Most companies that fail over time do so because of a series of modest mistakes made by generations of management. Markets shift and corporations are slow to adapt. Strategic acquisitions, which could change a company’s future for the better, are ignored or passed up. And, perhaps most common of all, a company begins to decline because it loses the creative spark of its founder or the input of employees that are the company’s creative engine.
The firms on the 24/7 Wall St. list of companies that will never recover from their mistakes are all still in business. Each firm was a leader in its industry, if not the leader, but made a critical error or errors that destroyed their chance to have a brighter future.
For want of a nail, the kingdom was lost.
Motorola did not produce a product that leveraged the huge success of its RAZR handset, a product that propelled the company to the No.2 position among cellphone manufacturers worldwide. Boston Scientific decided that it was not enough to be a large and highly successful company. Instead, it bought another company to be even larger. Blockbuster believed that video rental stores would remain the dominant way to distribute DVDs. It did not see that the DVD industry was faltering.
It is easy to say that good management never makes disastrous strategic errors. But, the results of good management may be, in part, a product of luck. GM’s prospects fell apart while rivals VW and Toyota did well. Did GM fail to see something on the horizon that its rivals did? Or was GM unlucky because its home base was the US where the labor movement was powerful and heavy cars with large engines sold well?
There are ten companies on this list. The fortunes of each have been badly damaged. Whatever the reason, what each lost is irretrievable.
The handset company sold 50 million of its Razr handsets in two years and 110 million over four years. The company shipped 12 million units in the third quarter of 2005 alone. The success of the Razr made Motorola the No.2 handset company in the world in the second half of 2006, behind perpetual leader Nokia.
Motorola failed to use its huge advantage in the early days of higher end handsets to become one of the leaders in the emerging smartphone business, which is now dominated by Apple and Research In Motion. Today, it must also compete against larger companies with stronger balance sheets such as Nokia, LG, and Samsung. These corporations are aggressively pushing for global smartphone market share. Motorola’s new Android-based handset cellphones sell well, but the momentum the company lost in 2007, 2008, and 2009 means that it will never be more than a niche supplier.
Motorola’s sales hit $42.9 billion in 2006 and the company made more than $4 billion. Motorola’s revenue, which included discontinued operations, was $4.9 billion in the most recent quarter of 2010. On that same basis, the company made only $109 million. Motorola is on a pace to reach $20 billion in revenue and $400 million in net income this year. Motorola’s stock traded for over $26 in late 2006. The shares change hands at about $8 today. The DJIA is up 10% over the last five years. Motorola is down more than 60%.
Today, Motorola’s leadership has disappeared, and it struggles near the bottom tier of an extremely competitive market. Motorola shipped only 8.3 million handsets in the second quarter of 2010. In comparison, Nokia shipped more than 90 million in the same period. More forcefully, handset manufacturers shipped 346 million units worldwide in the most recent quarter.