6 Corporate Decisions that Burnt Millions

Investing in different sectors and industries are no more a fresh thought. Making wrong investment decisions, meanwhile, keep recurring in business across the world, though all of us are provided with enough of the failed-investment stories that took place in different parts of the world.

 

 

Still, if you need more of them, here is Eric Fox of Investopedia providing you with some of the similar failure stories that ended up as the worst investments of all time that are made across a broad range of sectors and industries.

Check out for those 6 decisions that made some of the corporate giant step backward.

Decisive Bear Stearns

Joe Lewis, the British Businessman, was ranked 290^th on the Forbes’ 400 billionaires list in March 2012. Starting his career in the family catering business and then making his fortune as a currency trader, he became quite notorious in 1992 as he had his large bet against the British Pound, when that currency declined by 20 percent in a day’s period after the government withdrew from the European Exchange Rate Mechanism. This currency trade, later christened as Black Wednesday, made Lewis profit hugely.

Lewis then started buying shares of Bear Stearns in the latter part of 2007. It was company that was suffering from the then financial crisis and its involvement in the mortgage-backed securities market. As the stock was trading above $100 per share, he raised his stake in that company to more than 10 percent by the end of next year. He continued to have the stake even after Bear Stakes was acquired by JP Morgan for $10 per share in March 2008. This brought him a loss of more than one billion dollars. Still he clings on to the stock, even if the same is performing rather flat over the last four years.

Vain Scream: Yahoo!

When you doubt something, you just google it. But before this ‘googling,’ it was Yahoo! that offered help and it ruled the internet. But it made a rather foolish decision to buy company shares in the late 1990s as it was increasingly getting worried about its competitors gaining more and more shares. But the companies listed by Yahoo! were those with little revenue and no profits. In May 1999, it acquired GeoCities, a company that hosted a series of personal web pages on the internet organized into communities, issuing $2.9 billion in stock for GeoCities. This resulted in a GAAP loss of $19.7 million on 1998 revenues of $18.4 million. In July same year, it again purchased Broadcast.com, audio, video broadcasting company, issuing stock worth $5 billion for this company. This reported a GAAP loss of $16.4 million on 1998 revenues of $22 million.

However, in October 2009, Yahoo! closed down its GeoCities service and directing its customers to its own web hosting operation. The Broadcast.com was also proved to be not that productive as it soon became a cliché service on the internet. Since then, these decisions have become examples for how not to create shareholder value. It is reported that, the stock is still down by around 80 percent.

Cisco Flips Out

Cisco made a similar thoughtless decision, when it purchased the parent company of Flip Video in March 1999 for $590 million in stock. Flip Video was a maker of hand-held video cameras. Cisco was in full hopes, when it made such a deal as it claimed that the purchase would lift its business to the next level and drive the next generation of entertainment and communication experiences.

Only two years later, Cisco became fed up with the next level and new generation and soon it shut down the camera producing brand as part of its corporate re-alignment.

Caspian Networks

Caspian Networks was originally known as Packet.com, established in 1998, a company that provided the Network carriers with IP routers and other networking hardware. The company once could raise more than $300 million from various venture capital firms in several of the funding rounds. But it could never become profitable as it never sold enough of its products. The company had to breathe its last in the late 2006.

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mp’d Mobile 

Amp’d Mobile, the mobile content provider, leased spectrum from Verizon and other wireless operators and the company was mostly aimed at customers falling between 18 and 35 years old. From various venture capital firms and other investors, Amp’d Mobile could raise $350 million of funding in March 2007. It was all set to conquer the wireless world that had its services in the United States and Canada.

But, everything didn’t fell on place for this mobile content provider, as expected. In June 2007the firm got filed for Chapter 11 bankruptcy. The inability of the firm’s infrastructure to keep up with speedy growth made it bend to bankruptcy. The company made a stupid decision to lower credit standards to boost subscriber growth, which led to 45 percent of the company’s total subscriber base to be offending in paying their monthly phone bills.

Disney and Go.com

Often competition tempt firms to step into making large decisions, and many of them turn Brainless and cause the company to lose much of its earned money and reputation. Something similar happened to Disney, as it decided to launch the Go Network in January 1999 for competing directly with Yahoo!, AOL and other companies that operated web portals. It was believed that, Go.com would aggregate all the company’s well-known brands that operated online, such as ESPN and ABC News. The new network worked well in the beginning and soon became the fourth most visited website in the world.

But the site didn’t turn out to be profitable, despite its popularity, compared to the money that was spent to set up and operate the portal. And the new portal was eventually shut down in January 2001.