Struggling Greeting Card Maker Has Best Wishes

Gibson Greetings Inc., a company with more than its share of financial troubles in recent years, is hoping a new chief executive officer with a reputation for turning businesses around can lead it in a new direction as well.

Frank J. O’Connell came to the greeting card company with 30 years of experience in retailing. He has hinted he wants Gibson--a distant No. 3 in the industry behind Hallmark and American Greetings--to build on its long history in the greeting card business, and to reach into the realm of high-tech.

There are opportunities for innovation in the profitable but staid greeting card industry, said Jeffrey Stein, an analyst who follows Gibson for McDonald & Co. Investments.

Stein said the industry is likely to embrace alternative greeting card delivery methods, including the Internet. Cleveland-based American Greetings Corp. has begun operating a World Wide Web site through which personalized greeting cards are offered.

Since O’Connell was hired in August, he has spent much of his time meeting with company executives or on the road making contacts with analysts. Stein said he was impressed with O’Connell in their introductory meeting and is waiting to hear what he will do at Gibson.

“He’s got outstanding credentials,” Stein said. “A lot of people in the investment community have a great deal of respect for him.

“It remains to be seen what he plans to do. Gibson, for all of the difficulties they’ve had, is still a very profitable company. They’ve got a very strong balance sheet.”

O’Connell, 53, came to Gibson with a flashy marketing reputation built on turnarounds or sharply improved sales and profits he helped bring about at Skybox International, the sports and entertainment trading card maker; Reebok Brands North America, where he led a team that developed the “pump” shoe, and HBO Video, now a division of Time Inc.

He also has worked at food companies including Arnold Baking Co., and was a senior vice president for marketing at Mattel, the toy maker.

In a recent interview on CNN’s “Who’s In Charge?” program, O’Connell hinted at his plans for Gibson. He said that for 140 years, Gibson has been in the business of producing cards to help people with relationships to communicate with each other.

O’Connell said he wants to build on ways of enhancing those relationships in an era when high-technology communication methods such as voice- and electronic mail have made it harder for people to maintain more traditional personal communications.

“Their relationships are actually lagging because of technology,” O’Connell said. “Let’s take this business and let’s look at it in a different way. Let’s see how we can come in and start to really connect people through our product in a way that brings back the sincerity that I think everybody is missing now in this high-speed world.

“We are definitely going to stay with cards.”

But he wants to add a twist, a new way of delivering those cards.

“We’ll go to other mediums. I see cards as a medium,” he said.

O’Connell could succeed if he delivers a product different than what industry leaders Hallmark Cards and American Greetings are providing, said Jack Trout, a marketing consultant who has helped sell products from fast food to computers.

“His only real shot is what we call a flanking thing,” said Trout, president of Trout Partners in Greenwich, Conn. “Going around the industry with a very different idea is always a very good idea.”

Enterprise Rent-a-Car’s recent campaign to deliver cars directly to customers, a service market leaders Hertz and Avis were not offering, was a different idea that worked, he said.

Similarly, O’Connell might want to try something like a product people can use to customize their own greeting cards, Trout said.

“I get a magazine with my name printed in it. Why can’t we do that with a greeting card?” Trout said.

Gibson faces other troubles besides reworking its marketing strategy.

It successfully fought buyout offers from American Greetings, but still faces a shareholder lawsuit questioning why Gibson passed up those offers.

Gibson’s other recent troubles have included:

* A $28.6-million loss in 1994 and a $46.5-million loss in 1995, after which Gibson fired CEO Benjamin Sottile in February 1996. Its stock price had declined by more than half from a peak of $30 per share a few years earlier, although it’s now trading at about $20.

* A deliberate, $6-million overstatement of inventories in 1994 by former employees of gift wrap division Cleo Inc. Gibson replaced the Memphis-based division’s managers, then sold it off.

* A $20-million loss in soured derivative investment deals placed through New York-based Bankers Trust Co. Bankers Trust agreed to pay Gibson $14 million.

Those problems don’t trouble O’Connell. He is determined to keep Gibson independent.

The company remains financially sound despite its problems, Stein said.

“I don’t think they’re going to go away. The worst case I would see is that they would downsize and become a smaller company,” Stein said.

“The profit margins in the greeting cards industry are high by consumer goods companies’ standards. You can cover a lot of sins with the profits in the greeting card industry.”