Best and Worst Run Companies in America


1. Avon Products
> CEO name (tenure): Andrea Jung (12 years)
> YTD stock: down 40%
> Latest quarter EPS: flat at $0.38
> Insider ownership: 1.75%
> Key event: SEC starts investigation

Avon’s (NYSE: AVP) management has taken one of the greatest franchise operations in the world and nearly ruined it. The company has bungled its move into markets like China, where the company faces a bribery probe. Revenue growth in emerging markets, such as Brazil and Russia, has faltered. When it announced third-quarter earnings, Avon said it could no longer support its guidance for the balance of the year. The news caused several analysts to downgrade the company’s financial prospects and its stock. CEO Andrea Jung said Avon would continue to seek solutions through another of her interminable restructurings of personnel and operations. Just after Avon announced financial results, it disclosed an SEC investigation into improper contacts between the company’s management and Wall St. analysts.

2. Research In Motion
> CEO name (tenure): Jim Balsillie (19 years)
> YTD stock: down 71%
> Latest quarter EPS: down 57% to $0.63
> Insider ownership: N/A
> Key event: takes $485 million Playbook write-down

Research In Motion (NASDAQ: RIMM) was “the” smartphone company until Apple released the first iPhone in mid-2007. RIM had every chance to move from its core enterprise market into the consumer one, but was slow to do so and released poorly designed products. It then allowed itself to be flanked by another generation of smartphones built with the Google Android mobile operating system. RIM management continued the destruction of the company’s value through the release of several other badly built and badly marketed products, the most recent of which was the tablet PC Playbook meant to compete with the Apple iPad. Sales have been so poor that RIM recently took a $485 million write-down on its Playbook inventory. Also, RIM has recently warned twice that it would miss earnings forecasts. Three months ago, RIM said it would fire 2,000 of its 19,000 workers. RIM’s BlackBerry was the first smartphone, but its sales are close to putting it in last place among its competition. On December 7, after a trademark dispute, RIM backed down on its plan to change the name of its OS.

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3. AMR
> CEO name (tenure): Thomas Horton (less than 1 year)
> YTD stock: down 99%
> Latest quarter EPS: loss of $0.48, down from $0.39
> Insider ownership: 1.0%
> Key event: declares Chapter 11

AMR (NYSE: AMR), parent company of American Airlines, declared Chapter 11 recently. CEO Gerard Arpey turned down the board’s offer to stay as chief executive. Perhaps he was too humiliated by what he had done to ruin what was once considered the flagship airline of the United States. The most recent error on management’s part was its inability to settle labor disputes with the pilots, losing Wall St.’s confidence in the airline’s viability in the process. Investors traded shares down relentlessly during the month before the bankruptcy filing. Arpey’s greatest mistake, however, was his decision not to merge American with another large U.S. carrier. Meanwhile, a merger between United and Continental was put together to cut routes, personnel and equipment costs, among other things. Delta and Northwest set a marriage for the same reasons. American was left on the outside of the industry’s cost cutting trend.

4. Eastman Kodak
> CEO name (tenure): Antonio Perez (6 years)
> YTD stock: down 79%
> Latest quarter EPS: down 419% to $0.83 loss
> Insider ownership: 1.8%
> Key event: lurches toward Chapter 11

Kodak (NYSE: EK) went from being primarily an operating company with photo and digital assets to one which investors view as a patent holder with intellectual property to sell. Unfortunately, Kodak did not make a successful transition from the first to the second. It has never gotten a viable offer for any portion of its patent portfolio. Now, Kodak is within days of Chapter 11. Investors, in many cases, believe Kodak misled them. In the summer, it signaled it had adequate cash to operate through the end of the year. Within several weeks, the company said it would have to draw down a $160 million credit line. The stock promptly fell below $1. It’s hard to believe the stock was a component of the Dow Jones Industrial Average index as recently as 2004. To advise it on bankruptcy options, Kodak hired and then fired law firm Jones Day and quickly replaced it with Sullivan Cromwell. Kodak’s management cannot even decide which advisers are best suited to aid it. Kodak may have no choice other than to file for Chapter 11 because of lease and pension obligations. That has not kept CEO Antonio Perez from saying Kodak should make money next year. At this point, no one believes him.

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