"Gibson running out of time - rapidly"

Fretwired

TTony said:

I've seen and been involved in (quite) a few business acquisitions in my time.

The result is normally 1 + 1 = (about) 1.4

The pre-acquisition rationale is that we'll sell our products to their customers and their products to our customers, whilst simultaneously removing duplicated overheads to cut costs.  Hence the expectation is generally that the combined entity will be about 2.5x the sum of the previous parts.  Or whatever multiple is necessary to justify the deal.

The reality is that  you find that their customers don't want our products (which is why they were their customers originally!)  and that their products aren't really suitable for our customers (for one reason or another), and that there's a fair amount of overlap in the product lines that has to be removed.  The focus turns to the cost cutting, which (a) pisses of most of the staff and (b) pisses of many of the customers because the organisation is focused internally on its cost saving exercise.  Customer service declines and customers leave.

The costs of rationalisation are generally higher than expected - eg severance payments - and the integration costs more than expected (IT systems!).  Plus you find lots of conflict in respective corporate cultures that take a while to resolve.

Meantime the directors and senior managers find that they've hit all of their bonus targets for growth and company size (which were set prior to the acquisition of course), just by achieving the 1.4 number.  So, they're happy and disappear over the horizon with cash in pocket to repeat the exercise somewhere else.

Shareholders lose out (they effectively fund the 0.6 shortfall when 1+1=1.4).   "Rationalised" staff lose out.  Dissatisfied customer lost out.  And all the value, credibility and trust that had been built up in both companies prior to that point is destroyed.


Not suggesting that's how Gibson got into its specific predicament (because it's not, really), but that's how I've seen other businesses do it.

Not sure that was true in this case. Gibson wanted to diversify into other markets but in doing that they paid over the odds for average companies and then didn't have the necessary expertise or focus  to integrate their acquisitions into a cohesive group.

Look at Yamaha which bought Steinberg and Line 6. Both companies fit in with existing Yamaha brands and markets. Steinberg and Line 6 were able to leverage Yamaha tech and know-how and are able to cross sell their products. Steinberg promotes Line 6 and Yamaha products and vice versa. Steinberg's excellent audio interfaces are effectively Yamaha units.

Gibson would have been better off buying a company like Line 6 and diversifying into a new business segment (guitar and amp modelling) which would have been better aligned to Gibson's core business. It would relatively painless to cross-sell amp modelling products to guitarists and Gibson brands to Line 6 users.

Gibson's problem  is poor management.

Haych

Bridgehouse said:

pmbomb said:

From a customer's point of view there's nothing to worry about, for as long as people are willing to (over)pay for Gibson's products, they'll be made and sold somehow.

Not necessarily - someone may buy it, but I don’t think we know the full story.. 

We didn’t know the full story about Carillion, and there was no buying there - straight to liquidation, do not pass go etc..

The Gibson brand has huge value, even if it's just snob value and drop the logo on a headstock and guitars will sell.  I don't think there's a product that you could associate with Carillion that would interest a consumer or corporation in the same way.

I hope the Gibson brand lives on.  My hope is that Tokai purchase the brand and IPR as they seem to have been making the best Gibson guitars for decades.  I doubt that will happen, though.  Best guess is that the guitar manufacturing part will be acquired by an investment outfit who will do what they need to to cut costs and add value in the hope of selling it on in a couple of years.

goldtop

If Gibson can't make money in a zero-interest-rate world, then they're really messed up.

Somehow Fender/Gibson remind me of Oldsmobile, Plymouth, Chrysler. Nice to see from time to time, but increasingly irrelevant in a PRS+Helix world.

JayGee

Does this mean “buy now while stocks last” for affordable USA built Les Paul’s (like the Tribute Gold Top and Honeyburst) before somebody picks up the brand-name, moves the USA stuff (even further) upmarket and offshores the low-end stuff?

crunchman

JayGee said:

Does this mean “buy now while stocks last” for affordable USA built Les Paul’s (like the Tribute Gold Top and Honeyburst) before somebody picks up the brand-name, moves the USA stuff (even further) upmarket and offshores the low-end stuff?

