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Group 3: Still-Speculative Turnarounds

These companies are implementing turnarounds that are still at significant risk of failure -- EDS is one -- or are months, perhaps even years, from instituting changes that would make a successful turnaround possible. Disney and Merck fall into this category.

EDS has done all the right things by bringing in new management, changing its accounting to accurately calculate profit margins on new contracts and changing its business mix. But it remains unclear that this will be enough. EDS still suffers from old, large but unprofitable contracts, and it continues to face stiff competition to retain big accounts that have been targeted by aggressive competitors. EDS is in danger of losing its $7 billion contract to run the U.K.'s tax and national insurance system.

The prospects at Disney and Merck are equally uncertain, but for different reasons. There, managers who have been unable to fix problems are entrenched.

Although Disney faces major problems with its ABC television network, its theme parks and its flagship animated film business, CEO Michael Eisner is firmly in control of the company's board of directors. In fact, Eisner's power increased with the resignation of Roy Disney, his strongest critic on the board.

At Merck, similarly, CEO Raymond Gilmartin recently announced that he will stay two more years to groom his successor, even though under his regime Merck has been unable to build a pipeline of new drugs to offset those older products going off patent.