Technology Ads for the Masses

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SAN FRANCISCO -- Prime-time television is getting a tad too geeky. Blame it on the ubiquitous "Intel Inside" ads, but another Silicon Valley giant is reaching out to middle America.

Cisco Systems

(CSCO) - Get Report

, the undisputed champion of computer networking equipment, plans to blow half its annual ad budget, up to $30 million, this year on television advertising.

San Jose, Calif.-based Cisco, a darling of Wall Street, wants to build a brand name and push its logo "Cisco Networks" to break through its anonymity with the masses. Among the benefits: Companies with strong brands tend to do better in downturns, because they're able to attract individual investors who tend to buy and hold.

Cisco, with nearly $8.5 billion in sales in fiscal 1998, is the main supplier of equipment used by businesses, Internet-service providers like

America Online

(AOL)

and phone companies preparing to hook themselves and customers up to the Internet. But it doesn't sell anything directly to consumers; you can't buy Cisco products at

Nobody Beats the Wiz

or

Circuit City

(CC) - Get Report

.

"We don't have any consumer products, per se," acknowledges Keith Fox, Cisco's vice president of marketing. But the company's TV ads aren't just a move to pump up the corporate ego. Rather, Fox says, Cisco is pursuing a strategy of "ingredient branding," aiming to create a mass brand much in the way

Intel

(INTC) - Get Report

, with its seven-year-old "Intel Inside" campaign, made its PC microprocessors the chips of choice among consumers.

Cisco's

TV spots

began running this week in the 20-largest U.S. markets. The ads, which are slated to run during sports, news and prime-time network programs, complement ongoing print and online campaigns.

The series of three 30- and 60-second spots, which bear the tagline "Empowering the Internet Generation," were shot in New Orleans, London, Spain and Vietnam. One features serious-looking children -- backed by solemn-sounding music -- reciting facts about the spectacular growth of the Internet ("The Web has more users in its first five years than the telephone did in its first 30") and making prognostications about its future ("One day, the Internet will make long-distance calls a thing of the past"). The ads note that all "Net traffic flows through Cisco's equipment" and end with the challenge, "Are you ready?"

"If you're not ready for this new Internet economy, you better get ready, you better do something," says Mike Massaro, who heads the Cisco account for the San Francisco-based agency

Goldberg Moser O'Neill

.

Last year, Cisco launched a cobranding effort, called "Cisco Powered Network," with Internet service providers, local phone companies and cable providers. The goal is to convince consumers that Cisco makes the most reliable and secure network gear available and that they should choose services that use Cisco's products. That could have tremendous implications for Cisco's future growth if, as the company projects, the network of tomorrow carries voice, data and video on one system, using the Internet Protocol, or IP, transmission technology.

With the move toward unified voice and data networks, Cisco is coming into direct competition with much larger companies, telecom equipment makers

Lucent Technologies

(LU)

and

Northern Telecom

(NT)

. "But the real benefit to a company like Cisco is probably minimal at this point. Within the customer base, they're as well-known as they're ever going to be."

But it will be a different story with investors. Creating "brand equity" can help companies reduce the volatility of their stock price, says Michael Murphy, editor of the

California Technology Stock Letter

. Before the Pentium rollout and subsequent "bunny suit" commercials, 68% of Intel's shares were held by institutional investors; that figure is now down to 45%. Currently, some 67% of Cisco's shares are in the hands of institutions. According to

Baseline

over the past five years, Intel's stock has been 9% more volatile than the

S&P 500 Index

, while Cisco's stock has been 58% more volatile.

"Advertising attracts individual shareholders to your company," says Murphy. "It gives you a base of loyal shareholders rather than a group that sells because some Wall Street analyst got up grumpy that morning."

For more info on institutional holders of this stock, as well as financial statements and earnings estimates, please see the

Thomson Company Reports.