If you've ever wondered what a "pure-play company" is, wonder no more.
Pure-play firms have a single business focus. Coca-Cola (NYSE:KO) is a beverage pure play, while PepsiCo (NYSE:PEP) isn't, because it owns Frito-Lay snacks, featuring such brands as Lay's, Ruffles, Tostitos, and Cheetos. (Did you know that in fiscal year 2000, PepsiCo reaped more than twice as much in revenues from its Frito-Lay salty-snack unit as it did from its Pepsi beverage unit?)
In networking equipment, Cisco Systems (NASDAQ:CSCO) is a pure play, whereas Nokia (NYSE:NOK) is involved in networking equipment and other operations. Until it was snapped up by Unilever (NYSE:UL) a few years ago, Ben & Jerry's was an ice cream pure play, compared to the conglomerate ConAgra (NYSE:CAG), which owns the Healthy Choice brand that includes ice cream as well as many other disparate businesses, such as Butterball turkeys, Hebrew National hot dogs, Hunt's tomato products, Jiffy Pop popcorn, and La Choy Chinese foods.
When investors are drawn to a particular kind of business, they may seek out a company that's a pure play, so that their invested dollars won't be spread out over other, less desirable business segments. On the other hand, many investors are drawn to more diversified businesses because they're less reliant on any one business line.
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