I suspect that it is likely that the lower end of the range ends up getting built outside the US.  Fender do it with their Mexican range, and PRS do it with the SE range.  Not necessarily a bad thing.  The Fender and PRS guitars are very good.

designerseye88

BRISTOL86 said:

Was very surprised in my recent visit to PMT in Bristol to not see a single Gibson guitar.

Yes i noticed this the other day! 

Fretwired

crunchman said:

JayGee said:

Does this mean “buy now while stocks last” for affordable USA built Les Paul’s (like the Tribute Gold Top and Honeyburst) before somebody picks up the brand-name, moves the USA stuff (even further) upmarket and offshores the low-end stuff?

I suspect that it is likely that the lower end of the range ends up getting built outside the US.  Fender do it with their Mexican range, and PRS do it with the SE range.  Not necessarily a bad thing.  The Fender and PRS guitars are very good.

I think its a risk. I recall many years ago Fender looked at moving all Strat production to Mexico and just making high-end Custom Shop guitars in the US. They binned the idea because being made in the USA is part of the brands appeal.

Gibson makes too many variants of the Les Paul - I find it confusing . The same is true of Fender.

Whitecat

Fretwired said:

crunchman said:

JayGee said:

Does this mean “buy now while stocks last” for affordable USA built Les Paul’s (like the Tribute Gold Top and Honeyburst) before somebody picks up the brand-name, moves the USA stuff (even further) upmarket and offshores the low-end stuff?

I suspect that it is likely that the lower end of the range ends up getting built outside the US.  Fender do it with their Mexican range, and PRS do it with the SE range.  Not necessarily a bad thing.  The Fender and PRS guitars are very good.

I think its a risk. I recall many years ago Fender looked at moving all Strat production to Mexico and just making high-end Custom Shop guitars in the US. They binned the idea because being made in the USA is part of the brands appeal.

Gibson makes too many variants of the Les Paul - I find it confusing . The same is true of Fender.

Yep - and it’s a perfect example of what happens when you allow accountants to run the show. “Line filling” is a terrible affliction. 

JerkMoans

Bridgehouse said:

We didn’t know the full story about Carillion

IMHO all they needed to do was go back to basics, do what they did best: ditch Steve Hogarth, get Fish back in, play the classics from Script for a Jester's Tear.

Bridgehouse

JerkMoans said:

Bridgehouse said:

We didn’t know the full story about Carillion

IMHO all they needed to do was go back to basics, do what they did best: ditch Steve Hogarth, get Fish back in, play the classics from Script for a Jester's Tear.

They lost the plot when they released the album “PFI”

Garthy

Musicman20 said:

It would be interesting to know the UK sales trends of brand like Gibson post-thevotethoushaltnotspeakof....

Never mind that, Trump's tax cuts have given an average of $4000 to middle America and cut business taxes by 14%. IF Gibson can refinance their loans then the above keeps the wolves away for a little longer. I think they'll be going through Ch11 by July and it could well be the bank running a hugely pared down company as a going concern.

mixolyd

Is it purely coincidence that the one major guitar maker whose core product line is finished in nitro is going to the wall?

kt66

18 Gibsons on PMTs online shop.
Chapter 11 beckons, but it does not mean the end of the brand, I worked for Converse when they went bust in 2001, now the bloody shoes are everywhere. 
Shows what good management and a good brand can achieve. 

strat1990

kt66 said:

18 Gibsons on PMTs online shop.
Chapter 11 beckons, but it does not mean the end of the brand, I worked for Converse when they went bust in 2001, now the bloody shoes are everywhere. 
Shows what good management and a good brand can achieve. 

I've seen 1 used Les Paul and a handful of epis in my local PMT. not like it used to be. Now it's all Fender/Gretsch/Jackson. Suits me. 

richardhomer

When FMIC was raised from the CBS ashes, it was a whole new beginning for Fender. I’m not privy to their figures - but the last 30 years must have massively out-performed the previous 30 years in terms of sales volumes, profit - and reputation.

