, we have a nose for sniffing out trouble. We've profiled
collapsing companies and most recently, the hundreds of banks at
risk of being seized by the
. Today our focus is brands.
Since the economic crisis, many well-known brands disappeared
thanks to negative economic forces. Today, hundreds of large
companies facing uneasy futures remain. Whether they're
going under, being bought out, or simply getting a new face, we
believe these 11 companies will have a hard time making it to 2012
looked like it was out of the game at the end of 2008, when its
share price hit $0.35, a historical low for the retailer.
But at the beginning of July, Borders finally released its Kobo
e-Reader, nearly three years after
Amazon (Nasdaq: AMZN)
started selling its Kindle, and a year after
Barnes & Noble (
released their e-Readers. Even though it was late to market, it
looked like Borders had a shot at establishing itself as the
no-frills discount e-retailer, pricing the Kobo at just $149.
However, since its release, Sony, Amazon, and Barnes & Noble
have dropped the prices of their e-Readers to more competitive
But the future of the Borders brand may depend less on the e-Reader
market and more on the outcome of a contentious court battle
between Barnes & Noble and billionaire Ronald Burke. Burke is
suing Barnes & Noble in an attempt to wrestle away a seat on
its board of directors, and it is widely believed that if Burke
wins the seat, he'll push the company into buying Borders.
Howard Johnson is part of the mammoth
Wyndham Worldwide Corp. (
, which owns 13 hotel brands ranging from budget to luxury. Howard
Johnson sits right in the middle of that stratum. Originally a
600-store-strong restaurant chain in the 1960s, it's now known
primarily as a hotel chain.
While there are some international locations, Howard Johnson is
largely an American franchise targeting families and leisure
travelers. Rising traveling costs and high unemployment have hurt
this demographic and Howard Johnson has failed to target a more
lucrative one: business travelers. The brand has been stagnant for
the last decade, and it has not initiated any notable marketing
campaign or worked to maintain a loyal customer base. The
slow motion failure of Howard Johnson would simply mean that a
great American classic -- but not a great American performer -- has
run its course.
When Rupert Murdoch's
News Corp. (Nasdaq: NWSA)
bought MySpace in 2005, it looked like a genius move. Over the next
few years, MySpace grew into the most popular social networking
site in the U.S. In 2006,
Google (Nasdaq: GOOG)
paid News Corp $900 million to place search ads within MySpace
But by April 2008, the spark had flickered, and dimmed. Facebook
stepped into the light. And it's remained that way ever since.
MySpace is currently ranked 25th in Internet traffic -- paltry in
comparison to Facebook's #2 spot.
MySpace has struggled to return to its former glory days. In 2009,
CEO Rupert Murdoch announced that the social networking site would
fall short of its traffic commitments to Google. MySpace's
lucrative ad deal with Google expires in August 2010 and there has
been no announcement as to how it plans on replacing that revenue.
Some analysts, including CNBC's Dennis Kneale, are calling on News
Corp to shed some of its brands, including MySpace.
Times have been tough for the entire magazine industry -- classic
all closed their doors in 2009. So it's not surprising that
, an X-rated magazine targeting women, would be among the wreckage.
's publishers, the privately-owned Blue Horizon Media, decided to
move the magazine solely online after declining sales made it
impossible to continue in print. But the magazine has experienced a
renaissance of sorts after convincing Levi Johnston, the father of
Bristol Palin's baby, to pose for a special print issue in 2010.
plans to capitalize on the momentum and release five issues in
2010, and depending on the reception, come back full force by 2011.
ultimately make it? The outlook's not so good. Even big publishing
houses like Conde Nast and Hearst are having a hard time keeping
the doors open, and
is already over-exerting itself paying astronomical fees for
celebrity photo shoots. Furthermore, the magazine's
pay-per-view online business plan is falling short, as fewer and
fewer people purchase subscriptions.
This leading Taiwanese computer manufacturer is best-known in the
U.S. for its highly portable, cost-effective laptops. When you buy
an Acer, you won't get the user-friendliness or visual appeal of an
Apple (Nasdaq: AAPL)
, but you will get an efficient device that still gets the job
By acquiring U.S.-based Gateway Inc., Acer has expanded its
footprint in the U.S. and it plans to have a smartphone on the
market by the end of this year. But further
in the PC industry makes Acer a potential juicy acquisition for a
struggling market giant,
Dell (Nasdaq: DELL)
. Acer and Dell have a complementary market exposure, and Acer's
strong foreign market presence could help Dell expand outside of
the U.S. market. Furthermore, Acer's strong retail channels
complement Dell's focus on direct-to-consumer channels. No
stranger to game-changing acquisitions,
should be considered a potential buyer as well.
