Mergers bring myriad marketing challenges

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Within a four-day period last month, a remarkable flurry of merger and acquisition activity involving b-to-b marketers took place.

First, on Dec. 13, Oracle Corp. announced that its 18-month hostile takeover bid for PeopleSoft had resulted in a $10.3 billion deal.

Two days later, Sprint Corp. and Nextel Communications announced plans for a $35 billion "merger of equals." The following day, Symantec Corp. unveiled its plan to acquire Veritas Software Corp. for $13.5 billion.

Next comes the task of integrating these companies. Among the marketing challenges are merging two disparate brands and fighting off competitors that try to take advantage of uncertainty created by the M&A activity.

Of the three transactions, observers say the Oracle-PeopleSoft deal may face the highest hurdles. Complicating it is the fact that Oracle is essentially acquiring two enterprise software companies: PeopleSoft and J.D. Edwards & Co., which PeopleSoft bought in 2003. "Oracle has a difficult road ahead," wrote Forrester Research analyst Paul Hamerman, who said the company may find it difficult to retain customers and employees.

In the marketing arena, Oracle will have to reconcile two competing brands. "In many cases the attributes of the brands of PeopleSoft and Oracle were on opposite poles," said Yankee Group analyst Mike Dominy.

Oracle garners higher marks for familiarity, according to branding consultancy CoreBrand, but PeopleSoft outperforms Oracle in terms of favorability. "Oracle is clearly known as hard-nosed, take no prisoners, don't screw around, hard charging. PeopleSoft is much warmer and fuzzier," said Russ Meyer, executive strategy director at branding consultancy Landor Associates.

Over the past 18 months, as Oracle was preoccupied with PeopleSoft, competitors tried to exploit the uncertainty. Microsoft Corp., for example, recently announced a "migration program" for PeopleSoft and J.D. Edwards customers.

More important, SAP, the leader in the arena, has positioned itself as a stable option amid the uncertainty in the rest of the industry. A few days after Oracle announced its hostile takeover bid, SAP ran advertisements in the Financial Times, The Wall Street Journal and elsewhere. The headline read, "A few words of comfort for customers of PeopleSoft and J.D. Edwards, just when you need it most." The body copy asked for the order: "If you decide to consider SAP, we'll create a customized offer based on the value of your PeopleSoft and J.D. Edwards investment."

SAP says its marketing campaign, which also included a press and analyst relations component, has paid off with market share gains. The company also said that Oracle CEO Larry Ellison's public proclamations about discontinuing PeopleSoft and J.D. Edwards software helped emphasize SAP's positioning.

"[Ellison] was actually the best marketing guy I had," cracked Herbert Heitmann, SAP's head of global communications.

Symantec and Veritas

The integration of Symantec and Veritas will also pose challenges, though likely less difficult than Oracle-PeopleSoft. For Symantec, the acquirer in this deal, a key marketing challenge may be convincing the market that it is more of a b-to-b brand than a consumer one. "If I were Symantec, I would work on changing the perception of the market that they're a consumer company," said Stephanie Belaouras, senior analyst at Yankee Group.

The acquisition of Veritas, which sells storage software, may help alter that perception. Symantec said that 75% of the business of the combined company will be enterprise-oriented.

In the meantime, however, Symantec faces a question often posed by mergers: How long does it maintain the Veritas brand? Symantec spokeswoman Genevieve Haldeman, while characterizing discussion of marketing specifics as "premature," said, "Initially, our plan is to keep the Veritas product and brand name until we're able to transition them into the Symantec brand. We'll certainly look to leverage the brand equity they've generated in the market."

The Sprint and Nextel deal won't close until the second half of 2005, so the companies are reluctant to discuss specifics of marketing plans. "It's still business as usual," said a Sprint spokesman. "We continue to compete vigorously against Nextel until the merger receives the necessary approvals from the regulatory agencies."

Still, some branding aspects appear to be taking shape for the combined company, which will be called Sprint Nextel. Both brands have strong familiarity and favorability ratings, with Sprint possessing stronger familiarity ratings but Nextel having stronger favorability numbers, according to CoreBrand.

"I would change the name to Nextel instead of Sprint," said Al Ries, chairman of branding consultancy Ries & Ries. "Just as a word, Nextel has some connotation of advanced communications. Sprint sounds like running shoes."

Sprint Nextel could be No. 1

No matter what the ultimate name, the combined company has as key targets the enterprise and small-business markets. "The merger could boost Sprint Nextel to a No. 1 overall share in the U.S. mobile business services segment across job categories, combining Sprint's white-collar customers with Nextel's blue-collar base," wrote Forrester analysts Charles S. Golvin and Lisa Pierce.

A method that Nextel has used to target a wide range of business customers and prospects-as well as consumers-is its title sponsorship of NASCAR's Nextel Cup. This sponsorship appears likely to remain when the companies officially join forces.

"The NASCAR relationship has been a very exciting relationship for Nextel, probably the most or the best investment we have made in marketing since we've been in the business," said Tom Kelly, Nextel's COO, during the conference call announcing the deal.

"We're in flight already with the planning for that," said Gary Forsee, Sprint's chairman-CEO. "It would be the Nextel Cup in 2005, and we'll certainly work with the appropriate branding for that in the future." 

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