Can a Company Save Itself With a Name Change?

Answers to your questions about the news.
Jan. 31 2013 12:29 PM

Do Corporate Name Changes Ever Work?

BlackBerry joins Sony, Exxon, Datsun, and Unisys in an expensive gamble.

BlackBerry Chief Executive Officer Thorsten Heins speaks in front of a display of one of the new Blackberry 10 smartphones at the BlackBerry 10 launch event by Research in Motion on Jan. 30 in New York City.
BlackBerry Chief Executive Officer Thorsten Heins speaks in front of a display of one of the new Blackberry 10 smartphones at the BlackBerry 10 launch event by Research in Motion on Jan. 30 in New York City.

Photo by Mario Tama/Getty Images

Research in Motion, the maker of the BlackBerry smartphone, changed its corporate name to BlackBerry on Wednesday. Do name changes save struggling companies?

Not usually. Most studies show that a name change has either little effect on a business’s long-term prospects or a mildly negative impact. A study of U.K. corporations, for example, showed that name-changers underperform compared with the overall stock market by almost 10 percent over the three years following the switch. That’s on average. Subdividing the data makes the future look even bleaker for BlackBerry, because the companies that tend to profit from name changes are fledgling businesses. When a new company changes names, it’s usually to broaden its product offerings or market reach. (A young company called Tokyo Tsushin Kogyo changed to Sony in 1958 so that Western consumers would have an easier time pronouncing the brand name.) When an established company changes names, it’s usually to break out of a slump—and it rarely works. Research in Motion/BlackBerry has seen its stock price drop 90 percent since its 2008 high. Corporations with falling stock prices prior to a name change perform even worse in the three years afterward, in part because the move smacks of desperation to investors. Shareholders don’t seem overly impressed with Research in Motion’s new moniker at this point. Although companies, on average, get a minor 4 percent bump in the days immediately following a name change, BlackBerry’s stock is down 12 percent after Wednesday’s announcement.

Changing names is quite expensive for a big company. Nissan originally sold cars in the United States under the name Datsun to protect the Nissan brand in case the new venture failed. Changing the name back to Nissan in the mid-1980s cost the company between $30 million and $100 million. In an interesting twist, Nissan is now spending millions to relaunch the Datsun brand. Navistar (formerly International Harvester), Unisys (the successor to Burroughs and Sperry), and UAL (United Airlines, briefly called Allegis) also spent tens of millions of dollars on advertising, headquarter redesigns, marketing consultants, and signage to reflect name changes.

Advertisement

These short-term expenses are nothing compared with the risk of naming a corporation after a single product or brand. If some calamity befalls its flagship, the corporation finds it difficult to escape the taint. When BP and Amoco merged in 1998, the company spent hundreds of millions of dollars erasing the Amoco name from 9,000 stations across the United States and remodeling them to reflect the BP brand. However, after the 2010 Deepwater Horizon oil spill soiled the Gulf of Mexico and BP’s reputation, investors urged the company to revert U.S. stations to the Amoco name.

There have been plenty of successful name changes. Some of the world’s largest corporations have rebranded themselves. In addition to Sony, Nike (Blue Ribbon Sports), Exxon (Standard Oil Company of New Jersey), and Olympus (Takachiho Seisakusho) all began with different names. But these success stories are simply highly salient exceptions rather than the rule.

The Explainer has one hot tip for investors: Companies can get a major bump by changing their names to take advantage of market hysteria. A pair of studies in 2001 and 2005 showed that companies that added “.com” to their names during the bubble of the late 1990s received a massive stock spike of 74 percent in the days after the announcement. Companies that dropped “.com” after the bubble burst earned a nearly equivalent 64 percent surge.

Got a question about today’s news? Ask the Explainer.

TODAY IN SLATE

History

The Self-Made Man

The story of America’s most pliable, pernicious, irrepressible myth.

The GOP Senate Candidate in Iowa Doesn’t Want Voters to Know Just How Conservative She Really Is

Does Your Child Have “Sluggish Cognitive Tempo”? Or Is That Just a Disorder Made Up to Scare You?

Naomi Klein Is Wrong

Multinational corporations are doing more than governments to halt climate change.

The Strange History of Wives Gazing at Their Husbands in Political Ads

Television

See Me

Transparent is the fall’s only great new show.

Doublex

Lena Dunham, the Book

More shtick than honesty in Not That Kind of Girl.

Rehtaeh Parsons Was the Most Famous Victim in Canada. Now, Journalists Can’t Even Say Her Name.

Parents, Get Your Teenage Daughters the IUD

The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
Moneybox
Sept. 30 2014 12:04 PM John Hodgman on Why He Wore a Blue Dress to Impersonate Ayn Rand
  News & Politics
Politics
Sept. 30 2014 1:38 PM Mad About Modi
 Why the controversial Indian prime minister drew 19,000 cheering fans to Madison Square Garden.

  Business
Building a Better Workplace
Sept. 30 2014 1:16 PM You Deserve a Pre-cation The smartest job perk you’ve never heard of.
  Life
Education
Sept. 30 2014 1:48 PM Thrashed Florida State’s new president is underqualified and mistrusted. But here’s how he can turn it around.
  Double X
The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
  Slate Plus
Slate Picks
Sept. 30 2014 11:42 AM Listen to Our September Music Roundup Hot tracks from a cooler month, exclusively for Slate Plus members.
  Arts
Brow Beat
Sept. 30 2014 12:42 PM How to Save Broken Mayonnaise
  Technology
Future Tense
Sept. 30 2014 11:55 AM The Justice Department Is Cracking Down on Sales of Spyware Used in Stalking
  Health & Science
Bad Astronomy
Sept. 30 2014 7:30 AM What Lurks Beneath the Methane Lakes of Titan?
  Sports
Sports Nut
Sept. 28 2014 8:30 PM NFL Players Die Young. Or Maybe They Live Long Lives. Why it’s so hard to pin down the effects of football on players’ lives.