United Technologies must drop its modesty

Weekly Corporate Growth Report, Nov 12, 2001 by Rock, Justin

The United Technologies Corp. has been forced to make some strategy changes since the terrorist attacks of September 11. The company, lown for its Otis elevators, Pratt & Whitney engines, Carrier air conditioners and Sikorsky helicopters, must find a way to convince investors to stop selling off their once prized stock.

UTC is a $27 billion conglomerate that has posted 28 straight quarters of beating Wall Street's earnings expectations. However, the firm did not receive much attention during the 90's as many investors were attracted to the new crop of high tech stocks. UTC just sat back and made itself a earnings powerhouse.

But after the unforeseen events of this year, CEO George David has the company's strategy in transition. First, David's plan to turn UTC into an even larger player took a hit when GE scooped up Honeywell International just minutes before David could seal the deal. Then, after UTC successfully thwarted GE's deal in July, some of the firm's key units were launched into disarray on September 11. The attacks ended UTC's amazing consecutive earnings record and scared investors away. The stock price fell 26 percent in the first day when trading resumed on September 17.

On October 16, David announced that UTC will only meet expectations this quarter, which still is a 14 percent increase in third-quarter earnings to $565 million. He also stated that the downturn could cut $250 million from fourth-quarter profits. The company must now become more vocal to lure investors back.

Changing UTC's image, or lack there of, will be a significant aspect of convincing investors that the firm's prospects are sound. The fact that UTC's name does not appear on any of its products is not going to help. So when London ad agency Euro RSCG Wnek Gosper began developing new ads for the company two years ago, it found it had to compensate for a corporate culture based in modesty. An example of the new campaign is the advertisement that shows UTC scienfists in suits and sunglasses (imitating the trailer for the movie Reservoir Dogs) with the slogan "The Punks Who Killed Heavy Metal." In other words, UTC is on the cutting edge of technology.

UTC's stock price has already rebounded to around $53 from its post-attack low of $41.64. If the firm continues its focus on double-digit earnings and lets people know who they are, UTC may become one of the most stable conglomerates on the market.

Source: Business Week, Hoovers.com

By Justin Rock

Editor