This venerable watch firm heads into the ’90s with a diversified product line and a new stress on quality, styling and service
Bulova isn’t Bulova anymore.
At least it isn’t the inventory-fat firm that stumbled wheezing and gasping for fiscal breath into the 1980s. Today, it’s a lean and innovative corporate machine.
A tip-off to the change is its new name: Bulova Corp., not Bulova Watch Co. The name change represents a new Bulova with first-class customer service; improved product quality, styling and technology; and diversified product lines, including jewelry, watches by artists and trendy beach bags with attached clocks. The commitment to this better Bulova is backed by a new logo, new headquarters and even a new address.
The changes cap a 10-year effort by owner Loews Corp. to rescue and rebuild the reputation of the 114-year-old firm. It’s all part of the “revitalization of one of the great names in American products, a name that got tarnished,” says Andrew H. Tisch, a director and former president of Bulova.
In the process, Bulova has grown into a $160 million concern (double its 1979 value) and, say Bulova officials, is at least No. 2 in all major price points where its watches compete, with much of the business in the $150 + category.
Potential: The future didn’t look so cheery in 1979, when Loews paid some $30 million to buy Bulovafrom majority shareholder C.P. Wong, managing director of Hong Kong watchmaker SteluxManufacturing Co., and other shareholders, who had owned it since 1976. Bulova was on the financial ropes, pummeled by losses of $48 million in the three previous years, lackluster sales and loan restrictions that gave its bankers extensive control over assets and operations.
Still, Loews saw Bulova as an investment with good potential. One reason was the firm’s “strong name,” says Herbert C. Hofmann, Bulova president and former chief operating officer.
When Loews actually took over, it discovered how bad things really were. “We found Bulova was within 30 days of bankruptcy,” says Tisch.
Adds Hofmann, “The numbers were scary. Our initial investment [for purchase and make-over] was $36 million. By the time we fully valued everything, it was $100 million.”
Not only was Bulova belly deep in red ink, but product quality was “questionable” and styling was “staid, stodgy and lackluster,” says Tisch. Indeed, recalls Tom Hickerson, a 15-year employee who now is controller and a corporate vice president, “a major obstacle was regaining customer confidence in our quality and service.” It was lost, he says, largely due to the former owner’s absentee management and the Far East firm’s habit of “flooding us with product not up to our standards.”
Downsizing: After months of learning the business and reviewing operations, inventory and finances, Tisch and Hofmann laid Bulova’s woes squarely before Loews officials. Instead of a quick fix or sell-off, Tisch and Hofmann wanted to restructure the firm, turn it around financially and restore confidence in its product.
“But we said that first we’d lose $30 million the first year and $20 million the next,” recalls Hofmann. Loews officials weren’t happy. But instead of pulling the plug, they gave Tisch and Hofmann the go-ahead to reorganize and downsize.
Most of Bulova’s top management went into early retirement, replaced by Loews executives. Overall, the staff was trimmed from 2,500 in 1980 to about 550 now. The firm winnowed accounts from 17,000 in 1979 to about 12,000, dropping those that were too small, geographically remote or not economically viable for salespeople to service in those years of rising gas prices.
Bulova stopped making watch movements, cases and crystals and shut down manufacturing operations in Bienne, Switzerland and Providence, R.I., and at Bulova Park headquarters in Queens, N.Y. (The only survivors: production of dials for corporate award watches and the five-person design-and-model shop in Providence, where “we do our own design…to stay unique,” says Hofmann.) Now, components are made to order by select high-quality suppliers around the world that adhere to Bulova specifications.
Shedding those operations saved money and allowed Bulova to react quickly to market changes. “When Loews came in, the watch industry was moving from [emphasis on] technology to fashion,” says Tisch. “Instead of large volume in a few single styles, we needed a lot of styles, with less volume of each. We needed flexibility to work with various designers, suppliers and case manufacturers. We couldn’t be locked in [to the old manufacturing operation].”
Because of the changes, says Robert Webber, vice president of operations and a 24-year employee, Bulova now is a “very lean and mean” company. “We went from a structured manufacturing firm to a marketing and distribution firm by using aspects of the watch industry overseas,” he says. “This made us much more price competitive than when we manufactured in the U.S.”
Big bucks: At the same time, Bulova’s new bosses spent big bucks–thanks to Loews–to restore product quality and reliability. “In those days, no money went into marketing,” recalls Tisch. “It was all going to clean up the operation.”
Bulova paid $10 million to buy back old inventory from retailers and scrap it. It conducted a $200,000 survey of jewelers, consumers and even Bulova employees for opinions of Bulova and its products. It spent $1 million on quality control advisers and inspectors to evaluate Bulova inventory and set stricter specifications.
