Making Money in Technology
After the Bubble, page 26
Consolidation and Rationalization, continued
For example, the market does not need a dozen or so public Internet advertising firms. One or two of
these will probably survive.
Combining, consolidating, and rationalizing are the order of the day. This means selling or shutting
down assets that don’t work and streamlining the rest of the operation. If there’s enough market to
support one company in a niche, then three players should combine. Costs will be saved, and there will
be enough revenue to support a viable entity. (Of course, the other option is that the three players can
duke it out, cutting prices to increase market share until it’s likely that there will be no survivors.)
In boom times, growth at any cost makes sense. In today’s environment, strategies that save money by
consolidating and rationalizing are winners.
The “Zombie” Company: Taking Down a “Living Dead” Business
A “living dead” company—also known as a “zombie”—is one that is dead, but doesn’t know it yet. When the
money is gone, it will disappear.
It’s probably too late to revive a zombie company. The opportunity is to sell viable assets, add that
to the cash on hand, and shut down while there is still a surplus.
The most important thing is to get to a zombie early enough. By the time the company hits the wall—for
example, because it can’t make next month’s payroll—it is far too late. There are no viable options left.
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