Stocks Backpedaling from Bad Decisions

Joel Anderson |

Meg Whitman HPQOctober has been the month of take-backs as several major companies backtracked on previous major announcements that met with resistance from the public, or simply proved too expensive.  In each case, despite moving towards deep and significant changes, these companies ultimately made the decision to make even more significant, public reversals on their proposed plans.

HP Keeps PC Division

Computer-making giant Hewlett-Packard Company (HPQ) announced Thursday after market close that it had scrapped plans to separate and remove their PC division. Shares of HP were rewarded by a jump of over 2 percent in their stock value in early trading Friday. HP, which named former eBay (EBAY) titan Meg Whitman as their CEO on Sept. 22, had previously made the puzzling announcement that they intended to sell or spinoff their PC division in August. The news promptly saw a sell-off that caused its stock price to lose over a quarter of its value.  However, after a thorough review, HP scrapped the plan, announcing that it would be too expensive to separate their businesses on account of significant integration of areas like supply chain, IT, and procurement.  "First and foremost, HP is a hardware company," Meg Whitman said in an interview after her company's dramatic change of tack. "We want to build out our software, but I don't think we are done yet on hardware. There is a lot of opportunity."



Bank Stock Gaffes

Several major U.S. banks also had to backtrack on plans to impose fees on debit card users.  Bank of America (BAC) had made an announcement earlier this month that they planned to begin imposing a $5 monthly fee on their debit card users. The backlash was fast and furious as social media began to overflow with angry Bank of America customers expressing their rage and making plans to drop the bank.  One branch in Seattle even saw a protestor light his debit card on fire.  The vehemence of the reaction was so swift that JP Morgan Chase (JPM) backed off their own plans to institute fees, claiming that it was due to their own market research and not the outpouring of anger over Bank of America's plans. A number of other banks have joined them in assuring consumers that they won't charge fees for debit cards, including U.S. Bancorp (USB) and Citigroup (C).

Netflix and GM Stumble, Change Tune

The troubles for Netflix, Inc. (NFLX) have been well documented. Since the company's July announcement that they intended to split their streaming and DVD services--combined with a 60-percent price hike for those wanting to keep both--the stock has tanked, losing over three quarters of its value as it plummeted from a 52-week high on July 13 of $304.79 per share to a 52-week low on Oct. 25 of $74.25 per share. The massive drop resulted in a loss of over $12 billion in market capitalization. The hits just kept on coming as their Q3 earnings reported showed a loss of some 800,000 outraged subscribers. However, possibly their biggest gaffe came in the effort to separate their streaming service from the DVD service, creating a new service called Qwikster.  The reaction from consumers was immediate and the internet buzzed with vitriol for the company that could previously do no wrong.  The reaction was so strong that Netflix CEO Reed Hastings retracted the move less than a month later. “We underestimated the appeal of the single Web site and a single service,” Steve Swasey, a Netflix spokesman, said in an interview. “We greatly underestimated it.”

General Motors (GM), meanwhile, also had to make a public reversal earlier this month after anger over an ad depicting cycling in a negative light. The GM ad, which used the tag "reality sucks" along with a picture of a tired cyclist next to a happy driver, ran in college newspapers throughout the country. However, the immediate backlash from college students and cyclists led GM to pull the ad and issue public apologies to cyclists everywhere.

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Companies

Symbol Name Price Change % Volume
LIF:CA Labrador Iron Ore Royalty Corporation 16.51 0.18 1.10 351,061
EBAY eBay Inc. 35.57 0.45 1.28 24,063,339 Trade
C Citigroup Inc. 63.41 -0.21 -0.33 16,395,259 Trade
JPM JP Morgan Chase 86.86 -0.16 -0.18 18,812,029 Trade
GM General Motors Company 34.20 0.01 0.03 10,238,774 Trade
BAC Bank of America Corporation 22.82 -0.11 -0.48 85,399,612 Trade
USB U.S. Bancorp 50.77 -0.53 -1.03 8,689,930 Trade
HPQ HP Inc. 17.80 0.09 0.51 14,051,542 Trade
NFLX Netflix Inc. 158.02 3.13 2.02 6,250,761 Trade

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