“We looked at every single component and tested it,” says Webber. “If it didn’t work, we didn’t ship it. We still stick to that rule religiously.”
That caused problems with some suppliers, says Webber. There were sizable back orders in 1982 and 1983 as Bulova educated suppliers to its new, stricter quality controls, replacing firms that couldn’t or wouldn’t adapt. “But we felt it was better to pay the price in-house than get into the horror [of product and service problems] in the field,” he says.
The resulting improvements are reflected in statistics from Bulova’s repair and service department. Ten years ago, Bulova’s net service costs totaled $6 million. By 1988, despite inflation and higher labor costs, the figure had dropped to $2 million. Some shrinkage came with the industry shift to quartz movements. But most of it is due to tougher quality control.
`Bad years’: Not surprisingly, the first few years — which Hofmann calls “the bad years” — were rough. Says Tisch, “We were trying to survive and convince the industry, and ourselves, that Bulova wasn’t going out of business.”
That wasn’t easy, and Bulova officials admit they underestimated how long the recovery would take.
They also faced other challenges, including technological advances. When Loews bought Bulova, 80% of its watches had mechanical movements. But the industry and marketplace were shifting to the new, rapidly changing quartz technology. At first, Bulova had trouble keeping up. Indeed, one reason for the failure of its Swiss Accutron — one of the first introductions under Loews — was the firm’s inability to make movements thin enough to fit the styling of the times.
Another problem was holding on to people. In the first few years, salespeople and executives left due to “rumors and worry,” says Hofmann. A few others were hired away.
Turnabout: But the changes — and Loews’ gamble — began to pay off. In 1985, Bulova announced a net 1984 profit of $7.7 million, its first after a decade of losses.
That reflected renewed consumer confidence and freed Bulova from what Tisch calls “years of damage control.” Hofmann says the firm became “proactive instead of reactive.”
Bulova officials cite three reasons for the turnaround:
* People. Hofmann and Tisch say the success isn’t due to strategy or genius, rather to the hard work of “our team.” Some of the workers were there when Loews took over. “Bulova had very strong second-line managers” handling the day-to-day operations, says Hofmann. “So we put them in positions where they could run things and turn the company around.”
Company employees were “very, very protective and interested in making [the company] work. Even security guards would ask how sales were doing,” recalls Hofmann. “That gave us needed incentive.”
The firm also benefited from members of the management team who came from outside the watch industry. “We aren’t traditional in our ideas of what a watch company can or should do,” says Paul S. Sayegh, a former Loews assistant controller who came with Hofmann and Tisch in 1979 and now is executive vice president and chief financial officer. “In the past, people concentrated just on watches. But this management has a broader vision. If opportunities arise that aren’t traditional but fit with our watch business — such as our [artist-designed] Classic Moments watches and our 14k jewelry — we’re willing to consider them.”
* Corporate support. Loews’ moral and financial support has been another plus. “As long as we told them what we were doing and had a plausible reason, they supported us,” says Hofmann. “Once we had their approval, all they said was `How are you doing with your plan?’ and `Don’t give us any surprises.”
Loews’ one requirement is that Bulova reinvest profits to help the business grow. “The Loews concept isn’t profit and loss, it’s asset valuation,” says Tisch. “As long as we show the value of assets will grow at a substantial rate, Loews doesn’t need the dividends they would otherwise get from Bulova.”
Loews is pleased with the results. In April, in appreciation for a job well-done, Loews held 10th anniversary celebrations for Bulova employees. Then in August, it announced Tisch would move to chairman of its Lorillard tobacco division, with Hofmann becoming president of Bulova.
* Service. Efficient, effective customer service (including accounts receivable, customer queries, shipping and repair) is another key to success, says Hofmann. Eighteen percent of Bulova employees — more than twice the average for most manufacturers — are involved. “Efficiency experts might say we’re overstaffed,” he says. “But we see ourselves as a service organization. We really do need this many people to service accounts, handle inquiries and follow up on anything customers ask for.”
One service that has improved markedly in recent years is turnaround on orders. (“We have a responsibility to manage the retailer’s inventory,” says Hofmann.) Thanks in part to semiboxed merchandise and extensive on-hand inventory, orders usually are shipped within three days of receipt.
Image changes: Bulova has taken a number of other steps in the past three years to change its image, including:
* New name. The company moniker was changed last year from Bulova Watch Co. to Bulova Corp. “We saw we’re much more than a watch company,” says Tisch. “We make clocks. We make artillery fuzes [in its Bulova Systems subsidiary]. We’re exploring new markets and products. Now we can expand outward whout our name limiting us to watches.”
