WHAT was once British Petroleum was rebranded as Beyond Petroleum. They could have called it Browne Petroleum, such was the influence of the great man in charge. Now, you have to wonder what BP stands for: Bad Positioning? Boardroom Politics? Beyond Parody?
BP is a company vulnerable on two fronts. It is more than just an oil major, it is a brand with a value swollen by its reputation for sound management and environmental innovation. That reputation is woven around the personality of its chief executive, Lord Browne of Madingley. The troubles now besetting the company touch on both.
In the US, BP has a series of political problems. The closure of the Prudhoe Bay oilfield was prudent, but it gave politicians in Washington a corporate scapegoat for soaring prices at the pump. In 2005, Browne had responded promptly and personally to the explosion at BP’s Texas City refinery, but
15 people were killed by the blast, nearly 200 injured and the company’s image was badly damaged. Then in June, the US Government accused BP traders of manipulating the market in propane.
Then there is the office politics. Lord Browne has announced that he will retire at the end of 2008 after he reaches the age of 60. Setting aside the arguments which brought about his decision to retire, his departure means that for the next two years Britain’s biggest company will be running the equivalent of Petroleum Idol: a knock-out competition to run BP. Then, set all this against the backdrop of a volatile oil price.
It is tempting to see Lord Browne in much the same predicament as Tony Blair. He is a man now looking to his legacy, dogged by the question of his succession and, for very different reasons, routinely troubled by America.
Lord Browne’s prospects look far better than the Prime Minister’s. The US mid-term elections in November should ease the political pressure on the company — there will be less mileage in bashing BP afterwards. The company has made clear Browne’s successor will come from the inside. Investors are beginning to recover underlying confidence in the company. But much will hinge on Lord Browne. He is a relentless advocate of the company, personally passionate about future energy technologies, a steady manager of his team and a political pro. He will need those skills: his last two years may well be his most testing yet. Not just his reputation, but the BP brand is at stake.
Logical steps
IT’S silly season, but it is still hard to make sense of the Logica deal. LogicaCMG already had a credibility gap over its acquisitions. If share price is the test, more appear to have been value-destroying than in shareholders’ interests.
The company’s case is that things would be worse without the mergers. Logica is a medium-sized player in a European market where growth is modest and margins under pressure from competition, not least from profitable, low-cost Indian software groups. As in any other mature sector, participants therefore turn to consolidation in lieu of growth.
In its new deal to buy Scandianavia’s WM-data, however, Logica is spending £882 million and boosting its equity base by a third to pay a 25 per cent premium for a company operating in an area where its own trade is modest. Hoped-for cost savings are therefore a less-than-thrilling £15 million a year.
The real purpose of the deal is to get bigger and therefore spread the risk of a group that still depends on a few key areas of expertise. But if Logica wants to become a global player that serves global customers, it has an awful long way to go: to Asia and America, for instance. That would mean more acquisitions, more merger risk and more potential sellers. For investors, wouldn’t it make more sense to sell the company at a premium to one of its Indian rivals?
Now and then
SO, FAREWELL then, NOW. No time like the present to lay to rest a bad idea. NOW was once a content company, launched alongside the excitable Richard Li’s extraordinary swoop on Hong Kong Telecom. In the not-so-recent past, it was established as a global television business, an offshoot of the futuristic Pacific Century CyberWorks. When that did not work out, it was relaunched in 2004 as a UK broadband provider. Once again, it was dripping in hubris: this time it promised to rival BT for high-speed internet access. Today, it has just 14,000 subscribers and its chief executive will not be replaced. It appears to be headed for the dustbin of history.
There is a lesson here about creating new media brands. The ones that work are more than businesses run out of reclaimed warehouses, fronted by groovy logos. They provide consumers with new services: Skype offers telephony, Google a search function, YouTube a new platform for user-generated content — a great distraction from actually working. What does not work is a convergence copycat commissioned by the CEO. Repackaging is no replacement for invention.
Richard Li’s futuristic business was called Pacific Century Cyberworks: PCCW. It was often confused with the accountancy firm PricewaterhouseCoopers, or PwC. Maybe a little management consultancy is what they need now.
jamesharding@thetimes.co.uk
