MILLBURN, N.J. (TheStreet) -- Every October for the past three years, I have presented my list of the worst-run companies in the U.S. It is time to unveil 2009's list of ignominious public corporations, but first, let's turn back the clock and see how past honorees have fared:
2006 InducteesAlcoa ( AA): The company and its stock have floundered the past few years, suffering from the lack of aluminum demand and the concurrent decline in aluminum prices. The best decision that management has made in recent history was to raise $1.3 billion in March through a series of common stock and convertible debt offerings. The Cash for Clunkers program may have helped boost some short-term auto production, and demand from Boeing ( BA) for its 787 Dreamliner is beginning to get off the ground. Other than that, the revenue side of Alcoa's business model remains constrained. Alcoa is still alive and may survive, but it still has a whole host of operational and management issues to overcome. Alcatel-Lucent ( ALU): This telecommunications company was never able to rejuvenate itself after the tech and telecom bust nearly a decade ago. Alcatel has cleaned up its balance sheet and is managing to survive to some extent, but it is still on the endangered company list. Cablevision ( CVC): The Dolan family has managed to destroy shareholder value while increasing its own wealth for many years. Cablevision is saddled with debt and has negative book value, yet the company has managed to collect a series of prime properties. The New York Knicks, a Cablevision asset, are a long-term laughingstock of the NBA and will have to sign Lebron James to save the franchise. But Cablevision has managed to endure a global debt crisis and deep recession, so while the company is poorly managed, it appears to be a survivor.
2007 InducteesPalm ( PALM): Palm has had its up and downs. Right now it's on a roll, thanks to the smartphone boom -- that is to say, relative to itself. Compared with Apple ( AAPL) and Research In Motion ( RIMM), Palm is rather insignificant. Time will be the true test for the company, but for now it has a reprieve. Circuit City: Filed for bankruptcy. Charter Communications: Filed for bankruptcy. Six Flags: Filed for bankruptcy. Washington Mutual: Declared insolvent and seized by the FDIC, Washington Mutual is now a part of JPMorgan's ( JPM) retail banking unit.
2008 InducteesMacy's ( M): Of all the companies on my list, Macy's is the most likely to turn itself around. After biting off too much in acquisitions and expanding too much, the retailer is carrying a significant amount of debt. Macy's is caught in the squeeze between the discount retailers such as Wal-Mart ( WMT) and the luxury retailers such as Nordstrom ( JWN). Macy's is still a poorly managed company, but I see some glimmers of hope. General Motors: Filed for bankruptcy. Time Warner ( TWX): The publishing business stinks, AOL was the worst acquisition of all time, and the balance sheet is a horror. While Time Warner has been able to pare back debt, goodwill is still sitting on the balance sheet like a festering sore. The latest installment of the Harry Potter series was a disappointment compared with its predecessors. Management still has its hands full, and I am still not sure that it's the right management to lead Time Warner out of the wilderness.Now, on to this year's list.
- Poor financial condition: Heavy debt loads, large amounts of goodwill and poor cash flow are common among poorly run companies. As a result, their balance sheets are in lousy shape. The inability to shore up balance sheets could spell further danger in the future.
- "Second banana syndrome": Some of the companies on my list are not what would you refer to as "best of breed." Most of them are in an industry or sector that has at least one more-dominant competitor. After all, why swill beer when you can sip champagne?
- Ineffective management: Successful companies will have management teams that not only innovate but also can perform during times of stress. In fact, innovation does not simply mean introducing a single "cool" product, as Sharper Image did with the Ionic Breeze Air Purifier. Effective innovation and management are about being able to transform a company into a provider of a well-balanced and diversified line of products.
- Strategic mistakes: This can take many forms. One of the most damaging mistakes is a large acquisition that turns out to be costly. Take Washington Mutual, for example. The company acquired Providian, a subprime-type credit card issuer, for $6.5 billion in 2006.