The dot-com bubble burst at the starting of the 21st century, and the banking crisis in 2009 caused numerous “big” businesses to shut down or become defunct. There were plenty of tech companies, and banks that failed because of poor business decisions. The article “Seven Ways to Fail Big” explains the various reasons for failure.
Lehmann Brothers
Lehmann Brothers shut down and filed for bankruptcy after more than 150 years of existence. They played a major role in the subprime mortgage crisis of 2008, and the company’s assets were filled with toxic mortgage-backed securities. However, the company used “Faulty Financial Engineering” to hide its financial practices. A court-appointed examiner indicated that “Lehman executives regularly used cosmetic accounting gimmicks at the end of each quarter to make its finances appear less shaky than they were”. They used accounting shenanigans to hide the bad assets so that the shareholder value is not affected.
The company’s management should have rightfully disclosed their toxic assets to the shareholders and the board so that sufficient measures could have been taken by the shareholders before it got too late.
AOL
AOL was one of the early pioneers of the internet, at the start of the 1990s. They provided a lot of tools on the internet such as email, messenger, and a search engine. They became one of the world’s biggest tech companies towards the end of the 20th century. Their IPO became one of the largest in history, and their valuation soared to more than $100 billion by the late 1990s. AOL acquired Time Warner in one of the biggest mergers in history. The merger however was a case of the “Synergy Mirage” where both the companies did not have anything complimentary. Both companies had completely different products, markets, and customers. They failed to utilize each other’s strengths, and the venture failed. They valued of the merged company fell from a peak of $360 billion to as low as $120 billion.
In my opinion, AOL should have looked for companies which helped fix its shortcoming such as broadband companies, and not in something where there is a clear lack of synergy.
Nokia
Nokia was the world’s biggest mobile manufacturer until the start of 2010s when it was usurped by Apple and Android devices. With the advent of smart touch screen devices, many mobile manufacturers provided users with smart operating systems such as Android and IoS. However, Nokia made a very bad bet and decided to stick to its own proprietary Symbian OS which ultimately flopped. Symbian OS was slow, did not have sufficient apps, and did not integrate well with third-party devices. Nokia made a very bad technology, that led to its demise. In my opinion, Nokia should have done more due diligence on the latest tech in the market and listened to its customers when making major decisions on technology.
References
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.