By Douglas A. McIntyre, 24/7 Wall St.
Many American companies have done incredibly well this year. A number posted extraordinary financial results in 2011. Others have launched products that revolutionized markets.
Of course, many big public corporations also did very poorly. Several nearly destroyed their business and dragged down shareholder value with it. 24/7 Wall St. combed through the S&P 500 to find the best and worst managed companies in America for 2011.
To make a list of semifinalists, 24/7 Wall St. considered stock price, changes in earnings per share, major shifts in market share and changes in management, among other data. Once the initial screen was complete, we reviewed product launch success, financial results, success of new management and the performance of each company within its industry. The editors then sifted through the finalist to identify those that rewarded both customers and shareholders and those that caused these two groups the most harm.
Neither the best-run companies list nor the worst-run companies list includes a large number of corporations from any single industry. This indicates our methodology identifies well- and worst-managed companies regardless of the industry. Based on our criteria, the management of Starbucks did as good a job as the management of Oracle — two of the best-run companies. Similarly, Eastman Kodak management did as poorly as the management of American Airline parent AMR — two of the worst-run companies.
1. Avon Products
- CEO name (tenure): Andrea Jung (12 years)
- YTD stock: down 40 percent
- Latest quarter EPS: flat at $0.38
- Insider ownership: 1.75 percent
- Key event: SEC starts investigation
Avon’s management has taken one of the greatest franchise operations in the world and nearly ruined it. The company has bungled its move into markets like China, where it faces a bribery probe. Revenue growth in emerging markets, such as Brazil and Russia, has faltered. When it announced third-quarter earnings, Avon said it could no longer support its guidance for the balance of the year. The news caused several analysts to downgrade the company’s financial prospects and its stock. CEO Andrea Jung said Avon would continue to seek solutions through another of her interminable restructurings of personnel and operations. Just after Avon announced financial results, it disclosed an SEC investigation into improper contacts between the company’s management and Wall St. analysts. (Since this article was originally published, Avon announced that longtime chief executive Jung, would step down in January of 2012, ending her 12 year term as the longest-serving female executive at a Fortune 500 company.)
2. Research In Motion
- CEO name (tenure): Jim Balsillie (19 years)
- YTD stock: down 71 percent
- Latest quarter EPS: down 57 percent to $0.63
- Insider ownership: N/A
- Key event: takes $485 million Playbook write-down
Research In Motion was “the” smartphone company until Apple released the first iPhone in mid-2007. RIM had every chance to move from its core enterprise market into the consumer one, but was slow to do so and released poorly designed products. It then allowed itself to be flanked by another generation of smartphones built with the Google Android mobile operating system. RIM management continued the destruction of the company’s value through the release of several other badly built and badly marketed products, the most recent of which was the tablet PC Playbook meant to compete with Apple's iPad. Sales have been so poor that RIM recently took a $485 million write-down on its Playbook inventory. RIM has recently warned twice that it would miss earnings forecasts. Three months ago, RIM said it would fire 2,000 of its 19,000 workers. RIM’s BlackBerry was the first smartphone, but its sales are close to putting it in last place among its competition. On December 7, after a trademark dispute, RIM backed down on its plan to change the name of its OS.
- CEO name (tenure): Thomas Horton (less than 1 year)
- YTD stock: down 99 percent
- Latest quarter EPS: loss of $0.48, down from $0.39
- Insider ownership: 1 percent
- Key event: declares Chapter 11
AMR, parent company of American Airlines, declared Chapter 11 recently. CEO Gerard Arpey turned down the board’s offer to stay as chief executive. Perhaps he was too humiliated by what he had done to ruin what was once considered the flagship airline of the United States. The most recent error on management’s part was its inability to settle labor disputes with the pilots, losing Wall Street’s confidence in the airline’s viability in the process. Investors traded shares down relentlessly during the month before the bankruptcy filing. Arpey’s greatest mistake, however, was his decision not to merge American with another large U.S. carrier. Meanwhile, a merger between United and Continental was put together to cut routes, personnel and equipment costs, among other things. Delta and Northwest set a marriage for the same reasons. American was left on the outside of the industry’s cost cutting trend.