Hits & Misses

Company bets that paid off and those that bombed.

By David Jacobson, Business 2.0 Magazine

(Business 2.0 Magazine) -- [MISS] Leave out the beaver. Memorable ads lead to memorable results, right? Not always. After unveiling a well-received campaign featuring Abe Lincoln and a bucktoothed rodent, Japanese drugmaker Takeda has seen drowsy sales of its new sleeping pill, Rozerem. Despite more than $110 million spent on advertising in 2006, Rozerem took in only $76 million, grabbing just 2 percent of a market dominated by Sanofi-Aventis's Ambien (76 percent) and Sepracor's Lunesta (17 percent). Why the sleepy response? Industry-watchers say the ads' intriguing weirdness diverted attention from Rozerem's key point of differentiation: It's the first prescription insomnia med that you can't get hooked on.

[HIT] Streaming dj vu. While YouTube and other Web 2.0 sites struggle to monetize their traffic, Web 1.0 bellwether Cisco Systems (Charts, Fortune 500) is having no such problem, thanks to the newbies' need for vast numbers of routers and switches to deal with video's bandwidth requirements. Slinging old-school slang, CEO John Chambers called video "the killer application" driving demand as Cisco posted record sales and 40 percent profit growth in its most recent quarter. Bernstein Research noted that streaming one 30-minute sitcom uses the bandwidth of two years' worth of e-mail for an average user. "Conservative assumptions lead us to forecast 60 percent bandwidth growth per year for a decade," the analysts said. "As bandwidth grows, we expect router sales to follow."

[MISS] Late to the party. After sitting out most of the decade-long U.S. housing boom, in 2003 British banking giant HSBC Holdings decided to join the fun, buying U.S. lender Household International for $14 billion. HSBC soon became one of the largest players in the market for subprime mortgages--the higher-rate loans given to riskier buyers. But with rising interest rates squeezing borrowers, HSBC (Charts) said in February that it will set aside an extra $1.8 billion to cover potential losses, citing defaults on loans based on "stated income," as well as $11 billion in exposure to high-risk second mortgages. The news was followed by the departure of two of HSBC's top U.S. executives and by Wall Street analysts cutting earnings estimates by about 8 percent.

[HIT] Now spamming at a theater near you. If there's anything marketers love, it's a captive audience. Hence their love of National CineMedia (Charts), which has ridden a surge in movie-theater advertising to more than $200 million in annual revenue and one of the most successful IPOs of the year. Formed in 2005 by the three biggest U.S. theater chains, the startup packages slickly produced preshow programming and distributes it via satellite to a network of 11,000 digital projectors, letting advertisers target audiences by movie rating and theater location. In February, CineMedia took its success to the bank, selling a 40.5 percent stake for about $800 million; the stock then jumped 30 percent in its first two weeks of trading.

[HIT] Soupercharged. Campbell Soup has been selling a reduced-sodium line since the 1980s, but despite the nation's ever-increasing appetite for healthier fare, the blanditarian offering has never lived up to the company's expectations. At least not until last August, when Campbell reformulated its recipes with a special type of sea salt naturally lower in sodium. The 32 varieties that resulted helped the company increase U.S. soup sales by 4 percent for the six-month period ending in January; even better, their fatter margins led to a quarterly profit boost of 13 percent. Analysts say the line has also helped the iconic brand to expand its already dominant market share by nearly 3 percentage points. And thanks to Campbell's clever dealmaking, that trend isn't likely to change: Though the company won't provide many details about its new NaCl, it's more than happy to divulge that it has locked in an exclusive source.  Top of page

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