Split decision is Microsoft's 'biggest brand challenge'

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As Microsoft Corp. enters the appeals phase of its long-running antitrust case, its biggest challenge may be outside the courtroom. The software giant must continue to market its products and brand even as its corporate identity remains in limbo.

On June 7, U.S. District Judge Thomas Penfield Jackson ruled Microsoft should be divided into an applications company and an operating systems entity. The company wasted no time asking for an appeal and a stay on court-ordered remedies to allow it to operate unfettered while the appeal is pending.

"This is probably the biggest branding challenge they've ever faced, but I think they're up to it," said Michael Goulde, exec VP at Patricia Seybold Group, a consultancy.


Brand consultants, analysts and industry observers said the company should focus on repairing relationships with software developers and on promoting its vast portfolio of sub-brands, such as software programs Office, Excel and Word, and Internet portal MSN.

"Putting more focus on the sub-brands vs. on the corporate [Microsoft] brand would give them the ability to build equity at a second level," said Allen Adamson, managing director, Landor & Associates, New York, adding that even if Microsoft loses the case on appeal, it could easily migrate that equity into a new applications company.

Windows, Microsoft's ubiquitous operating system, for example, doesn't need the Microsoft corporate brand. "They've got to start driving equity into the product brands and making them stand away from Microsoft as much as possible," Mr. Adamson said.

Aaron Goldberg, VP-principal analyst for Ziff-Davis, agreed, but also said Microsoft needs to strengthen ties with the software

developer community, where "relationships have never been worse." A fact not lost on anyone at Microsoft, least of all, Chairman and Chief Software Architect Bill Gates, who recently announced $2 billion in developer support over three years.


"They've got a lot of friends to make," Mr. Goldberg said, especially among what he referred to as "alphageek" developers--young, up-and-comers who won't "touch Microsoft products."

Still others believe the company's biggest customers might be used in testimonial-style marketing and advertising.

"Did anybody bother to consult any customers about whether they were harmed . . . the people who give Microsoft their money?" queried Mr. Goulde of Seybold.

Mr. Goldberg and others believe Microsoft will beef up marketing and advertising coffers considerably for the next fiscal year, which starts July 1, spending on co-op marketing programs with partners, vendors, dot-coms and small, value-added resellers. Direct marketing will be key.

Microsoft spends close to a $1 billion in marketing globally. Its advertising agency of record, McCann-Erickson/A&L, San Francisco and New York, is responsible for more than $450 million in billings.

Microsoft broke a new corporate image TV spot by McCann on June 11. Mr. Gates, in the :30, addresses Microsoft's passion for next-generation software that helps people at work and at play and connects them to the Internet wherever they are. The spot is the third in a series the company has fired off since the original April 3 antitrust ruling, said Mark Murray, public affairs director for Microsoft.

Other forms of image communication were under consideration and could be deployed at various points during the appeals process, Mr. Murray added.


Key corporate initiatives loom: Next Generation Windows Services, the details of which will be released June 22; the further deployment of Windows 2000; and the forthcoming consumer Windows ME, all of which will require marketing initiatives.

"This isn't a one-year marketing fix," Mr. Goldberg said. "It's going to be a three- to five-year marketing fix, and they're going to act as supplicant for a long time."

Copyright June 2000, Crain Communications Inc.

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