Each year, 24/7 Wall St. regularly compiles a list of brands that are going to disappear in the near-term.
Last year’s list proved to be prescient in many instances, predicting the demise of T-Mobile among others.
Click to see what brands will disappear >
In late May, AT&T and Deutsch Telekom announced that AT&T would buy T-Mobile USA for $39 billion. The deal would add 34 million customers to the company and create the country’s largest wireless operator.
Other 2010 nominees—including Blockbuster—bit the dust, while companies such as Dollar Thrifty are on the road to oblivion.
Last September, after finally giving in to competition from Netflix and buckling under nearly $1 billion in debt, Blockbuster filed for Chapter 11 bankruptcy protection. In April of this year, Dish Network acquired the company for $320 million.
Car rental chain Dollar Thrifty is still entertaining buyout offers from Avis and Hertz. On June 6, the embattled company recommended that its shareholders not accept Hertz’s recent offer, valued at $2.24 billion, or $72 a share.
Meanwhile, on June 13th, Avis Budget announced that “it had made progress in its discussion with the Federal Trade Commission regarding its potential acquisition” of the company. Although Dollar Thrifty can remain choosy, a sale is a matter of when, not if.
We also missed the mark on a few companies. Notably, Kia, Moody’s, BP, and Zale appear to be doing better than we expected.
Brands that have stood the test of time for decades are falling by the wayside at an alarming rate.
For instance, Pontiac—a major car brand since 1926—is gone, shut down by a struggling GM. Blockbuster is in the process of dismantling, after it once controlled the VHS and DVD markets. House & Garden folded after 106 years. It succumbed to the advertising downturn, a lot of competition, and the cost of paper and postage.
Its demise echoed the 1972 shutdown of what is probably the most famous magazine in history: Life.
That was a long time ago, but it serves to demonstrate that no brand is too big to fail if it is overwhelmed by competition, new inventions, costs, or poor management.
This year’s list of The 10 Brands That Will Disappear takes a methodical approach in deciding which brands will walk the plank.
The major criteria were as follows: (1) a rapid fall-off in sales and steep losses; (2) disclosures by the parent of the brand that it might go out of business; (3) rapidly rising costs that are extremely unlikely to be recouped through higher prices; (4) companies which are sold; (5) companies that go into bankruptcy; (6) firms that have lost the great majority of their customers; or (7) operations with rapidly withering market share.
Each of the 10 brands on the list suffer from one or more of these problems. Each of the 10 will be gone, based on our definitions, within 18 months.
Sony has a studio production arm which has nothing to do with its core businesses of consumer electronics and gaming.
Sony bought what was Columbia Tri-Star Picture in 1989 for $3.4 billion. This entertainment operation has done poorly recently. Sony's fiscal year ends in March, and for the period revenue for the group dropped 15% to $7.2 billion and operating income fell by 10% to $466 million.
Sony is in trouble.
It lost $3.1 billion in its latest fiscal on revenue of $86.5 billion. Sony's gaming system group is under siege by Microsoft and Nintendo. Its consumer electronics group faces an overwhelming challenge from Apple.
The company's future prospects have been further damaged by the Japan earthquake and the hack of its large PlayStation Network. CEO Howard Stringer is under pressure to do something to increase the value of Sony's shares. The only valuable asset with which he can easily part is Columbia which would attract interest from a number of large media operations.
Sony Entertainment will disappear with the sale of its assets.
The first Saab car was launched in 1949 by Swedish industrial firm Svenska Aeroplan. The firm produced a series of sedans and coupes, the flagship of which was the 900 series, released in 1978. About one million of these would eventually be sold. Saab's engineering reputation and the rise in its international sales attracted GM to buy half the company in 1989 and the balance in 2000.
Saab's problem, which grew under the management of the world's No.1 automobile manufacturer, was that it was never more than a niche brand in an industry dominated by very large players such as Ford and Chevrolet.
It did not build very inexpensive cars like VW did, or expensive sports cars as Porsche did. Saab's models were, in price and features, up against models from the world's largest car companies that sold hundreds of thousands of units each year. Saab also did not have a wide number of models to suit different budgets and driver tastes.
