Stash Learn

Financial News

May 4, 2018

Why Do Companies Change Their Names?

By Team Stash

For troubled businesses like Cambridge Analytica, a new name can signal a restart.

Twitter LinkedIn Facebook

It may be gone, but it won’t be forgotten anytime soon.

Cambridge Analytica, the data mining company that came under fire for collecting the names and personal information of an estimated 90 million Facebook users so it could compile voter profiles for the Trump presidential campaign, is shutting down.

The company announced its bankruptcy on Wednesday, in a press release.

But its executives and founders have reportedly launched a new business with another name that may do similar kinds of data collecting.

Members of Cambridge Analytica’s executive team have regrouped, and have launched another company, called Emerdata, which may pick up where Cambridge Analytica left off, according to reports.

Why is Cambridge Analytica changing its name?

The company has seen its name dragged through the headlines.

Companies that are the subject of negative publicity, usually for wrongdoing or some other misfortune, often change their names. Bad publicity can cause a company to lose business and even shut down.

Cambridge Analytica, based in Cambridge, England, began to unravel in March, when former employees leaked that the company had stolen personal information from millions of Facebook’s customers.

Cambridge Analytica cited a decrease in the number of customers as the reason for closing its doors. “Despite  Cambridge Analytica’s unwavering confidence that its employees have acted ethically and lawfully…the siege of media coverage has driven away virtually all of the company’s customers and suppliers,” the release said.

Why is a company’s name important?

A company’s name is a vital aspect of its brand. In fact, companies have something called goodwill associated with their names.

Goodwill is the actual monetary value that can be attached to the name, and that value comes from the company simply having customers willing to buy its products and services. Goodwill, however, is often “intangible,” which means it’s hard to assign a specific dollar amount to it.

When a company’s name is tarnished by wrongdoing or some other serious problem, it sometimes can’t recover, as customers abandon it. As a result, companies will sometimes change their names to get out from under a cloud of bad press, or association with previous wrongdoing.

What are other companies that have change their names?

Phillip Morris, formerly one of biggest manufacturers of cigarettes and tobacco products in the U.S., changed its name to Altria in 2002 following a class action suit against the cigarette industry. The suit left Phillip Morris and other tobacco manufacturers on the hook for nearly $250 billion of damages related to the harmful consequences of smoking.

A company’s name is a vital aspect of its brand.

Security firm Blackwater, renamed itself Xe Services, after some of its workers were convicted of killing Iraqi citizens in 2007. Coincidentally, its founder, Erik Prince, is a board member of Esemerdata, according to reports.

Similarly Andersen Consulting became Accenture, in part to distance itself from its association with the Enron scandal. The company’s tax division had audited Enron’s books, even as Enron hid billions of dollars of debt related to bad deals from its investors, which led to Enron’s collapse in 2001. Enron was one of the leading energy producers in the U.S. at the time of its failure.

Is a name change a good or bad thing?

But it’s not always scandal that leads to a name change.

Google became Alphabet in 2015, to signal to the market that the company is about more than its signature search engine product. Alphabet is a holding company that includes Google, but also an advertising business, Youtube, and the Android operating system, among other business lines.

Similarly, Kentucky Fried Chicken became KFC in 1991 as diners became more health conscious, to downplay the “fried” in its name, according to reports. It may also have changed the name to avoid new licensing fees surrounding use of the word “Kentucky” in its brand name.

And here’s a name change that probably needs no explanation: Jerry and David’s Guide to the World Wide Web became Yahoo! in 1995.

Interesting fact: Yahoo! is an acronym for Yet Another Hierarchical Officious Oracle. At least, according to Yahoo.


Written by

Team Stash


Invest in

By using this website you agree to our Terms of Use and Privacy Policy. To begin investing on Stash, you must be approved from an account verification perspective and open a brokerage account.