Date: Fri, 17 Oct 1997 18:33:59 -0700 (PDT)
Subject: Troubled SyQuest to pump $35M into advertising Health-care provider puts alliances under microscope
======================================================================
Business Times staff writer
Banking on the theory that to make money you have to spend it,
Fremont's SyQuest Technology Inc. will pour upwards of $35 million
into a marketing campaign it hopes will return the company to
profitability.
The beleaguered removable hard disk-drive and cartridge maker,
which has bled losses for seven consecutive quarters and was
threatened with delisting from Nasdaq last year, said the campaign is
aimed at boosting top-line revenues.
In an interview, Ed Harper, SyQuest's chief executive, said the
company will spend $16.5 million in the next three months, and $25
million in 1998, as it seeks to penetrate previously untapped
markets, particularly PC users who have never bought a removable
drive before.
"The campaign is designed to reposition SyQuest and bring our
products to the forefront of people's minds," Harper said. He added
that the $36.5 million total is "by infinite dollars" the most
expensive marketing effort in SyQuest's history.
The broad-based media blitz features TV, radio, newspaper, and
magazine spots in 17 markets nationally.
The theme, "Explore Your Genius," cuts across a wide swath of
political and cultural spectrums, with ads appearing in everything
from the New York Times to Howard Stern radio broadcasts.
Silakhan Route Inc., a San Francisco marketing consultancy, is
providing the creative thrust of the campaign and producing the ads.
In an unusual arrangement, the firm is being compensated almost
entirely in warrants that can be converted to stock. Silakhan
officials said they stand to earn "seven figures" or "nothing"
depending on the success of their efforts.
Analysts applauded the campaign, but said it may not save the
company, which still has a long way to go to catch chief rival
Iomega Corp.
"This provides them a shot," said HD Brous & Co. analyst Howard
Rosencrans. "If they can produce a good product, they're back in the
game."
A noted Iomega supporter, Rosencrans recently raised his rating on
SyQuest from "neutral" to a "speculative trading buy."
SyQuest's troubles have been well-chronicled. While Utah-based
Iomega enjoys a considerable lead in the installed base of its
products and has become a $1.8 billion company from $150 million
three years ago, SyQuest has languished.
But recent changes - including a new management team and $159
million in financing during the past 16 months - has given the
moribund company new life, analysts said.
Rumors that SyQuest will unveil a new version of its flagship
SyJet removable cartridge with 1 gigabyte in storage capacity next
month has fueled a minor rally in the company's stock, which in early
October climbed above $5.50 after hovering below $3 for much of the
year. Two years ago the stock hit a high of $17.
The new drive is expected to sell for about $299 - or $100 less
than Iomega's similarly positioned and popular Jaz removable storage
product.
Analyst Rosencrans said the product has "substantial market
opportunity at that price point."
In its latest effort at revival, SyQuest is borrowing a page from
Iomega by focusing its advertising on the masses, CEO Harper said.
The company's traditional market has been professionals in the
desktop publishing area.
Paul Losee, an Iomega veteran and now a managing partner of
Silakhan, said themes will target PC customers such as home office
users, artists and families.
Patrick Tenney, an analyst with BancAmerica Robertson Stephens &
Co., cautioned that it was "too early to tell" if SyQuest has the
momentum to turn the corner.
"The run up in stock and the huge trading volume is people hoping
for a turnaround," he said.
On Oct. 15, SyQuest stock closed at $4.75, unchanged. |
