Cisco, the computer networking giant, has spent the last decade acquiring rivals and buying back stock. It’s time to acknowledge that this strategy isn’t working. Investors who bought Cisco’s shares a decade ago have received no return on their investment.

MY COMMENT: That might be true, but in all fairness, if you’d bought the Nasdaq index a decade ago, you haven’t received much return either. In nominal price terms, Cisco’s return is more or less equivalent to that of Cisco. But we’ll come back to that later.

Results this week should give Cisco another chance to profess its optimism…Eternal ebullience is nothing new from Mr. Chambers, who once claimed Cisco could increase sales by 50 percent a year over the long run. They’ve since grown 7 percent annually.

Yet the years of deal making may be making Cisco unwieldy. Cisco has 59 standing boards and councils. This seems like a recipe for endless meetings, management confusion and reduced accountability.

MY COMMENT: This latter point is one with which I wholeheartedly agree. In fact, one of the basic tenets of transaction cost economics (see Oliver Williamson, Nobel Honoree) is that although acquisitions might make sense when there is market failure, at some point the benefits of bringing transactions within a firm (e.g., through acquisition) wear off. Size eventually yields inefficiency.

Cisco has always acquired and plugged companies into its sales and production network.

…Cisco continues to acquire new businesses — $22 billion worth since 2002 (including some $7 billion this year), according to Dealogic.

The other pillar of Cisco’s strategy, stock repurchases, hasn’t rewarded shareholders either. Returning excess cash from operations to shareholders should increase a stock price. Unfortunately, in Cisco’s case, the practice hasn’t measured up to theory. Cisco has spent close to $60 billion on stock buybacks since the start of its 2002 fiscal year. That’s about three-quarters of cash flow from operations. So why haven’t shareholders benefited?

First, the total count of shares outstanding has only decreased by 1.3 billion. This is partly because of dilutive acquisitions. However, if the number of shares hasn’t shrunk much and Cisco’s stock hasn’t risen, this presents a conundrum. What exactly is the benefit to shareholders of these purchases? Shouldn’t the price of a slice of Cisco increase if it is spending so much on buybacks?

MY COMMENT: Ouch! Now that is damning evidence. If the number of shares (float) decreases but the price remains the same, shareholder value is destroyed. In this sense then, Cisco’s return actually compares unfavorably in real terms to that of the Nasdaq. Moreover, it is suggestive that Cisco’s acquisitions may have played a role in destroying shareholder value (see Acquisitions, A Great Shareholder Ripoff).

So what is Mr. Cyran’s proposed solution?

After 10 years of searching for the promised land of growth, it’s time for something different. Slowing acquisitions would [be] a good start.

Moreover, if Cisco is so complex that it requires 59 councils, it should consider breaking into more manageable pieces.

MY COMMENT: After years as a Wall Street darling, I wonder whether Cisco truly deserves that distinction. And I agree that it might not be a bad idea for them to reevaluate their corporate strategy.

Good stuff!!

Holding aside the sale price, if this deal goes through it would become the third high-profile purchase of a Western automobile manufacturer by a Chinese firm this year (Geely’s purchase of Volvo, Beijing Automotive’s participation in the Saab deal, and Sichuan Tengzhong’s acquisition of Hummer from GM).

Chinese firms are acquiring Western automobile manufacturers in an attempt to upgrade capabilities. They lag far behind the leading Japanese, US, European, and Korean auto manufacturers in technological capabilities, and the acquisition of Western firms represents an attempt to close that gap in R&D, design, styling, sales, marketing, and production.

However, as I noted in a recent interview in the Effective Executive magazine, this acquisitive behavior is not unique to the automobile industry. Chinese companies have increasingly been acquiring Western companies in a variety of industries (e.g., Lenovo’s acquisition of IBM’s PC division and TCL’s acquisition of Thomson’s TV division), all in an effort to close a still significant capabilities gap with developed country firms.

As I mentioned in that interview (see Interview in the Effective Executive):

When I think about China, Japan, and South Korea, certainly some similarities can be drawn. All three followed an export-led growth path to prosperity. However, once a certain level of prosperity had been achieved through trade, the three countries diverged with respect to international investment. South Korean firms have generally followed a more organic growth strategy – eschewing acquisitions of foreign targets in favor of building businesses from scratch. Japanese firms followed a similar strategy up to a point…Insofar as China is concerned, although we are in the early stages of China’s international expansion, it seems so far that Chinese firms are following a more growth-through-acquisition type of strategy…

My sense is that this has a lot to do with the capabilities of the firms from these countries. That is, by the time Japanese and South Korean firms began to expand, they did so from a position of technological strength. For this reason, they were able to organically extend existing advantages to other countries. China, by contrast, is expanding from a relatively weak technological position not only vis-à-vis Japan and South Korea, but also vis-à-vis the rest of the developed world. In this sense then, Chinese firms are embarking on a strategy of acquisition in order to acquire the technological capabilities their firms currently lack.

