We examined nine companies whose plans to revive their fortunes have not succeeded and found several common themes. Managements often fail to appreciate the size of the challenges they face. Competition is fiercer than expected and markets change. Further complicating matters are investors who often want results more quickly than companies can deliver. Of course, the line between success and failure is a thin one.
When things go well, as they did in the cases of Apple Computer Inc. (NASDAQ: AAPL) and Ford Motor Co. (NYSE:F), they can go spectacularly well. These happy endings, however, are rare. Turning around failing companies is one of the hardest things for any executive to do.
Here is our list of 9 corporate turnarounds that have yet to turn around:
1. Borders Group
Borders Group Inc. (NYSE: BGP) may have a financial white knight, or it may not. Reports were out late last week that GE’s finance arm held talks about providing a financial lifeline. Then came word that Borders hired restructuring lawyers. It recently began delaying payments to vendors to conserve cash. Let’s pretend that Borders does get a last-ditch financing pact and that it gets its debt refinanced. What really changes? Borders has faced eroding sales and the last sales gain for a year was in calendar 2006 (fiscal year ending Feb. 3, 2007). The new figure was down roughly 30% by even a year ago since then. Borders just trimmed 45 jobs at the corporate headquarters in Michigan and that is on the heels of a fresh plan to close a Tennessee distribution center to cut 310 more jobs.
Borders is now a penny stock and its market cap is a mere $64 million. With shares back under the $1.00 mark, a delisting notice is a risk and more problems may be coming its way. For some reason, the Fahrenheit 451 analogy keeps coming to mind.
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2. Boston Scientific
Boston Scientific Corporation (NYSE: BSX) is one that we (and many others) keep thinking will make a comeback. The medical device maker has been riddled with device issues and recalls. Its prior 3-year run of roughly $8 billion in revenues is expected to fall to $7.79 billion in 2010 and $7.91 billion in 2011, according to Thomson Reuters. The only saving grace is that the earnings estimates of $0.39 EPS for 2010 and $0.43 EPS for 2011. We see little risk to an implosion here, but the company is lost in space.
Competition from Johnson & Johnson (NYSE: JNJ), Medtronic (NYSE: MDT), St. Jude Medical (NYSE: STJ) is fierce, and its acquisition of Guidant for almost $27 billion has never really paid off despite Abbott Laboratories (NYSE: ABT) participating in that merger. At $7.33, shares are less than half and then some since its Guidant deal was completed.