A post on zerohedge.com describes the woes of Red Lobster, which is quickly going out of business. Does this headline seem oddly familiar?
"Red Lobster Abruptly Closes Dozens Of Locations, Loses Its Key Supplier And Begins Fire Selling Kitchen Equipment"
IBM hasn't been bought out by private equity? That's because for all intents and purposes, IBM acts exactly like a private equity firm. Let's take your words and do some minor wording substitutions...
"...(IBM stock) was bought up by private equity firms, which (encouraged the management to make) a series of bad long-term decisions in order to goose short-term numbers and pull money out of the firm. (IBM) used to own many of its locations, but the (management) decided to sell them off and lease back, su-king the real estate profits out of the firm and saddling it with the leasing costs."
People like to omit that Red Lobster was bought up by private equity firms, which made a series of bad long-term decisions in order to goose short-term numbers and pull money out of the firm. RL used to own many of its locations, but the PE boys decided to sell them off and lease back, su-king the real estate profits out of the firm and saddling it with the leasing costs.
The good news is that IBM hasn't been bought out by private equity.......YET.
IBM went too woke, and now risks going broke.
In the news this morning, Red Lobster has filed for Chapter 11 bankruptcy. The typical path for a business in Chapter 11 starts by suffering years of continuous losses in core parts of the business under a succession of CEOs. After the BK filing, the business attempts to get on its feet again by selling off operations, terminating long-term debt obligations and shrinking its overall financial footprint so that it can survive.
Remember that this is really an IBM story and not a story about Red Lobster. IBM has been following in the footsteps of Red Lobster, even if it hasn't filed official paperwork with the court. A succession of CEOs and years of losses in its core lines of business have been interspersed with selling off of operations and regular large-scale dismissals of employees. This is the path followed by any business in Chapter 11.
So what comes next? A business that cannot survive after Chapter 11 either finds a savior (someone to buy it), or ends up in Chapter 7 (complete and total liquidation). I've held for a long time that IBM's fate will eventually be in the hands of the US government. The technology portfolio is too large, too advanced and too entrenched in our society to be left in just anyone's hands, and despite IBM's ongoing efforts there are still a lot of employee benefit obligations. At some point, the USG will either make decisions for IBM (overruling its management at times), or it will dictate if, when and how IBM is to be broken up. IBM's fate will thus be left in the domain of government bureaucrats and politicians.
@3uwq+1swWJcQE, the environment feels the same at IBM, thanks to the F&O leadership of JW and JK. Oh, and of course RTO mandates.
Walk into a Red Lobster restaurant and it feels like you've been transported back to the 1980s. Walking into an IBM office has the same effect.
It is alleged that the main event that brought Red Lobster down was the endless shrimp promotion. Sales of cheddar biscuits and other filler items went down as people went for the shrimp...like several dozen at a sitting per customer. Thai Union bailed out...as the main seafood supplier, they were taking heavy losses.
You may be right but Red Lobster had other issues too. Food quality for the price was terrible. Restaurants are filthy/dirty. Service is terrible.
https://www.zerohedge.com/markets/red-lobster-abruptly-closes-dozens-locations-loses-its-key-supplier-and-begins-fire-selling