Don't Go Home With a Loser on New Year's

Fools, don't do it.

It's the end of 10 years of disappointing portfolio returns. You're feeling a little lonely, a little vulnerable, yet a little hopeful at the dawn of a new decade. Don't let these companies seduce you at midnight with tall tales of earnings growth, healthy balance sheets, or the glorious promise of a new product.

No, really -- you might just wake up with an empty wallet and a tiger in the next room.

As we wrap up 2009, here are our top 10 companies that will be rendered obsolete in the next decade.

10. Vonage (NYSE: VG  )
Vonage, purveyor of annoying commercials, has had stock scares in the past. But with increased competition -- from telecom companies offering digital voice bundles, to cable companies also getting in the act, to potential threats like Google's (Nasdaq: GOOG  ) Voice application -- Vonage's VoIP days look numbered. With no moat around its technology, it'll have trouble battling its well-heeled competitors.

9. Borders
We don't think we're going out on a limb by saying Borders is a loser. Amazon.com has dominated book sales both physically and digitally. Meanwhile, Borders has posted declining sales, and it hasn't stepped out of the red for the past two years, except during the holiday season. We don't think Borders is headed for a fairytale ending.

8. Qwest (NYSE: Q  )
Customers rarely show much love for major telecoms and cable companies, nor get much in return. (Comcast doesn't care. There, we said it.) But Qwest customers might be in the clear before too long. The company is milking a steadily declining phone subscriber base with no clear growth avenues.

7. Sprint (NYSE: S  )
Speaking of steady declines in subscriber bases, has anyone seen Sprint lately? With wireless penetration rates greater than 90% in the U.S., and smartphone manufacturers now controlling software that can circumvent individual carriers' voice services, the future looks murky for wireless-industry growth. It's doubly murky for a third-place company that can't slow its gradual decline. Sprint's betting the house on a 4G WiMax push. If that doesn't work, look out below!

6. Blockbuster
A few years ago, Blockbuster was going head-to-head with Netflix (Nasdaq: NFLX  ) for home-delivery domination. Now it has shuttered stores, maintains a paltry presence (at best) in mail subscriptions, and faces increased competition from Redbox's $1 rentals. In the next decade, video streaming will be gaining steam. The company has too much ground to make up, and it's hemorrhaging money. Blockbuster, please follow the lights and exit the theater.

5. Gamestop
Sure, it's managed to grow its revenue so far, but is there really a long-term future for a bricks-and-mortar experience that relies on a target market of web- and tech-savvy early adopters? Sadly, no. Video game consoles already have access to online game downloads, and gamers can rent games through the mail. Game over, GameStop.

4. Palm (Nasdaq: PALM  )
The Pre hasn't inspired much awe on the sales floor. Not surprising, since it's got an exclusive agreement with No. 7 on our list (Sprint). Innovators are crowding into the space. Whether they prefer an iPhone or an iDon't, consumers aren't flocking to Palm's last stand.

3. Abercrombie and Fitch
Look around -- no one is digging Abercrombie's style anymore. Tweens and frugal shoppers don't want to splurge on the exact same sweater everyone else is wearing. Nowadays, they're searching for individual expression and cheap chic. Unfortunately, Abercrombie's style and price point are off-target. Dropping sales and a Reuhl failure are exposing Abercrombie's weaknesses. The company might be placing its bets abroad, but the market is too crowded. Sorry, Abercrombie; the days of identical outfits are long gone, and so are you.

2. Garmin
Poor Garmin. It was once a trailblazer, but you don't need GPS to find its competition. If you own a smartphone, just look in your pocket. Deep discounts point the way to Garmin's future. The company would be wise to refocus on its aviation, marine, and outdoor products. However, as its continued work on the poorly conceived Nuvifone shows, it'll exit the consumer market kicking, screaming, and destroying shareholder value.

1. AOL
Its botched merger with Time Warner (NYSE: TWX  ) never worked, and now AOL is trying the solo gig again. Now that AOL's single, it's trying to sell everyone on its advertising and content-publishing properties -- completely ignoring the part of the business that still functions as an Internet service provider (ISP). That's probably a smart move, given the massive ISP subscriber declines that AOL was posting before its recent IPO. But we're not holding our breath that AOL's revamped business focus will recoup the bulk of its revenue that came from its ISP side. In coming years, while we're watching the ball drop, AOL will be watching its stock drop. Don't give it company. It came to this party alone, and it's leaving alone. 

Here's hoping your New Year is loser-free.

Katrina Chan, Eric Bleeker, and Anand Chokkavelu contributed to this article, but none of them own shares in any of the companies mentioned. Sprint Nextel is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers selection. Amazon.com, GameStop, and Netflix are Motley Fool Stock Advisor picks. The disclosure policy will say something funny just as soon as its head stops hurting.


