|From Class Acts to Penny Stocks
Commentary. David Pauly is a columnist for Bloomberg News. His
opinions are his own.
By David Pauly
New York, Oct. 28 (Bloomberg) -- Lucent Technologies Inc. should
have a secure spot in corporate history as heir to Western
Electric, which made telephones that lasted, and as owner of the
vaunted Bell Laboratories.
Same for Corning Inc., inventor and biggest producer of fiber-
optic cable, which speeds information around the world.
Yet Lucent and Corning are now part of an ignominious bunch of
companies that have lost virtually all of their stock market
value. Lucent shares that traded at $64.69 about three years ago
were worth 96 cents at Friday's close. Corning shares, worth
$113.33 a bit more than two years ago, closed at $1.97.
Lucent and Corning are now penny stocks, wallowing in the depths
with unknown companies peddled by bucket shops. Lucent is
resorting to a reverse split to raise the price of its shares --
and prevent them from being thrown off the New York Stock
They are not alone in their misery. Nortel Networks Corp., a
competitor of Lucent that once accounted for about one-third of
the value of all stocks on the Toronto Stock Exchange, has
plummeted too. In mid-2000, its shares traded at $89; Friday they
were worth $1.14 apiece.
Sun Microsystems Inc. deserves our respect as a maker of server
computers for the Internet, as the inventor of the Java software
language and as a constant baiter of Microsoft Corp. Still, its
stock has fallen to $2.88 from $64.66 about two years ago.
EMC Corp., whose refrigerator-size computers mark it as the
leader in data storage, has seen its shares plummet 95 percent to
$5.42 in about two years.
These companies weren't victimized by fraudulent accounting or
looting by executives. Rather, they were savaged by recession,
war jitters and their own overexuberant expectations for the
telecommunications and computer markets.
Investors might think the shares of such companies are good
buys -- that the market was as crazy going down as it was going
up -- but stocks reduced to cents per share have trouble coming
The telecommunications industry is all red ink and pink slips.
Sun's and EMC's sales began falling in mid-2001, and no rally is
Bargain hunters might be more tempted by other respectable
companies whose shares have dropped 75 percent or so from their
peaks and are now trading at just below or above the $10 level.
This group of the fallen -- nickel stocks maybe? -- includes
Cisco Systems Inc., the once-sure-thing assembler of computer
network equipment; Charles Schwab Corp., proven to be an
adaptable financial services company; Oracle Corp., the producer
of computer software for managing information; and Motorola Inc.
and Nokia Oyj, both leading makers of cellular phones. Cisco's
shares closed at $11.78 Friday, down 86 percent from their March
Some companies may be sorry they split their stocks so eagerly
when the market was bubbling. If Oracle, for instance, had
foregone its three most recent splits, its stock would have been
worth $61.56 Friday rather than $10.26. Oracle shares still
would've fallen 78 percent from their peak, of course.
Investors might be intrigued to find a company like Ford Motor
Co. on the list of nickel stocks at $8.72. Here's a bedrock of
the U.S. economy; certainly, it will rebound. Well, history is
littered with once-solid companies that failed or became
whispers: American Leather, Swift & Co., Woolworth, the
Old-timers at Bell Labs and Corning may still realize something
on their investments -- or their companies may be destined to
live in infamy as case histories for MBAs.