Nearly a decade ago, the AOL Time Warner media merger was valued at
well over $100 billion. Today, that mega-merger is considered the
all-time biggest destroyer of shareholder wealth, and
has been assigned a much smaller price tag. But people often forget
that AOL still has a lot going for it, making it an interesting
acquisition target. For example, over the next five years, the
company will generate cash equal to its current market cap of $2.3
Microsoft (Nasdaq: MSFT)
recently made a run at
Yahoo! (Nasdaq: YHOO)
, a company valued at over $21 billion with a P/E ratio nearing 28.
Why not scoop up a company that, at one-tenth the price of Yahoo!,
will pay for itself in half a decade? Microsoft would get the
5.8 million (mostly older) U.S. subscribers who still use AOL, and
those users could be transitioned to Microsoft's Hotmail service
and Bing search engine. Microsoft would also end up with the AOL
homepage, which some analysts claim is worth $1 billion alone.
Whether you're looking for a hard-to-find battery or a remote that
will control every on/off switch in your house,
purports to have it all. Unfortunately, the slump in the consumer
electronics space has slashed demand for the store's peripheral
products. The recession has even forced RadioShack to ask the city
of Fort Worth, Texas, site of its corporate headquarters, to
relieve the firm of $10.76 million in tax liabilities.
There has been speculation that RadioShack has hired
Goldman Sachs (
opportunities, and that
Best Buy Co. (
is an interested suitor. Look for this electronic accessory
retailer to be gobbled up by a larger firm within 18 months.
Trans World Entertainment Corp. (Nasdaq: TWMC)
, owner of the f.y.e. music store chain ("for your entertainment"),
was just named by
to a list of troubled retailers.
Trans World closed 157 f.y.e. stores during fiscal 2009 and another
18 in the first quarter of 2010. The stores' sales of physical CDs
have plummeted, with revenues falling -18% in one year. The company
has operated at a loss since 2007. Bob Higgins, chairman and CEO of
Trans World, has announced plans to close even more of the
unprofitable stores, calling it "good business practice."
The company has been slashing prices, and now many
cost $9.99, the same price as a full-length digital album on
Apple's (Nasdaq: AAPL) iTunes. But a return to profitability means
convincing music buyers used to getting music online that they
should come to the mall to sort through the racks of CDs like they
did a generation ago.
U.S. Cellular (
is the country's sixth-largest wireless carrier, bringing in $4.2
billion in operating revenue last year. However, smaller carriers
are using lower prices to undercut U.S. Cellular while larger firms
can offer better coverage and a wider array of mobile devices. U.S.
Cellular currently finds itself in no man's land, and has been
named a strong candidate for a leveraged buyout by Bank of America.
USM has never publicly expressed interest in being purchased, but
according to Bank of America, current market conditions are ideal
for weaker companies to be preyed upon by larger competitors. The
company's solid customer base, including 6.1 million customers in
26 states makes the company a coveted target for a larger telecom
player such as
to swoop in and bolster its own market cap.
Casual shoe sales surpassed sneaker sales during the last decade
Foot Locker (
can no longer operate the massive sneaker super-centers it was once
known for. It has already consolidated its Lady Foot Locker brand
with the rest of its products as it continues to trim fat.
On January 8th, Foot Locker announced it would be closing 177
stores and cut 120 executive-level positions, and Moody's recently
reaffirmed the junk status of a significant portion of Foot
Looker's debt. Foot Locker's target consumer, the die-hard sneaker
aficionado, is part of a younger consumer group experiencing high
levels of unemployment. In a highly competitive but possibly
weakening retail sector, Foot Looker's reorganization may not be
enough to pull it through a slow-growth environment, and we see
this brand as a former retail giant on the way out.
operates in a tough environment. Prices for inputs (electricity,
caustic soda) continue to go up, but prices for the final product
(refined aluminum) continue to go down. Some of its largest
competitors are Chinese and Russian firms that exist only because
of gigantic state subsidies. Subsidized companies have no incentive
to stop producing, so the world is awash in aluminum. According to
Rusal, the world's largest aluminum producer, the aluminum market
may have a surplus of 500,000-700,000 tons in 2010.
And to top it all off, Alcoa's debt load is as close to
unsustainable as you can get. For example, from March 31,
2009 to March 31, 2010, Alcoa paid $474 million in interest alone.
That comes out to 20% of gross profit (Revenue - COGS) going to
debt service before considering any other costs of doing
business. The high debt
could easily drive Alcoa into bankruptcy if low prices and high
costs continue to put pressure on margins.