<< They are, however, in a position where they must re-prove their leadership one of two ways >>
They never lost their leadership. LU just tried to put the fear into everybody with their vaporware announcement. It is a tactic used by all the big boys such as C$CO, INTC, MSFT, LU, etc.
These companies are best known for kicking their competitors when they are down. Take an A$ND or COMS for instance. They wait until the company has a difficult merger or has a temporary earnings setback or whatever, and then they pounce. They flood the market place with tough talk and hype releases just so they can knock a COMS or A$ND down a few points. Then they start cutting prices and trying to win every deal, even if it means taking a little less profit for the time being. They can absorb a hit in one area and make up for it in another. These price cuts and press releases knock down the price of their weaker competitors right when they are trying to regain their footing. It results in the stock price tumbling some more and after a while it has an effect on the business in general. If a company like A$ND or COMS has their stock price in the cellar long enough, and just when they try to climb back a huge behemoth like C$CO comes in and beats them back down, eventually it erodes investors and employee confidence. This is why you rarely see smaller competitors like A$ND, COMS, or CS, have only one quarter of problems. Even though management thinks they are back on track a larger competitor will do what it takes to make sure they disappoint the street and lose credibility with analysts and investors. It is harder to attract talent and make strategic acquisitions when your stock gets battered every week. Companies like C$CO who do the battering just watch their stocks go higher so all the talent/technology goes to them. People want stock options in companies with a rising stock price, not some laggard who can't get their stock to move.
It's just a sad fact of life. That's the way the big boys play. Kick 'em when their down. That is why big powerful companies just get more and more expensive and little guys get cheaper and cheaper. C$CO's CEO was just bragging in some article about how C$CO's market cap is 60-70% larger than their largest seven competitors combined If C$CO was smart they would have crushed A$ND and COMS some more before they had a chance to get back up. If INTC was smart they would cut some prices for NIC's again and send COMS reeling. One or two more earnings disappointments and COMS will be just like CS--- in the teens.
I hope I didn't stray off-topic too much but you get the idea behind LU's tactics. |