Read/Post Comments (10) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2009, at 3:44 PM, tominpa62 wrote:

    Agree on all counts but Vonage. I do agree that Vonage probably won't be around long term, but I also believe that it will be acquired at a significant premium to its current price. It has shown enormous resiliency under extremely adverse conditions, and is now offering innovations and price points that others have not matched. Short term, risky play, but a potentially lucrative one.

  • Report this Comment On December 31, 2009, at 4:13 PM, Fool wrote:

    Again, an unprofessional, possibly manipulative and technically poor attack on Sprint and some of the most favorable "underdogs" to close the year!

    What happened to your creativity and gutsy calls that led investors to :"undiscovered" profits? Did you simply lose your guts or someone bought you out!

    Happy New Year

  • Report this Comment On December 31, 2009, at 4:38 PM, plange01 wrote:

    2009 ends in a loss as it started.since march stocks rose on bad news and went in the opposite direction of the economy.expect 2010 for reality to quickly set in as the US enters its second year in a depression and moves toward a major collapse....

  • Report this Comment On December 31, 2009, at 6:17 PM, bma377 wrote:

    Sprint is a likely takeover target. I am a subscriber and love their network. No congestion and always a good signal. Let Verizon and AT&T fight. I disagree about the voice circumventing that you mentioned, AT&T and Verizon have much more to lose. Sprint is much more ahead in moving toward an all-IP network. So I really disagree with your analysis, I am buyer of S at these levels.

  • Report this Comment On December 31, 2009, at 6:27 PM, PeyDaFool wrote:

    I love the title to your article nearly as much as I loved your article!

    Side notes:

    1. I was with Sprint for 10 years and recently switched to the iPhone. I really love Sprint's service, but, alas, they couldn't keep up with Apple on this one.

    2. You're so right about A&F, Borders, Blockbuster (and especially) AOL.

  • Report this Comment On January 01, 2010, at 12:17 AM, topsecret09 wrote:

    Pitch by: topsecret09 11/17/09 6:57 PMReply | Report this post

    In this recession, there are struggling apparel retailers all across the country. Then there's Abercrombie & Fitch. The upscale teen retailer has suffered 10 straight months of double-digit same-store-sales declines. In the second quarter of 2009 alone, sales were down an eye-popping 30% across the company's three name outlets: the flagship Abercrombie brand, which has 567 stores; Hollister, a 520-store teen chain; and Ruehl, a 29-store chain for young adults that Abercrombie shut down in June. Abercrombie & Fitch lost $26.7 million, which includes $24.4 million in charges associated with the closing of Ruehl, in the second quarter. During the same period in 2008, Abercrombie scored a $77.8 million profit. "Abercrombie has mismanaged this economic downturn more than any other retailer," says Britt Beemer, CEO of America's Research Group, a retail consulting firm.

    Profit for the three months that ended Oct. 31 fell to $38.8 million, or 44 cents per share, or 30 cents per share excluding one-time items. That beat the average expectation of analysts surveyed by Thomson Reuters for adjusted earnings of 20 cents per share.

    Revenue fell to $765.4 million, squeaking past analyst expectations of $764.5 million. Expenses fell 16 percent.

    Sales in stores open at least a year, a key measure of a retailer's health, dropped 22 percent. This seems like a classic short squeeze run-up,and cannot continue. I will short this stock all the way to the bank. They are not even making enough money to cover their dividend !! Sheesh....... TS

  • Report this Comment On January 01, 2010, at 12:42 AM, tkell31 wrote:

    Good idea on A and F TS. Happy New Year.

  • Report this Comment On January 01, 2010, at 12:45 AM, topsecret09 wrote:

    On January 01, 2010, at 12:42 AM, tkell31 wrote: Good idea on A and F TS. Happy New Year

    Thanks, Happy New Year...........

  • Report this Comment On January 01, 2010, at 5:03 PM, Chinastocks55 wrote:

    LPIH: Longwei Petro Inc.

    A China energy blue chip in the making.

    http://finance.yahoo.com/q?s=LPIH.OB

  • Report this Comment On January 04, 2010, at 3:55 PM, Fool wrote:

    I have to say these articles are with lack of due diligence.

    One example is Qwest

    The fact that they are taking fiber to the curb and to new development should send a long term strategy signal. Twisted pair copper is dead? What do you think coax is? But not to mention that they are and have been rolling out 40meg residential dsl and now looking at 80 Meg over 2 pair copper, while partnering with dish network to deliver more HD programming than any cable provider.

    When fiber reto fits are done over the next 5 years coax will be like the old copper pair. But the difference is that the disparity between coax and fiber is so big, it won't be like twisted pair copper vs. Coax.

    You need to know your technology and het some analysts who understand this sector before you post something so wrong.

    Here is my projection. Qwest will be $10 before end of 2010 is over or very close to it. Did I mention they are profitable with a 7% dividend payout? All while spending millions to upgrade to the new fiber network?

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