However, by burying its well-known, immediately identifiable brand with something that could mean anything, Axon risks devaluing the extensive goodwill that's been built up over the years, and there's nothing to suggest it will be a successful strategy either.
A rose by any other name...
Smith & Wesson also recently changed its corporate name to the bland American Outdoor Brands (SWBI 1.44%), though it is keeping its storied firearms name, much as Axon isn't changing the name of its stun guns. Similarly, a few years ago Research in Motion changed its name to BlackBerry (BB 1.40%) to emphasize its focus on its self-named smartphone and operating system.
Where the one was really an attempt to bury its association with firearms by identifying with a new, bigger market opportunity, the other has done nothing to stop the smartphone company's slide into irrelevance. People have turned off their BlackBerrys en masse as they turned to the Apple iPhone and Samsung Galaxy. BlackBerry has even stopped making its own phones, now preferring instead to farm out the responsibility to a third party.
The gunmaker said the Smith & Wesson brand didn't do justice to the full range of products it now offers, but it also doesn't change that firearms still represent 87% of total net sales. Still, by separating itself from the volatility inherent in gun sales by erecting a barrier in the form of an innocuous sounding new corporate identity, it hopes it can smooth out the wild swings of its stock.
...doesn't always smell as sweet
While Netflix (NFLX 0.12%) didn't rebrand the whole company when it renamed its DVD-by-mail rental service to Qwikster, it quickly came to realize what a dumb move that was. Even though the future of the company is in streaming and content creation, it didn't mean it needed to entirely recast its legacy business. Fortunately it hadn't changed the corporate identity so undoing the rebranding scheme was simple enough to allow it to go on as if nothing happened.
Yet that episode also shows a company doesn't need a completely new name even if it is going in a wholly new direction. Netflix could have come up with exciting new branding for itself as it entered streaming and began making cool, engaging shows, but it realized it had a lot invested in the Netflix brand, despite it originally representing a way to rent movies over the internet. Changing the corporate identity would have cost it a lot more than simply ordering new letterhead and business cards.
In that respect Axon can only hope to achieve the success Altria has, perhaps one of the more successful name changes in corporate history. While it doesn't stop anyone from knowing it makes cigarettes -- arguably, it makes you think about it more -- its stock has enjoyed massive gains since it made the switch nearly 15 years ago, particularly if you include the spinoff of Philip Morris International in 2008.
The full picture
Axon's name change is certainly one that focuses on its new direction, not least because it adopts the name of its body cam business. Yet at first blush it would appear to be a situation similar to Smith & Wesson because TASER stun guns still represent more than 70% of total 2016 revenues. But that's down from 83% the year before and TASER sales rose just 24% compared to the 153% gain in the Axon division.
And Axon sales represent the bigger opportunity. According to TASER's own figures, almost 98% of the 18,250 or so police departments in the country have purchased its stun guns, meaning there's limited opportunity for future growth. While body cams have big potential -- it just announced Austin, Texas just became the 37th major city to buy its cameras -- the real future revenue stream will come from Evidence.com, its evidence management system.
Like a razor-and-blades business model, Axon can afford to give away its body cameras as it's offered to in exchange for hooking people into the evidence management system, which will become an extraordinarily sticky service once it is embedded in a department. It won't be easy for a police department to extract itself from Evidence.com because of the time, expense, and pervasiveness of the new system in transferring all that data.
American Outdoor Brands tries to make the same pitch for its new rugged outdoor market opportunity by saying it's a substantially larger market than firearms, but it is also a crowded field it will never dominate compared to the relative handful of major body camera and evidence management companies, which is already one of the leading names in the industry.
Seeing the TASER name taken down off the marquee is tough for those who respect the brand, but despite changing its corporate identity to Axon Enterprises, the new name is infinitely better than Tribune Publishing's decision to change its name to tronc, Inc. And whether you still call it TASER or by its new Axon Enterprise name, this is a company that still has the potential to register stunning growth in the future.