Sodastream Needs a Savior

Jacob Harper |

sodastream stock, carbonization, green mountain coffee roasters stock, small-cap stocksAny company built on the back of a single product is extremely vulnerable. And not just to a competitor who can produce a knockoff that’s just as good. Single product companies that rely on just one innovation to carry them are on the wrong side of time. That is, as time goes on, their prospects get dimmer by the day. And it appears that time has arrived for Sodastream (SODA) , who issued a revenue forecast on October 7 that was absolutely disastrous – and unless a radical change soon takes place, a sign that their time has run out.

To be sure, Sodastream did everything they could to postpone the inevitable. They rigged their home carbonation machines to only work with their replacement cartridges to force customers to use their products. They tried to battle out possible competitor Green Mountain Coffee Roasters (GMCR) over the latter’s supposed in-development home carbonation unit. But in the end, a fad is a fad is a fad and Sodastream could not prolong the company’s tenuous grasp on the fledgling home carbonation craze.

The fallout has been worse than anyone, even their naysayers, suspected. Sodastream announced before the bell that revenue for the company was expected to be about $125 million. That’s $20 million less than last year, and a whopping 20 percent less than analysts had been calling for.

The market’s reaction was swift and vitriolic. After the announcement trading of SODA’s shares were halted for a full hour as the stock plunged through the floor, falling 21 percent on the day to cap off a year that’s seen shares now lose more than 60 percent of their value.

Rumors are already circulating that Sodastream is actively seeking a white knight buyer to come in and save them, or at the very least are looking to go private. A possible move off the public market makes sense – Sodastream is going to have to completely reinvent the company and is likely to lose money for an extended period while they retool. Privatization allows a company the time to test new products and figure out a fresh plan of attack without the pressure to immediately return results, like beleaguered home computing powerhouse-turned-laggard Dell (DELL) .

No matter which pat they take, the only certainty right now is Sodastream needs to act fast, or things will only continue to get worse. New product, new owners, privatization, any one of them could work. But staying the course as single product company whose lone revenue driver is quickly receding from public consciousness will have just one result: bankruptcy.

 

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Companies

Symbol Name Price Change % Volume
SODA SodaStream International Ltd. 37.79 1.28 3.51 585,455
GMCR Keurig Green Mountain Inc n/a n/a n/a 0

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