Next Fifteen Communications Group Plc (NFC), whose value has dropped by a quarter since the public relations firm revealed costs of a digital makeover, knows that everyone likes a comeback story.
The company polished the image of a foundering Cisco Systems Inc. (CSCO:US) by raising the profile of the CEO and improving transparency at the biggest maker of networking equipment. PRWeek magazine called it the 2013 campaign of the year.
Now it’s BlackBerry’s turn. And if Next Fifteen succeeds in helping the smartphone maker regain market share, the London-based P.R. company may itself become a comeback kid, said Roddy Davidson, an analyst at Westhouse Securities.
“They’ve had a strong base of blue-chip clients, almost freakishly strong for a company their size,” Davidson said in an interview. The BlackBerry contract, announced last month, is “a significant feather in their cap in terms of validation of what they are able to deliver.”
Next Fifteen shares have dropped 26 percent since April 23, when it said a two-year digital transition -- through restructuring, investment and acquisitions -- will cost about 2 million pounds ($3.1 million). The stock was unchanged at 84 pence yesterday, valuing the company at 50.2 million pounds.
The decline from a 12-year high on April 11 is a “clear overreaction” and presents a potential 36 percent upside for investors, Davidson said.
Next Fifteen, with clients such as Amazon.com Inc. (AMZN:US), Facebook Inc. (FB:US) and Microsoft Corp. (MSFT:US), would “miss a very significant opportunity” if it doesn’t push digital services immediately, Chief Executive Officer Tim Dyson said in an interview from Palo Alto, California, where he’s based.
Client requests for branded online content, social media interaction with customers and web success measurements have hastened digital efforts, said Dyson, 52, who joined Next Fifteen straight out of college and became CEO eight years later in 1992.
“If you put a name into Google and that generates content you don’t like, that’s a really bad outcome for a brand these days,” he said.
With BlackBerry, Next Fifteen faces the task of refreshing the reputation of a brand that has lost business to Samsung Electronics Co. and Apple Inc.
It’s “a fabulous challenge” to ensure that 76 million BlackBerry customers remain loyal while marketing encourages people who previously rejected the product to have another look, Dyson said. Next Fifteen’s Text 100 division joined with Brunswick Group LLP to revive Cisco, and will work alongside APCO Worldwide Inc. to change BlackBerry’s (BB) fortunes.
Engaging in dialogue with a brand’s detractors is one public relations approach in such cases, Dyson said. A product is more likely to get a second chance if people perceive genuine intent that’s “good and honorable.”
“We try to develop content that is very shareable, that has a high degree of interaction, that’s often quite visual in nature,” Dyson said. He declined to specify plans for BlackBerry.
Next Fifteen is buying “insight” businesses that help target campaigns, including the purchase in April of Connections Media, a public affairs specialist in Washington, said Anthony Cross, a fund manager at Liontrust Asset Management, Next Fifteen’s majority investor with 58 percent.
“When making the transition, there will be people who haven’t got the skill set in digital P.R. and you need to accrue people,” he said. The company forecasts digital revenue will grow to more than 50 percent of sales by 2015, from 43 percent.
Agencies run by early adopters of technology drive change themselves “because they’re chomping at the bit to do anything that is new and different,” said Clea Bourne, a promotional media professor at Goldsmiths University of London. Others need to enlist help.
Next Fifteen will retrain some workers, hire expertise and eliminate some positions, Dyson said. The company has hired about 100 software developers in two years. It will continue to explore acquisitions in Europe and Asia, particularly in market insight, said Dyson, who owns about 8.4 percent of the stock.
Next Fifteen, with 1,100 workers and offices in 17 countries, competes against companies including WPP Plc (WPP), valued at 14.6 billion pounds. While a handful of huge P.R. firms dominate an industry pursuing a $500 billion advertising market, small organizations are sometimes favored because they are in tune to a company’s “perceived identity,” Fiona Orford-Williams and Iain Daly, Edison Investment Research analysts, said in a June 12 note.
“The delivery of content and marketing more and more in real time, and across multiple channels, presents agencies with significant challenges in implementation, consistency and flexibility,” the analysts said. “The skill sets to deliver all of these are in short supply.”
Davidson of Westhouse cut earnings estimates for this year and next, in part on digital revamp costs, though he said recognition of the company’s potential may change rapidly. His stock prediction of 114 pence is the lowest among three analysts who share targets with Bloomberg. Canaccord Genuity last week reiterated a 130-pence target, while Peel Hunt predicts a rise to 120 pence.
“There aren’t really many traditional public relations companies that compare or that have been as proactive as Next Fifteen,” Davidson said. “The share price could potentially reverse quite quickly.”
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