Nortel Networks Corp. yesterday unveiled its first significant advertising campaign in four years, aiming to rebuild its brand name among business leaders after suffering through the brutal telecommunications industry bust.
"This is truly a brand campaign," said Bruce Horner, Nortel director of global branding and advertising. "The past three years have been really hard on the whole sector. Now, we're very optimistic and bullish about where we are as a company. This is an important signal for the marketplace."
The Brampton, Ont.-based network equipment maker plans to spend as much as $15-million (U.S.) on mostly newspaper and magazine advertising in business-orientated publications around the world. The aim is to raise Nortel's profile among senior business people, such as chief executive officers. These high-ranking officials are now more than ever directly involved in decision making when companies buy network equipment.
The last time Nortel promoted its name in this fashion was 1999. Back then, in the middle of the boom, the company spent about $50-million on a much bigger effort that included television and whose musical theme was provided by the Beatles' Come Together.
Cisco Systems Inc., a Nortel rival and the world's No. 1 network gear maker, is in the middle of a similar campaign, spending more than $100-million to ingrain its name in people's minds.
"[Ours]is a lot more focused," Mr. Horner said. "I would describe it as surgical. We don't need a $100-million budget. We're not going to be a mass market advertiser."
Willa Black, a Cisco Systems Canada Co. spokeswoman, said Cisco's efforts have been successful globally and have improved its name recognition in Canada, where it stands alongside such companies as International Business Machines Corp.
"Our overall top-of-mind awareness with business leaders and technical decision makers has increased significantly," Ms. Black said. She added that the Cisco campaign -- which began in June -- will continue into the company's second quarter, the coming November-January period.
Duncan Stewart, a partner at Tera Capital Corp. in Toronto, said the Nortel campaign is a positive sign. Mr. Stewart, a Nortel shareholder, compared the company with a recovering coma patient. Last fall, when Nortel stock fell lower than $1, it was barely breathing. Today, Mr. Stewart said, it's talking.
"As a shareholder, I'm excited," Mr. Stewart said. "This is one of those watershed-type things. It obviously indicates they have a confidence that brand-building is useful. You don't build brand when you're worried about survival."
Cisco is far better positioned financially to assert itself through advertising than Nortel. Cisco has posted a profit for the past seven quarters. As of July 26, the San Jose-based company had $8.49-billion in cash and short-term investments on its balance sheet. It has no long-term debt.
Nortel has made money in just one quarter since 1999, the January-March period this year. While Nortel had $4.19-billion in cash as of June 30, it also had $3.88-billion in long-term debt and several hundred million in restructuring costs before the end of this year.
Lehman Brothers Inc., in a report yesterday, said Nortel has essentially hit break-even after two years of hard cost cutting but sales growth is a challenge.
"Good sales growth is needed to drive material earnings growth," Lehman analyst Steven Levy said, "and the outlook remains highly unclear."
The Nortel campaign began yesterday in Canada in The Globe and Mail with a full-page colour advertisement on the back of the Report on Business. Tomorrow, it moves internationally to The Wall Street Journal. Nortel plans to include other papers such as the Financial Times in London as well, Mr. Horner said.
"It's very different from what we've done before," he said. "The ads are evocative and emotional."
In the past, Mr. Horner said, Nortel advertising tended to focus on products. This campaign focuses on an idea, the theme being that Nortel products eliminate boundaries. This includes providing the equipment to bridge wireless and fixed-line networks, which is supposed to make workers more productive.
"The entire company," Mr. Horner said, "is feeling optimism and galvanized to rebuild the brand."