computer networks and applications unable to connect to one another. David Bowie's (disclaimer: my pick in Fool Survivor) classic song "Changes" begins to play, and a lonely fish jumps into a large aquarium, joining others. The voice-over describes Novell services software solving the complexities of e-business and allowing intranets, extranets, and the Internet to work together on one platform. The spot ends with the tagline, "Novell: The Power to Change."
The ad couldn't have come at a better time. After a number of disappointing earnings reports, the company has been in dire need of an image shake-up -- perhaps even more so than Jacksonville's secondary. The company hasn't hidden the fact that its brand image has suffered, particularly in comparison to competitors who have employed their own expensive television ads. The 'Net services provider has lost valuable market share, and the television ad is the latest attempt to employ its own "ch-ch-changes."
Still alive and kicking
Is this too little, too late? That remains to be seen. However, it's clear that Novell isn't done making news. Several weeks after its most recent earnings announcement, the company stated it was laying off 16% of its workforce -- saving $25 million per quarter -- coupled with a restructuring charge of $40 million. Despite the moves, the stock price has still lost nearly 75% of its value this year, and rumors of a product spin-off remain.
The Street claims the reorganization is a signal that the company is preparing for a division spin-off. Management has quieted such talk, and money managers long Novell have been left salivating at the tremendous wealth propositions. I'm not saying a spin-off won't ever happen and doesn't make sense from a shareholder wealth perspective. After all, certain product divisions, such as NetWare and its Internet Caching System (ICS), are widely regarded as industry-leading technology. Rather, I don't see that strategy in the immediate future.
The question to consider is whether Novell can build badly needed brand recognition. One thing to keep in mind is that the company is undergoing a change in its business model -- from an operating system to a network management focus. Thus, entering the field of Internet-related services and building separation from the competition is easier said than done. CEO Eric Schmidt is widely regarded as a capable manager, particularly on the technology side, so execution will be a factor to consider.
The good news is that the company has top-notch technology. That has never been in question. The television ad campaign is certainly a step in the right direction. Although a little late, it appears Novell has finally figured out that the best technology doesn't mean market dominance. They should have just watched Apple Computer (Nasdaq: AAPL).
Nonetheless, a revamped marketing effort coupled with excellent technology suggests an improved business model. Substantial revenue growth will be something to watch for -- but the company has indicated its reorganization won't affect topline growth until next year. Therefore, Novell shareholders likely wont see any real gains in the near-term.
In "Changes," David Bowie sings, "Time may change me." I guess the same is true for Novell, as we are all left to wait and see if the company's changes can get it back on track.
Your Turn:
Is Novell taking the necessary steps to build brand recognition? We welcome your thoughts on our Novell discussion board.
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