Not that too many people noticed, what with anthrax scares and bombing missions, but we lost a pretty big name the other week.
Polaroid Corp. filed for Chapter 11 bankruptcy protection after years of struggling to get beyond its mainstay, instant photography. In the financial equivalent of a death notice, Value Line last month stopped its coverage and provided this sobering send-off: “Due to the company’s mountains of debt and bleak earnings prospects, we think this issue offers little interest for investors.”
Ouch. Was it so long ago that Polaroid had been a proud member of Wall Street’s “Nifty Fifty,” a group of four dozen or so premiere growth stocks in the 1960s and early 70s that provided a security blanket for institutional investors? Polaroid, along with the likes of IBM, Xerox, Kodak and Disney, were sometimes known as “one-decision” stocks because once you decided to buy them, they supposedly could be held forever. “So what if you paid a price that was temporarily too high?” wrote stock maven Burton Malkiel in his classic tome, “A Random Walk Down Wall Street.” “Since these stocks were proven growers, sooner or later the price you paid would be justified.”
Sound familiar? As in Lucent and Cisco and Nortel and Sun Microsystems? Just as those one-time sure things have become the black sheep of our current investment portfolios, the Nifty Fifty found themselves pretty well deflated by the mid-1970s. They’re mostly all still here, but the medical reports are not encouraging. Besides Polaroid, Xerox has been on life support for years. Kodak is struggling. McDonald’s and Disney must keep excusing away their poor results.
This is a good time to be reminded that there’s no such thing as a divine right in corporate America, no matter how impressive the pedigree. Consider AT & T;, at one time the ultimate widows and orphans stock, whose flagging fortunes and stock price is causing all its shareholders to feel abandoned.
Just days after the Polaroid filing came word that Bethlehem Steel Corp., the 101-year-old war horse whose steelwork was used for the Golden Gate Bridge and Rockefeller Center, also filed Chapter 11. A turnaround guy brought in last month still talks about finding a merger partner, but behind the scenes lawyers are already at work settling the estate.
Why do companies die? As makers of buggy whips and rotary telephones will tell you, it often comes down to outliving your usefulness. In 1947, Polaroid came out with a product that was considered breakthrough technology at the time: a camera that could develop pictures on the spot, using the synthetic light-polarizing material that Edwin Land first developed in the 1920s. Our parents raced out to buy those clunky Polaroids with their gooey, smelly film and over the years the company became a symbol of American success and ingenuity.
But when it came time to move beyond cameras, nothing seemed to work. There were failed efforts at digital imaging. Lots of money spent on something called dry film technology that never took off. All the while, management ran a notoriously bloated and inefficient shop.
Expect more business deaths in the coming months. These are vulnerable times for companies that have been hanging by a thread, and as they leave us, keep one thing in mind: Good ideas are never enough.
Mark Lacter is editor of the Business Journal.
