Licensing and Divesitures

August 11, 2005

Brand licensing is often talked about as means to extend a brand into new categories, to grow a brandís footprint or create new revenue streams by leveraging equity in new markets. But licensing can be a tool to facilitate divestiture, too.

When AT&T spun off AT&T Wireless in 2001, the AT&T name and logo were vital in helping Wireless both leverage the equity in the AT&T brand and project a seamless AT&T experience for wired and wireless customers. Yet AT&T still needed to own the mark ñ so they could manage its use and dictate any modifications to the mark into the future. A brand license was set-up between the two companies to address these needs. With the sale of AT&T Wireless to Cingular last year, this license was revised accordingly to help transition existing customers and enable Cingular to put the mark to use in marketing communications. The transition now complete, Cingularís rights to the AT&T mark have expired ñ though they did fully adopt some elements associated with the Wireless brand (like "How many barsÖ?")

Just a few months ago, IBM exited the PC business in a sale to Lenovo, the Chinese manufacturer that had essentially been building the products for the past several years. As part of the deal, Lenovo not only purchased the Think names (ThinkPad, ThinkCentre, etc.), but has also created a licensing agreement for limited use of the IBM name for a period time ñ which I believe to be for 5 years.

For IBM, allowing their brand to be used by someone else on a product line so intimately connected to their heritage is no small matter. Yet once the business decision is made that PCs can no longer be a profitable endeavor, licensing enables IBM to transition the business in a manner that can be controlled and managed.

Ultimately, Lenovo hopes to build its own equity, as well as evolve the "Think" line to a stand-alone PC brand. But to do that requires, for a time, a bridge that a license for the powerful IBM brand provides. Meanwhile IBM understands that a licensing relationship will help to positively transition the customer experience and contribute to the long-term health and vitality of the IBM brand.

- Jonathan Paisner

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