* New home. The firm left Bulova Park — its impressive four-story, 400,000-sq.-ft. headquarters in Queens, N.Y. — for a spartan two-level, 100,000-sq.-ft. office building and 90,000-sq.-ft. warehouse a few blocks away. With much less staff and almost no on-site manufacturing, the old site (which it now rents to other businesses) was no longer cost-efficient, says Hofmann.
* New logo. Bulova dropped its almost-20-year-old emblem (a stylized tuning fork adopted after the debut of Accutron, which used an electronic tuning fork oscillator). “It was a great logo, but research found people perceived it, and tuning forks, as outmoded,” says Tisch.
The new logo is a bold redesign of “Bulova” with the “o” resembling a sunrise. Actually, Bulova officials worried it looked too much like a sunrise and would remind viewers of Japan, known as the land of the rising sun and a major watch competitor like Citizen watches. But research found most people related it to Bulova’s “rebirth and growth,” says Hofmann.
* New address. In 1988, the firm persuaded Queens Borough to rename the short street adjoining its headquarters as Bulova Way in memory of Arde Bulova, the chairman who built Bulova into an international firm before he died in 1958.
New products: But the most apparent changes at Bulova are in product. Bulova debuted some watches in the early ’80s, but not until after the turnaround did it give full attention to creating new products. In 1985, it hired David A. Winkler from Longines-Wittnauer as vice president of merchandising and product development. Patricia Pepe Clark became the first full-time manager of merchandising and design for the firm’s clock division.
In 1986, Bulova unveiled Benetton, its first line of trendy designer name fashion watches. In 1987, the firm debuted its popular collectible clock miniatures, and last year added Benetton for Kids for the growing children’s watch market. This year, Bulova has premiered a major product almost every month since January, including:
* The 14k Ultime jewelry collection, an extension of its upscale Ultime 14k watches, primarily for jewelry stores.
* Buly, a new category of accessories — including beach bags and backpacks — in trendy styles and colors with attached clocks. Second-generation fall-color models are now in department stores.
* Harley-Davidson watches, licensed by the U.S. motorcycle manufacturer of the same name and aimed at buyers ranging from hard-core bike enthusiasts to people who consider “biker chic” fashionable.
* Fine Art Timepieces, from Classic Moments Co., [TM] a joint venture–Bulova’s first–with Chicago’s Circle Fine Arts Corp., a publisher of limited-edition fine art. The line includes The Artist’s Watch [TM] (limited editions designed by famous living artists), the Masterpiece Collection (featuring art by great masters), watches by sports artist Leroy Neiman and clocks with art by Norman Rockwell.
* Accutron. This well-known name left U.S. jewelry stores in the mid-’80s when its tuning fork mechanism grew outmoded (the watch remained part of Bulova’s corporate awards program). This spring, Bulova got good response to a market test (direct mail ads in national magazines) of consumer reaction to the new Accutron (quartz analog 23k micron stainless steel). Accutron will again be carried by Bulova salesmen.
* Tuxedo, a new line of dress watches whose case and sapphire crystal blend into a single mirror-finish unit.
* Antique Galerie, a new line of quartz analog wall clocks made in West Germany with frames from wood of old Bavarian farmhouses and folksy dial illustrations by a leading West German illustrator.
* Collectible miniature clocks with moon phases.
“Our goal,” says Robert Ryan, vice president of marketing, “is to find pieces of the market where opportunities exist for Bulova to create demand and become a major factor.”
Response to most of the new products has been good, say Bulova officials. Just as important, says Hofmann, is the “change in retailers’ perception of Bulova.” Instead of complaints about merchandise common at the start of the ’80s, “retailers now come in [at trade shows] to see what’s new from Bulova.”
Looking ahead: Bulova’s goals and operations won’t likely change under Hofmann, who replaced Tisch Sept. 5. He’s lower key and more of a hands-on administrator than Tisch. But the two men had worked together closely for almost 10 years setting Bulova’s direction. “We are in complete concurrence,” says Hofmann.
For 1990, Bulova plans to expand in markets opened this year. New products will include a line of fashion watches, perhaps miniature clocks in materials such as malachite, additions to Buly (probably umbrellas and ski jackets) and more Ultime jewelry.
Plans for the next few years call for continued heavy investment in brand-name support and products to increase Bulova’s share of watch, clock and other markets.
The future also may include some corporate acquisitions. Bulova Systems & Instruments, a subsidiary, recently bought Hamilton Technology Inc. (Both firms make electronic precision fuzes used by the military). Bulova Corp. itself has looked at possible acquisitions among jewelry, watch and clock firms. “But we won’t expand for expansion’s sake,” says Hofmann. “It must complement Bulova and enhance the name. Our core business will remain watches and clocks.”