Speaking of sunset companies, it doesn’t get any more painful than Eastman Kodak (NYSE:EK). Having become nearly synonymous with the photographic industry itself, Kodak is truly on “death watch,” having dropped to a mere 50 cents and a total market cap of only about $140 million. Rumors are flying about bankruptcy filings. Three board members have hit the eject handle in the past two weeks. And earnings … well there aren’t really any to speak of.
Hopelessly outclassed by the digital world, I think the brand belongs in a museum. The company has very little to pin its future on save the sale of more than 1,100 digital imaging patents and patent-related lawsuits aimed at harvesting earnings from those who (in Kodak’s opinion) have quite literally stolen them — including Apple and Research in Motion. The former is understandable. The latter is itself on death watch, so this is like squeezing blood from a turnip.
The one shining star, if there is one to be had, is that the value of those patents may be $2 billion to $3 billion — however, that’s a Pyrrhic victory in my opinion. The company doesn’t appear to have the cash necessary to survive the judicial process. But, if you want a flyer, that’s about how this one should be evaluated — and then only with money you can afford to lose.
Microsoft (NASDAQ:MSFT) looks as cheap as usual. I remember growing up in Seattle when the company occupied just one tiny corner segment of an office park in Bellevue, Wash. And I recall the IPO all too well — because I passed on it in one of the biggest mistakes of my investing life. I’ve owned Microsoft off and on over the years and have been pleased, but I wouldn’t buy it again today.
The company is stuck in the $20 range, and has been since 1998 — if you’re not counting the tech bubble years when it rallied to nearly $60 before flat-lining again. Over the past 10 years, the company has returned little more than 10% versus the S&P, which has posted more than a 36% gain including dividends.
The problem, as I see it, is not that the company’s core products don’t work — they do. But they can’t seem to figure out who they are, which seems more than a little futile to me given Microsoft has outspent Apple 10:1 over the past ten years. Still, it’s been outclassed, outmaneuvered and out-innovated at every turn. An appealing 2.5% dividend just doesn’t warrant trapping my money for years to come when the company is sitting on a $55.94 billion cash hoard, according to Yahoo! Finance.
Facebook (And almost any other social media company)
Many people think I’m a Luddite or some sort of curmudgeon for saying this. To be fair, I’m probably a little of both. But there is no way that a company like Facebook is worth the $50 to $100 billion being batted around. Well, not to anybody other than Goldman Sachs (NYSE:GS) and their private investment clients who invested via a highly anticipated “private” IPO last year — let alone the public IPO when it hits.
The company has the same old problem salesmen have the world over — monetizing eyeballs. Sure there’s a tremendous amount of marketing data, and the biggest single voluntary collection of people in recorded history using it, but that doesn’t necessarily translate into revenue — nor does it equate to value. Tire kickers don’t spend a lot of money.
Don’t get me wrong. I like Facebook. It’s innovative. It’s created an entirely new form of communication that’s quite literally revolutionary. And I can’t help but admire the fact that the company has more than 800 million users, more than 50% of which log on in any given day. But when push comes to shove, Facebook will have to struggle to keep people interested in a never-ending race against “freemium” apathy.
Perhaps there’s a MySpace posting about this somewhere …