![]() There was never any doubt that the watches produced by the Swiss conglomerate were some of the finest timepieces in the world. The next few years would be all about marketing and brand development. Dinner was provided by celebrity chef, Wolfgang Puck, and the entertainment by the Cirque du Soleil. A group of international journalists were then transported by Swatch bus to a resort in Death Valley. Hayek decided to raise the company's profile in the United States by holding a gala event, a glitzy three day event in Las Vegas at Caesar's Palace, to publicize its new product lines. SMH was a rather non-descriptive name and was often not even recognized by the buying public. In 1998 the company officially changed its name to Swatch to increase visibility and create brand identity. The next ten years were very profitable for Swatch and Hayek, its new leader. He revitalized the company, introduced new ideas, and is widely credited with salvaging the failing Swiss watch industry. He soon took over the majority of shares and was named CEO of the new company. Nicolas Hayek apparently liked the potential of this new company he helped create. The launch was a huge success and did not diminish the polished reputation of the more upscale brands owned by the company. It was high tech, low cost and much more appealing to the younger crowd. The company countered the Japanese domination of the low cost watch market by introducing the now famous Swatch Watch. The first year the newly minted conglomerate posted $124 million in losses on $1.1 billion in sales. In 1983 SSIH and ASUAG merged and became SMH (Societe Suisse de Microelectronique & d'Horlogerie). Hayek completed his work, which would be known as the Hayek Study, and recommended that the two rival firms would benefit by joining forces. The Swiss financial community wanted to preserve the rich Swiss tradition of watchmaking and hoped a recovery strategy could be developed. ![]() Nicolas Hayek, who was the Chief Executive Officer at a consulting firm bearing his name, was asked to evaluate the situation. Japanese watchmakers were mass producing inexpensive watches and gaining valuable market share. In the 1970s both companies were in financial trouble. In addition, each company controlled so many small subsidiaries it was difficult for either to maintain consistent policies throughout operations. Both companies grew by acquiring other local companies, but struggled during difficult economic times. SSIH was founded in 1930 as a result of a merger between Omega and Tissot. ASUAG was founded in 1931 with the goal of building and expanding the Swiss watch industry. The Swatch group was formed in 1983 by the merger of two Swiss watchmakers: ASUAG and SSIH. economy, and weak demand from Japanese tourists." Martine Rogonon of Banque Bordier offered a different opinion noting that Swatch does not have great exposure to Japan and that the decline in sales in 2001 was due to overall bad economic conditions worldwide. She stated, "The company is wary of a deteriorating U.S. Also in 2001 Swiss analyst, Gina-Luca Manca, of HSBC downgraded her rating from a "buy" to a "hold". Christoph Bohli, an analyst at Bank Sarasin, questioned the outlook for the remainder of 2001, but concluded that there was no concrete reason to be concerned about long term prospects. Although it has not met expectations in recent months, at least one analyst observed that the company was too optimistic in its forward looking statements. ANALYST'S OPINIONSĪnalysts reporting on Swatch are optimistic about the future of the company. Management indicated in its statement that this revision is not a sign of more serious problems. The forecast for 2001 was dropped from a projected 10 to 12 percent sales growth to a more modest 5 to 8 percent increase. The decline was attributed to an overall poor global economy and the slowdown of in the sales of luxury items. During 2001 the company was forced to revise its prediction of continued double-digit growth. The resulting 16 percent net profit margin was an increase over the 12 percent margin established in 1999. The company had a record setting year in 2000 posting $2,563 million in revenues and $403.9 million in net income. The Swatch Group has posted double digit profit margins for nearly a decade. Although the main focus of the company is consumer sales of wristwatches, the company does have interests in battery making, telecommunications components and timing and scoring devices. The company was formed through multiple mergers of smaller Swiss companies, which are now all operating under the Swatch umbrella. It is the largest watchmaker in the world and is responsible for the manufacture of many name brand watches and clocks. The Swatch Group is known for its trademark watches and time pieces.
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