It happens all the time with elderly movie stars and other celebrities who suddenly pop up in the headlines after a long absence. Our reaction, crass as it may seem, is to say, “Wait, they’re not dead yet?” So it probably shouldn’t surprise us when it happens to companies, too.
After all, many kinds of businesses have a natural life cycle. We’d all be rather surprised to find a thriving and publicly traded blacksmith’s or a buggy whip business on the New York Stock Exchange these days. And if someone suggests that you invest in a consumer-oriented “dotcom” with valuation metrics pegged to how many eyeballs it can attract, you’ll probably remember just how many corpses of similar entities lie buried in corporate graveyards from Silicon Alley to Silicon Valley.
Yet, some companies with business models that face massive challenges somehow manage to struggle on. A handful of them are so vital to both our way of life and to the economy as a whole that they get a big helping hand from the government when necessary and restructure or just keep staggering along in varying degrees of health until the next crisis. (Think of the auto industry.)
Others somehow seem to survive without ever thriving, despite big upheavals in their industries that have, in some cases, been aggravated by poor or ill-timed business decisions in corner offices.
Meet Wall Street’s version of the Final Four, the great survivors that haven't yet been killed off by intense competition.
Barnes & Noble (NYSE: BKS)
Borders didn’t make it. But in spite of the shakeup that e-books, the computer, mobile devices and on-demand entertainment in general have wrought on the book publishing industry – and the depredations of the giant Amazon.com, in particular — Barnes & Noble keeps lurching along.
True, it has shuttered its iconic Fifth Avenue store in Manhattan. Yes, it lost its focus by allowing itself to be lured into a costly and distracting business and price war with Amazon over e-readers and, later, tablets. It’s slooowwwly regaining some focus (after an abortive attempt to split the company in half). Shares are up nearly 40 percent this year. Can the company not only fend off insolvency but transform itself into a robust enterprise? The final chapter has yet to be written.
BlackBerry (NASDAQ: BBRY)
Once, famously, the company’s devices were so ubiquitous that they were known, wryly, as “Crackberries.” Then came Apple and the iPhone, and Google’s rival Android system, and suddenly BlackBerry looked like yesterday’s news, worth no more than whatever its patents could fetch. By this time last year, the prospect of the company surviving to celebrate the dawn of a new year looked remote — so remote, in fact, that one former employee trying to set up a pool among his recently ousted colleagues on when the company would finally close its doors couldn’t get any Vegas bookie to give him odds on a 2014 date.
New CEO John Chen, it seems, is having the last laugh, thanks in part to his ability to charm investors with his near-term cost-cutting plans and his ability to make headway shifting back toward offering secure messaging services. The company recently said it expects cash flow to break even by the end of fiscal 2015 and to return to profitability the following year. For now, though, the company is still bleeding red ink, so its long-term survival is still a tossup. But the shares are actually up nearly 9 percent so far this year
Zynga (NASDAQ: ZNGA)
Farmville is so, so… 2012. Actually, it’s even more passé than that. When was the last time a Facebook friend pleaded with you for something for their online farm? Now, it’s all about online lives for Candy Crush Saga. Even then, investors seem to have gotten wise to the fact that online gaming’s one-hit wonders can have less than wonderful “adult” lives once the first flush of enthusiasm has ebbed. And as goes the game, so goes the stock of the company that launched it.
All that makes it hardly surprising that shares of King Digital Entertainment (NYSE: KING), maker of Candy Crush, stumbled out of the gate late last month, slumping 15.6 percent in their first full day of trading. What is surprising is that Zynga’s stock, after plunging from $15 to less than $2.50 a share, is now actually north of $4.30, up 13 percent on the year. Part of that can be traced to some implausible rumors (a Yahoo takeover, anyone?) and some speculation that Zynga may emerge as a winner if online gambling takes off. (I’d put high odds against that happening, but then the stock is still pretty cheap.) It may not be the living dead, but it’s still a fairly high-risk proposition.
J.C. Penney (NYSE: JCP)
One reason I know this company is still alive is that I’m still getting flyers from them in my mailbox. But every time I wander into the store at my local mall, I resist the temptation to take the pulse of this venerable retailer. True, S&P’s analysts now thinks the troubled company’s credit rating is stable rather than deteriorating, but simply not getting worse isn’t enough to get excited about. (S&P also tossed words like “unsustainable,” “vulnerable,” and “highly leveraged” into its report….)
It’s hard to spin “less bad” into “good” in other areas too. The retailer still hasn’t found a new vision and, beyond discounting, hasn’t found a new strategic approach to winning back all the customers it has alienated over the last several years. That’s something that Best Buy (NYSE: BBY) seems to have accomplished, at least in part. Unless J.C. Penney adopts its own turnaround strategy, any recovery is liable to be short and perhaps not even all that sweet.
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