Broadcom fucked on monday- the next Enron:
Enron not only outfit to lose big
February 1, 2002
By JONATHAN LANSNER
The Orange County Register
A stunning $50 billion or so of shareholder money erased from the stock's peak to trough.
The company had net losses of $3.4 billion the past two years, largely due to write-downs against an aggressive acquisition campaign. In return, shareholders allege in court papers that insiders improperly sold $579 million in stock before some of the bad news got out.
We're not talking about Enron.
No, it's Broadcom of Irvine, which suffers from some unrealized dreams that high-speed Internet would quickly become a mainstream service.
Now, these O.C. chip makers deny wrongdoing. Surely, Broadcom's troubles don't have the taint that Enron's collapse does.
But what's often lost in the discussion of the Texas energy trader's demise is that Enron isn't the first company to stumble and wipe out a seemingly unfathomable sum of stockholders' wealth.
Economic cycles traditionally whipsaw countless companies. Trader obsessions often overheat stocks. Managements frequently make messes. Lots of mergers go bad. And sadly, accountants continually miss the warning signals.
But society can seemingly only deal with one yarn at a time, and the current passion has a sexy headline: ENRON ZAPS $60 BILLION FROM INVESTORS.
While that tab is six times the losses Kmart created, this carnage is by no way a corporate record.
Take Nortel and Lucent.
Here are two telephone- equipment makers that flopped selling gear for the Internet. Thanks to once-glorified shares and questionable deal-making, this dumb duo wiped out a combined total of almost one-half trillion dollars of shareholder's money.
That's a real soaking.
This past week, Global Crossing went broke after gambling on demand for miles of wires to support the Internet. About $50 billion of investors money is gone from its Web-mania peak.
Internet zaniness certainly boosted shares to silly heights - none more than CMGI, which owns Internet businesses. Its ascension-then-depression erased approximately $50 billion from savers' portfolios.
To be fair, this Internet stuff isn't all hot air. Just ask Kodak. Slow to adapt to digital photography, its shareholders saw nearly $20 billion of worth evaporate as Kodak painfully revamped for electronic imaging.
Xerox, the copier people, suffered an analogous techno-depression. Much like Enron, it recently faced a liquidity crisis - a calamity Xerox overcame. Still, through its crisis, Xerox lost roughly $40 billion of market value.
Big-ticket losses aren't just Digital Age phenomenons. Hyperbole isn't the sole cause for overvaluations. Bad marriages play an awfully significant part.
While Enron created dubious deals with key insiders, Cendant and McKesson dealt with crooks on the outside.
Cendant bought CUC to grow its stable of household-name services. Ooopps! The books were cooked, and in the ballpark of $30 billion in Cendant shareholder worth vanished.
McKesson suffered a similar fate. It purchased health software outfit HBO only to find it acquired an accounting fraud. Unwinding that disaster cost McKesson investors around $20 billion.
Then there's Tyco, which made so many acquisitions, few can comprehend the true picture. Its value plummeted by $60 billion in a post-Enron rush away from complex corporate organizations.
Or ponder energy's Halliburton, formerly run by Vice President Dick Cheney. Its difficulties navigating the oil patch trimmed in the ballpark of $20 billion off its investors' holdings. Conseco, the financial conglomerate, cost its shareholders an equal amount by misjuggling a collection of services.
Yes, Enron is a super-sized, messy - and maybe even sexy - corporate abscess. Yet history shows that it's also just another sad chapter in the risky drama that we call capitalism. |
