The Latest Bungles and Blunders in the News

America’s BIGGEST Bankruptcies.

In 2005 Sony BMG introduced Extend Copy Protection (XCS) software on music CD’s to try and combat piracy. In October of the same year it was discovered by Mark Russinovich that the software installed itself on the users computer with notification and cloaked itself to run without detection. The software itself caused many systems to crash and proved to be a security threat by allowing piggybacking by other malware. After public uproar sony released an uninstaller, but this made the problem worse as it was a bigger security threat.

Not only did Sony have to recall and replace several million CDs, but it resulted in several class action lawsuits and caused considerable damage to their company image.

Fat finger syndrome is the occasional tendency of traders, often while stress, to press the wrong button on their keyboard and lose substantial amounts of money.

In 2005 this problem struck Mizuho Securities when a trader accidentally type in a sell order for 610,000 shares at 1 yen in a firm called J-Com rather than one share for 610,000 yen. They managed to buy back about 480,000 shares, by which time the price had risen to 700,000 yen. It is estimated to have cost the firm over 40 billion yen.

In 2002 a trader for Bear Stearns entered a $4billion sell order instead of one for $4million, he was blamed for a subsequent drop of 100 points on the Dow Jones.

In 2001 a trader working for Lehman Brothers accidentally typed in too many noughts and sold shares worth £300million in various blue-chip companies. He meant to type in £3million and his actions sent the market into freefall wiping 120 points and £30billion off the FTSE 100.

In the late 1990’s there was a frenzy of speculative investment in internet related shares.  Investors believed that anything that would take advantage of this new technology was certain to make loads of money for them.  As long as the entrepreneurs predicted to make large profits quickly, venture capitalists were prepared to throw money at it.

Dotcom millionaires were made overnight.  Unfortunately it was soon realised that many of these firms were burning through cash with no prospect of ever making a profit.  Only the robust Dotcom business survived, stockmarkets plunged and the nasdaq fell by over 70% between 1999 and 2002.  Investors, both private and institutional, lost substantial amounts of money.

They usually say ‘Actions speak louder than words’, unfortunately in Gerald Ratner’s case his words rang out a lot louder to customers and share holders alike.  In 1991 speaking at the Institute of Directors, Gerald Ratner explained why he could sell products so cheaply.  In his words he explained that ‘The decanter was so cheap because it was total crap‘. Reports in the media led to the company’s shares losing £500m in value.  Ratner resigned in 1992 and the company became know as Signet.  Gerald Ratner has since setup an online jewellery business.

Not to be outdone by Coca-Cola with their New Coke, Pepsi released a drink in 1992 called Crystal Pepsi. It was a colorless, caffeine-free soft drink, and was released in United States, Canada, Australia and Europe. Unfortunately, much like New Coke, it turned out to be a massive commercial failure.

The taste was much like other Cola drinks, but most other colorless drinks were lemon and lime. Part of the failure came from the insistance by customers that they had added lemon and lime to the drink, when in fact they hadn’t, but this placebo effect caused a lot of confused.

Initial response to Crystal Pepsi was good, but after a huge advertising campaign failed to generate enough profit, the product was dropped. A citrus drink was the launched renamed Crystal by Pepsi, but this suffered the same fate and was short lived.

In the mid 90’s Unilever launched Persil Power in Britain, with the aim of catching up on some of its competitors. The powder contain a substance called manganese “accelerator”, which removed dirt at lower temperatures. Unfortunately their biggest rival Procter & Gamble showed that far from cleaning garments, it actually rotted clothing away. Eventually the product was recalled and the product was abandoned. Most of the law suits which followed were settled out of court.

In reverse order America’s TOP 10 BIGGEST bankruptcies.

10. Delta Air Lines - 2005 - $21.8billion

9. UAL - 2002 - $25.2billion

8. Pacific Gas and Electric - 2001 - $29.8billion

7. Global Crossing - 2002 - $30.2billion

6. Refco - 2005 - $33.3billion

5. Financial Corporation of America - 1988 - $33.9billion

4. Texaco - 1987 - $35.9billion

3. Conseco - 2002 - $61.4billion

2. Enron - 2001 - $63.4billion

1. WorldCom - 2002 - $103.9Billion

In the 1980’s Coca-Cola decided to fight the growing Pepsi brand by creating a new formula for their soft drink. First test in 1985, Coca-Cola believed they were onto a winner. Unfortunately the public thought otherwise and after 3 months and half a million complaints the old Coke returned, renamed as Coke Classic.

Some people argue that this was just a ruse to renew interest in Coke. Coca-Cola of course deny this.