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4 Companies (Besides BlackBerry) That Should Go Private Now

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BlackBerry (NASDAQ: BBRY  ) became the latest troubled company to bring in investment bankers to explore strategic alternatives that may include taking the smartphone pioneer private.

There are plenty of advantages to being a public company. It's easier to raise money. Stock options can attract and retain desired executives. The visibility also helps, especially if it happens to be a successful consumer-facing company.

However, there are also some good reasons to go private. A company that's struggling financially may find it easier to orchestrate a turnaround behind the scenes. There aren't investors to please every three months, forcing companies to sacrifice long-term goals for short-term profit objectives. 

If BlackBerry can turn things around, it has a much better chance of succeeding behind the constant scrutiny of Wall Street. Let's look at a few other companies that should join BlackBerry in exploring going private.

The leading small-box consumer-electronics retailer was a surprising star earlier this year. The stock had more than doubled by the time it peaked.

Then gravity kicked in.

RadioShack's in trouble. The push to specialize in wireless service hasn't paid off. Sales are falling. Margins are contracting. Losses are widening.

Analysts see RadioShack's loss doubling to $1.19 a share this year on a 12% slide in sales. It may be too late to save RadioShack, but if it's not, the best path is to get away from these quarterly disappointments as a public company.

Zynga (NASDAQ: ZNGA  )
There's unrest in CityVille. Words With Friends has turned to swearing. Draw Something has become an exchange between gunfighting duelists.

Zynga's still the top dog in social and casual games, but there isn't the same kind of money in these free and nearly free diversions as the market envisioned when it bought into Zynga's pre-IPO hype. The company went public at $10 two years ago, and it's been mostly downhill ever since.

There was a glimmer of hope last month, when Zynga landed Xbox's president to serve as its new CEO. However, turning Zynga around won't be easy for Don Mattrick, and this week's management shuffle, in which three key executives were let go, illustrates that some makeovers are better performed in private. 

Bookings at Zynga have been declining as fickle gamers go from game to game. The company hasn't been able to duplicate its earlier successes, too. Bookings were down a brutal 38% in its latest quarter. 

The good news is that Zynga still has a lot of its IPO money. Armed with more than $1.5 billion in cash and marketable securities, the stock isn't trading for much more than its liquidity. This would make Zynga a cheap purchase if a buyer doesn't have to pay much of a premium.

Cisco Systems (NASDAQ: CSCO  )
Shares of Cisco took a 7% hit on Thursday after posting lackluster guidance. The networking-equipment giant also stunned the market by announcing that it will lay off off 4,000 employees, or 5% of its workforce.

Cisco is in better shape than the other names on this list, but something isn't right if a cash-rich company that's still growing is scaling back its payroll. Cisco sees something, and it may be better to go private now than before the perceived weakness consumes the tech bellwether.

Cisco would be a tough company to take private. It was the country's most valuable company for a brief spell before the dot-com bubble popped. However, one would think that some of its missteps in recent years, including the now discontinued Flip camcorders and Umi videoconferencing platform, would've been less embarrassing if they had happened behind closed doors.

J.C. Penney (NYSE: JCP  )
The struggling department-store chain is a textbook example of a company that shouldn't be public.

Ron Johnson's gamble in refreshing Penney last year was disastrous, and last week's boardroom drama in the aftermath of his ouster is a no-brainer symptom of a situation that could be easier remedied outside the daily stock-price gyrations that accompany and inspire the theatrics.

Plenty of retailers have gone private and come back stronger. J. Crew and Restoration Hardware are just a couple of recent examples. As a public company, Penney is simply wading around in a death pool.

This may sound controversial, but even Johnson's vision could've eventually worked if it didn't happen at a public company, where the first few quarters of disastrous comps cut the transformation short.

Penney's best shot at being around in five years is to be taken private sooner rather than later.

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Read/Post Comments (6) | Recommend This Article (1)

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 August 17, 2013, at 7:59 PM, andresmitchell wrote:

    You're reading way too much into Cisco's layoffs. Easy to do but it's a non-event if you have followed this company for any length of time. They've been laying people off since the dot com bust. And they have definitely made some mistakes along the way. But as a serial acquirer, they will always end up with overlap and people doing the same job that simply aren't needed (i.e. non-engineers). I would venture to guess very few if any engineers are included in the layoffs. I'm not saying whether the business is good or not good or if management sees clouds on the horizon. But the layoffs are not an indicator either way. Business as usual. Nothing more.

  • Report this Comment On August 18, 2013, at 1:00 AM, ryanchandler25 wrote:

    I have to seriously wonder if this author knows why a company might be taken private in the first place.

  • Report this Comment On August 18, 2013, at 2:24 AM, dorpth wrote:

    It amazes me how astronomically paid CEOs are always able to bounce from one disastrous failure to another with great salary and severance package every time.

    Why in the world did Radioshack think specializing in wireless service was a good idea in a world where every mall has two dozen cell phone stores and kiosks? They need to realize that at this point their ONLY value is as a retailer in electronic parts. Their strength is being virtually the only brick and mortar retailer in the country to sell specialized electronic parts and that makes them invaluable to people who need those parts and can't wait for online shipping.

  • Report this Comment On August 18, 2013, at 4:57 AM, ryanchandler25 wrote:

    yeah and why on earth did Radio Shack choose to sponsor a pro cycling team. Millions upon millions when radio shack doesn't really have a presence in countries where cycling is a popular sport.

  • Report this Comment On August 19, 2013, at 8:02 AM, BenFE08 wrote:

    @dorpth - "Why in the world did Radioshack think specializing in wireless service was a good idea in a world where every mall has two dozen cell phone stores and kiosks? "

    Because you had totally incompetent upper management in charge of the company who didn't know their head from their behind about running a consumer electronics company.

  • Report this Comment On August 19, 2013, at 8:03 AM, BenFE08 wrote:

    @ryanchandler25 -

    Why the pro cycling team?

    Because it was the whim of the arrogant Brit CEO know-nothing who ultimately drove RSH into the toilet.

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