They have got some things wrong - they too went through a highly acquisitive phase which wasn’t their finest hour - but overall it’s been good.

There’s no question that the Gibson brand could be turned round in just the same way - though this would probably have to be under different ownership - and certainly different direction. 

jeztone2

It would help if the CEO understood the brand. Henry Juszkiewicz has been trying to turn Gibson into Apple. All high tech and forward vision. But the market they live in doesn’t want that. So every high tech guitar has been an utter disaster. Gibson is a heritage brand like Leica camera’s. Look at how Leica have thrived in recent years. Yes they went digital, but they took their time and made sure their core audience of consumers were happy. So they were retained.

It does make me wonder why you’d bother putting yourself through an MBA, if you make that much of a glaring error regarding the companies vision. I actually think the guitars quality has improved in recent years, but Robot tuners, the Shredder neck? They didn’t even bother to look at fretwire, yet every contemporary shredder guitar has massive frets, ESP, Ibanez, Jackson. Know thy market seems to be the proverb here. 

mixolyd

jeztone2 said:

It would help if the CEO understood the brand. Henry Juszkiewicz has been trying to turn Gibson into Apple. All high tech and forward vision. But the market they live in doesn’t want that. So every high tech guitar has been an utter disaster. Gibson is a heritage brand like Leica camera’s. Look at how Leica have thrived in recent years. Yes they went digital, but they took their time and made sure their core audience of consumers were happy. So they were retained.

It does make me wonder why you’d bother putting yourself through an MBA, if you make that much of a glaring error regarding the companies vision. I actually think the guitars quality has improved in recent years, but Robot tuners, the Shredder neck? They didn’t even bother to look at fretwire, yet every contemporary shredder guitar has massive frets, ESP, Ibanez, Jackson. Know thy market seems to be the proverb here. 

Yep, not only does their strategy make no sense e.g. turn the Les Paul Standard into an ugly metallic monstrosity hybrid thing in a bid to capture the Metal players who prefer pointy head stocks and 8 strings.  They are also ignoring the values that make Gibson special: history, mojo, craftsmanship, verisimilitude..ok they are monetising the last one but turning it into another year by year features race.

Where are the relic’d Les Pauls and 335’s?  You just have to look at Maybach to see the gorgeous, subtle work that can be done to give a new guitar the crazing and patina of a vintage collector’s piece.  They are already going to the lengths of finishing their guitars in nitro so why not  make the most of that as a competitive advantage?

Stuckfast

stickyfiddle said:

Ravenous said:

(For example I always wondered what the hell happened to the original Steinberger after Gibson bought it. I mean they seemed to buy a product and then kill it...?)

See also: Valley Arts, Kramer...

... Opcode, Cakewalk ...

uksaint7

The first problem is Henry's vision for Gibson to become a lifestyle brand, hence so many hugely expensive acquisitions outside their core market (Phillips alone was €135 million)- most of which have flopped. This is where the money has been lost.

The guitar side of the business remains profitable, despite mis-management on an enormous scale! Many people have alluded to the annual model year change, again Henry's idea and one which is completely unnecessary and one which their supply chain still hasn't managed to facilitate. The fixation Henry has with innovation actually isn't all bad, the HP models have been pretty popular and some really nice instruments and designs but they need to be offered alongside traditional models. And changing the entire lineup every 12 months for the sake of it is just stupid.

The relationship that Gibson have with many of their dealers seems to have been deteriorating as the hole they have been digging themselves gets deeper. They are a very tough company to deal with but it has only really been the last decade or so that things have got so bad. If they had stuck to making top-notch guitars and focussed on quality and lost the obsession with basically conquering the world then they wouldn't be in this mess.

rossyamaha

After reading the well documented reports of how terrible the company is to work for (specifically directed at Henry and bolstered by friends I have that work/ worked there), I can’t help but think of some inside job to ruin the company. Everyone is in the same boat and aren’t allowed to say anything negative or they’re out. They all club together and systematically fuck things up knowing that the company will be saved by someone who will kick Henry out the door. Maybe it’s just something I would do.