THE SKEPTIC: Corp Mania Pendulum Overcorrecting Again?
03 Feb 05:31
By Dennis Baker
A DOW JONES NEWSWIRES COLUMN
ZURICH (Dow Jones)--Yes, the inflated stock prices of the 1990s spawned a
gaggle of hair-brained corporate expansions that bordered on megalomania.
Yes, some crazed CEOs clutching wads of high-priced, newly issued shares
bought companies like mad to fill out their grand schemes.
And yes, the skeletons of many of these collapsed companies rattle in the
boneyard, their CEOs long forgotten.
Swissair (Z.SWI) comes to mind. So does the all-finance craze. And remember
all of those internet banks?
But does that really mean that all of the expansionary strategies hatched in
the 1990s were wacko?
Now, when you read about demands that AOL Time Warner (AOL) sell crown jewels
like its music, books or movie businesses, you begin to wonder if the pendulum
is again swinging past common sense and reason.
For sure, Swissair's folly centered on its desire to grow into a major global
player from a small regional base, and it ran out of money in the process.
But is the dream of multimedia really so far-fetched? Many TV junkies still
dream of a broadband connection delivering all types of entertainment into one
machine, with a big flat screen on the wall to display it all. We're waiting to
buy such an integrated system when it comes out, if for no other reason than to
get rid of the current tangle of wires, machines and add-on gadgets.
That means the tech collapse at most just delayed this multimedia rollout for
a couple of years, and companies willing and able to wait for the eventual
pickup may do well. Look at Swiss companies Micronas (Z.MSH) and Unaxis
(Z.UNX), for example - they're waiting patiently to pounce on the coming
migration to flat-panel home electronics.
So why would AOL Time Warner or any other entertainment giant unwind a
sensible strategy now, when asset prices are at the bottom and the multimedia
market it dreamt of is just emerging?
Indeed, AOL's problem, it seems, is having underestimated the coming mass
migration to broadband from dialup.
Yes, the markets became impatient when the grand promises failed to bear
fruit quickly enough - and in many cases, rightly so. But now they're becoming
impatient with companies that fail to unload underperforming - but promising -
assets fast enough, a strategy that's sure to backfire as well.
Perhaps the next phase will bring more patience for promising strategies and
more immediate impatience with dodgy corporate agendas.
-By Dennis Baker, Dow Jones Newswires; 41-1-212-2181;
dennis.baker@dowjones.com
(END) Dow Jones Newswires
02-03-03 0531ET |
