Cabletron unit coins new name

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Can a 30-year-old Harvard Business School graduate rebuild Cabletron Systems Inc. as a snazzy player in the enterprise network switching industry?

Garry K. McGuire Jr., exec VP-worldwide marketing and chief marketing officer at Cabletron unit Enterasys, will try. He wants to outflank big-name competitors Cisco SystemsInc., Lucent Technologies and Nortel Networks Corp. with a new corporate name--Enterasys Networks--and a focused message aimed at only four vertical industries. Enterasys is one of four spinoff businesses created when Cabletron split up its operations in February.

‘‘Our success will be measured in dollars and mindshare,’’ McGuire said. ‘‘Building a trusted [information technology] brand is something that’s taken Lucent, Nortel and others hundreds of millions of dollars to do. I think we can do it for a fraction of that, and within a year and a half’s time.’’

Using the slogan ‘‘Run with it,’’ Enterasys has begun a six-month, $20 million campaign that depicts athletes on the move. Developed by Herring Media Group Inc. and aimed at IT managers and CIOs, the advertisements cover the cutting edge of networking technology, from streaming video and data/voice convergence to click-to-talk browsers. The ads use examples of how these leading-edge technologies have been used in Enterasys’ four vertical industries: health care, financial services, government and education.

Next quarter, Enterasys will challenge its sales team to achieve a 50% penetration into the top 200 IT accounts in each of the four vertical markets.

‘‘Compared to what Nortel, Cisco and Lucent are going after, the segment of business we’re concentrating on is small,’’ McGuire said. ‘‘They’re saying they can bring the Internet to everyone. We’re not.’’ The company is betting its future on the belief that information technology buyers are tired of the sweeping messages. In October, Nortel launched the $100 million ‘‘Come together’’ campaign, replete with nerds and regular folk lip-synching the famed Beatles song. Ending with the question, ‘‘What do you want the Internet to be?’’ the campaign is a prime example of the ‘‘solve everything’’ message most networking companies are employing.

‘‘Everyone is saying they help businesses do business better, but we’re showing improvement in specific business practices,’’ said McGuire, who switched from selling computer equipment to marketing while at Nortel. In February, McGuire bolted from his most recent job as VP-solutions marketing at Compaq Computer Corp.’s $3 billion enterprise server business to join Enterasys.

Billions at stake

Despite a focus on just four markets, billions of dollars are at stake for Enterasys. If the current campaign boosts the voice, video and data networking company’s penetration in the four markets, Enterasys ought to be the biggest new brand on Wall Street next spring, McGuire said. The company plans an IPO early in 2001.

But the clock is running. Although 15-year-old Cabletron preceded Cisco Systems by eight years, its growth had been stymied. At the same time, the enterprise switching market has expanded at an explosive rate, growing 69% to $13 billion in 1999 and $20 billion in 2000, according to research firm IDC Inc. The market will reach $30 billion by 2004, IDC predicts.

‘‘Enterprises don’t make a decision on switches and change everything tomorrow,’’ said Katrina Dahlquist, senior research analyst with IDC. ‘‘It is a slow progression of upgrades and modifications.’’ But rapid growth in the market has given everyone a sense of expediency, she said. ‘‘The Cabletron name had a legacy problem. Doing away with it gives Cabletron just enough time to [deploy] their branding strategy.’’

Enterasys, with 2,200 employees, expects annual revenues of roughly $750 million in its first year.

Enterasys is focusing its marketing in industry trade publications targeted at finance, health care, government and educational IT buyers. In those verticals, Cabletron had done a good job selling hardware along with premium-priced services tailored for the special needs of those IT managers. From a technology standpoint, it will push its ability to deliver a ‘‘total visibility network,’’ meaning an IT manager can tell where a specific computer on its network has gone down.

Yet Enterasys is taking a big risk, said Al Ries, chairman of the marketing strategy company Ries & Ries Inc.

‘‘It doesn’t sound like the right direction,’’ Ries said. ‘‘People want to place their bets on the technology rather than market expertise. Even in a prosaic business like tires, Michelin became a big brand based on the fact they had radial-ply tires. Focusing on services in specific markets is helpful, but it will be difficult to sustain over the long term. Why would anyone want to do business with Enterasys unless they are a technology leader?’’

Moreover, health care, education and government are difficult verticals to exploit, said Robert Rosenberg, president of telecommunications competitive market research specialist Insight Research Corp. Finance is Enterasys’ only promising vertical industry, he said.

‘‘Enterasys should pick some verticals that are on a roll,’’ Rosenberg said. ‘‘Health care, education and government are the three paupers. Can you imagine any of those verticals saying they have money to spend? All are complaining about budget cuts and austerity.’’

Battling deep pockets

Another challenge is the fact that Enterasys is fighting some huge players with deep marketing pockets. According to Competitive Media Reporting, Cisco spent $6.6 million on b-to-b advertising in the first quarter alone. Lucent spent $11.1 million during that period and Nortel $6.1 million.

And new name or not, Cabletron’s weak reputation with IT executives may continue to haunt Enterasys, experts said.

‘‘Lucent had tremendous brand traction because of AT&T’s reputation, a tremendous public relations machine working behind it and $100 million in advertising spent over the first six months,’’ said James Gregory, CEO at global communications and research firm Corporate Branding L.L.C. ‘‘Enterasys has neither the power of the previous brand nor the size to support massive advertising. There will be a lot of pressure to establish the name quickly.’’

Currying favor

Stealth is a key to the campaign. For instance, the company has been concentrating much of its effort on currying the favor of technology analysts, who can make or break a new vendor. And McGuire hired former Compaq executive John Smyrnos to develop solution kits for marketing to each of the four vertical industries. A print and TV campaign planned for the start of 2001 will deliver a broader message, McGuire said.

One thing McGuire can’t get around is Enterasys’ made-up name. It is drawn from ‘‘entera,’’ which means ‘‘whole’’ in Spanish, and ‘‘sys,’’which is derived from the word ‘‘system.’’ Some marketing experts see the new name as a problem.

‘‘Usually words sound better than they look, but in this case, Enterasys looks better than it sounds,’’ Gregory said. ‘‘ ‘Enter a system’ is the logical interpretation. That’s not all that bad, but they’ll need to get in front of the message and communicate the meaning of the new name.’’

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