Back in July, 1999, Starbucks' (Nasdaq: SBUX) stock collapsed. The dominant coffeeshop franchise in the world was talking up Internet portal plans. So, when news hit the wires that Starbucks' plan to sell home furnishings and cookware online was falling through, the market dealt a punishing blow. Faster than you can say "Skinny grande mocha latte with a satin-black easy chair and ottoman," Starbucks fell from $40 to under $20 per stub.

At the heart of the matter, Starbucks was losing brand identity. Enthralled by the promise of the Internet, the company took its eyes off its core franchise. Suddenly, being the leading blender of the world's second most popular drink -- coffee -- wasn't enough. And, herein lies a lesson for all public companies: Unless there are very compelling economic reasons to diversify well-wide of the core business, don't. To Starbucks' credit, it withdrew its Internet designs, redoubled its efforts in coffee, and the stock is back around $40 per share.

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