GM decided to jettison the brand in late 2008, and the small company quickly became insolvent. Saab finally found a buyer in high-end car maker Spyker which took control of the company last year. Spyker quickly ran low on money because only 32,000 Saabs were sold in 2010. Spyker turned to Chinese industrial investors for money. Pang Da Automobile agreed to take an equity stake in the company.
But, the agreement is not binding, and with a potential of global sales which are still below 50,000 a year based on manufacturing and marketing operations and demand, Saab is no longer a financially viable brand.
The once-hip retailer reached the brink of bankruptcy earlier this year, and there is no indication that it has gained anything more than a little time with its latest financing. It currently trades as a penny stock.
The company had three stores and $82 million in revenue in 2003. Those numbers reached 260 stores and $545 million in 2008. For the first quarter of this year, the retailer had net sales for the quarter of $116.1 million, a 4.7% decline over sales of $121.8 million in the same period a year ago. Comparable store sales declined 8% on a constant currency basis. American Apparel posted a net loss for the period of $21 million.
Comparable store sales have flattened, which means the firm likely will continue to post losses. American Apparel is also almost certainly under gross margin pressure because of the rise in cotton prices. The retailer raised $14.9 million in April by selling shares at a discount of 43% to a group of private investors led by Canadian financier Michael Serruya and Delavaco Capital.
According to Reuters, the 15.8 million shares sold represented 20.3 per cent of the company's outstanding stock on March 31. That sum is not nearly enough to keep American Apparel from going the way of Borders. It is a small, under-funded player in a market with very large competitors with healthy balance sheets.
It does not help matters that the company's founder and CEO, Dov Charney, has been a defendant in several lawsuits filed by former employees alleging sexual harassment.
Sony Ericsson was formed by the two large consumer electronics companies to market the handset offerings each had handled separately. The venture started in 2001, before the rise of the smartphone.
Early in its history, it was one of the biggest handset manufacturers along with Nokia (NYSE: NOK), Samsung, LG, and Motorola. Sales of Sony Ericsson phones were originally helped by the popularity of other Sony portable devices like the Walkman.
Sony Ericsson's product development lagged behind those of companies like Apple and Research In Motion which dominated the high end smartphone industry early. Sony Ericsson also relied on the Symbian operating system which was championed by market leader Nokia, but which it has abandoned in favour of Microsoft's Windows mobile operating because of licence costs and difficulty with programmers.
In a period when smartphone sales worldwide are rising in the double digits and sales of the iPhone double year over year, Sony Ericsson's unit sales dropped from 97 million in 2008 to 43 million last year. New competitors like HTC now outsell Sony Ericsson by widening numbers. Sony Ericsson management expects several more quarters of falling sales and the company has laid off thousands of people.
There have been rumours, backed by logic, that Sony will take over the operation, rebrand the handsets with its name, and market them in tandem with its PS3 consoles and VAIO PCs.
MySpace, once the world's largest social network, died a long time ago. It will be buried soon.
News Corp bought MySpace and its parent in 2005 for $580 million which was considered inexpensive at the time based on the web property's size. MySpace held the top spot among social networks based on visitors from mid-2006 until mid-2008 according to several online research services.
It was overtaken by Facebook at that point. Facebook has 700 million members worldwide now and recently passed Yahoo! as the largest website for display advertising based on revenue. News Corp was able to get an exclusive advertising deal worth $900 million shortly after it bought the property, but that was its sales high-water mark. Its audience is currently estimated to be less that 20 million visitors in the US.
Why did MySpace fall so far behind Facebook? No one knows for certain. It may be that Facebook had more attractive features for people who wanted to share their identities online. It may have been that it appealed to a younger audience which tends to spend more time online. News Corp announced in February that it would sell MySpace.
There were no serious bids. rumours surfaced recently that a buyer may take the website for $100 million. The brand is worth little if anything. A buyer is likely to kill the name and fold the subscriber base into another brand. News Corp has hinted it will close MySpace if it does not find a buyer.
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