Sometimes, though, down-and-out
businesses stay that way, or manage to fall even further. The five
companies below have struggled for years to turn around their operations
and, for whatever reason, have failed to get themselves back on the
right track. We’re not predicting that they will go out of business
tomorrow, or anytime soon. They will, however, continue to face a tough
road ahead – and all will have to make significant changes if they’re to
become Wall Street’s darling comeback stories of future years.
Martha Stewart Living Omnimedia (MSO)Martha
Stewart’s media empire has been circling the drain for years as the
diva of domesticity’s popularity fades. Stewart has proven far more
adept at fashioning crafts than at developing a coherent, successful
corporate strategy. The company’s executive offices have seen a
revolving cast of managers, but none have managed to get profits
blooming. Revenues in Martha Stewart Living’s publishing business have
fallen year-over-year for seven straight quarters. During the company’s
third quarter, its only profitable business was merchandising.
Even
those profits may be in jeopardy as the company has had to revise its
partnership with J.C. Penney after being caught in the middle of a nasty
battle between that retailer and Macy’s. Investors have complained that
Stewart is vastly overpaid and she cut her pay in response. Stewart’s
best hope is to sell the company but given the trouble she has caused
it’s hard to imagine who would buy MSO.
Zynga (ZNGA)Zynga,
the creator of FarmVille and Words With Friends, has suffered a serious
drought of follow-up hits. As one analyst recently noted to Bloomberg,
with the exception of Zynga Poker, the company has failed to produce a
sustained mobile hit in ages. For players of Words With Friends, that would be like having only O’s and U’s.
New
CEO Don Mattrick, the former head of Microsoft’s Xbox business, was
brought on in July to put some zing back in the game-maker. The company
has also slashed jobs and cut back on outside contractors in an effort
to reduce costs. Those cuts helped the company post better-than-expected
third-quarter results, but unless Mattrick can position Zynga for
success in mobile, he’s going to have problems gaining traction. He
could also play “find the white knight,” but that’s a dangerous game,
too.
Sears Holdings (SHLD)When
billionaire Edward Lampert engineered the merger of Sears and Kmart in
2004, one analyst described it as a “dream deal.” The reality has been
more of a nightmare for long-term shareholders.
The ongoing struggles at troubled J.C. Penney (JCP)
may have overshadowed those at Sears, but sales have fallen at the
Hoffman Estates, Ill., company for 27 straight quarters. During the
first three quarters of 2013, the once-venerable retailer lost $1
billion. Wall Street analysts expect the red ink to continue for the
foreseeable future.
Lampert,
who became Sears CEO this year, is trying to unload any assets not
nailed to the floor as the company’s cash begins to dwindle. Sears has
announced plans to spin-off Lands' End and sell its auto centers, a deal
that one analyst estimates could be worth as much as $2.5 billion. But
the company has about $2.8 billion in long-term debt.
Sears’ struggles are taking a bite out of Lampert’s fortune. He was forced to reduce his stake in Sears
to under 50 percent because of redemptions from hedge fund clients. As
he continues to lose control over Sears, pressure will mount on Lampert
to either take the venerable retailer private or sell it to someone
else.
Radio Shack (RSH)Ever
since he became CEO earlier this year, Joe Magnacca has vowed to
“transform” the business. That’s a tall order. Radio Shack has been
struggling to keep pace with technology and stave off fiscal oblivion
for years. In 1999, the shares sold for $78.50. Now, they sell for
$2.66. The company has seen its market capitalization shrink by 98
percent. It now has a value of $270.4 million, which is tiny for a
national retail chain.
Maganacca
has tried to breathe new life into the stodgy brand through stunts such
as opening a pop-up store in New York’s Penn Station. Though Wall
Street analysts have welcomed these efforts, many think it’s too little,
too late.
Radio Shack is in
such poor shape that it’s unlikely that a buyer would rescue it, at
least before it shutters poorly performing stores. Though the company
had $613 million in cash as of Sept. 30, its long-term prospects aren’t
going to improve anytime soon.
MySpaceYes, MySpace,
once the dominant social network, still exists. It was acquired in 2011
by a group of investors including Panasonic and singer/actor Justin
Timberlake. The investors acquired the site from Rupert Murdoch’s News
Corp, now 21st Century Fox, for $35 million. News Corp. had famously bought the company six years earlier, for $580 million.
Under
its new management, MySpace has tried to reinvent itself as a social
music service. It relaunched the website earlier this year and undertook
a $20 million advertising campaign. Though it has attracted some 36
million users, profits haven’t followed and the company announced in
November that it had laid off 5 percent of its staff. According to
Business Insider, MySpace lost $43 million in 2012.
Even worse, a group of small, independent record labels called Merlin
has accused MySpace of using its members’ content without permission – a
situation that will have to be addressed. Even if it does reach a deal
with Merlin, MySpace still must find a way to compete against a slew of
larger, more popular music services such as those from Apple and
Spotify. For MySpace, the music may stop before that happens.
No comments:
Post a Comment
Leave a comment