Seen through that lens, it is obvious why Chinese automobile manufacturers are interested in acquiring Volvo, Saab, and Hummer. However, the fact remains that they are purchasing extremely troubled operations in an industry plagued with overcapacity (even in China) at a time when when the demand for automobiles (certainly in the developed world) looks increasingly uncertain (see Auto Industry’s Big Little Problem).

As a proponent of free trade and globalization, I view the acquisition of Western companies by Chinese companies as a welcome development. However, given the auto industry’s ills, I wonder whether these Chinese acquirers will be able to derive value from their tired, beaten, and battered Western subsidiaries, …irrespective of the price.

Time will tell.

The cost of attending a four-year nonprofit private college increased 4.3 percent in the 2009-2010 academic year compared to a year ago, bringing the average annual price to $35,636, according to an educational trade group.

Growing at an even greater rate was the cost of going to a public college. Public in-state college costs rose 5.9 percent, bringing the average cost to $15,213.

MY COMMENT: The cost of tuition at public colleges is currently increasing at a faster rate than at private colleges because public schools are beholden to battered state budgets. Nevertheless, they still represent a significant value (assuming there is little difference in the underlying quality of education across the two).

We certainly can debate the quality/price tradeoff between public and private universities, and I think families would be well served to carefully consider not just the sticker price, but the quality of the education along with the career services that students are likely to receive in exchange for that price. As I mentioned in a previous post (see The Future of U.S. Higher Education):

I agree that the cost of higher education might price some out of the market entirely. However, …the cost of higher education, coupled with what I view as a fundamental shift in consumer behavior as a result of the recession, will more likely usher in a shift in consumption versus an end to consumption.

Gone are the days of taking on exorbitant amounts of debt to send children to private institutions with tuition (not including living expenses) of $40,000 per year, or more. Instead, families will increasingly opt  for public universities with tuition in the $10,000-$15,000 range.

For example, families in Texas might start asking tough questions like, “Is the difference in the price between Harvard and the University of Texas really worth the $120,000 difference?” I am not willing to argue that real differences between being educated at a private university and a public university do not exist; however, I am not sure whether those “benefits” (to the extent that they do, in fact, exist) justify the additional premium in all cases. And those considerations are likely to impact the decisions of consumers.

In addition, as I mentioned in another post (see More on University Enrollment and Affordability, quote from a WSJ article):

Facing shrunken savings and borrowing options, parents and students are making some tough trade-offs in choosing and paying for college, suggesting some shifting attitudes toward higher education may endure beyond the recession.

For me, this is where the action lies. It will be interesting to see whether the financial crisis ushers in a structural shift in consumer attitudes and behavior that ultimately puts a cap on the rate of tuition increases. My guess would be yes.

As a Corporate Strategy scholar, I am generally more interested in how foreign firms make decisions to enter developing markets and how they manage their operations in those markets than the economic development path of any of the individual economies. However, it goes without saying that economic development (or the lack thereof) impacts the calculus of firms considering doing business in foreign markets. I was therefore interested to read a recent Op Ed about Russia in the Globe and Mail written by my colleague Nouriel Roubini (see BRICkbats for the Russian Bear).

In that article, Roubini questions the soundness of the Russian economy:

One powerhouse in the BRIC group is just hanging in there. Hint: It isn’t Brazil, India or China

One piece of bubble wisdom that has escaped relatively unscathed…is the assumption that the BRIC countries – Brazil, Russia, India and China – will increasingly call the economic tune in years to come.

Yet, the economic crisis that began in 2008 exposed one of the four as an imposter.

The weakness of the Russian economy and its highly leveraged banks and corporations, in particular, which was masked in recent years by the windfall brought by spiking oil and gas prices, burst into full view as the global economy tumbled. Saddled with a rustbelt infrastructure, Russia further disqualifies itself with dysfunctional and revanchist politics and a demographic trend in near-terminal decline.

While Russia retains the world’s largest (if somewhat aging) arsenal of nuclear weapons, as well as a permanent seat with veto power on the UN Security Council, it is more sick than BRIC.

Roubini’s conclusion is that the Russian economy is facing an inexorable decline, and as a result, it no longer deserves to be considered in the same class with the other fast-growing, dynamic BIC economies. He suggests that it is time to find a replacement.

Selling Foreign Goods in China (The Economist)

Every year, says Paul French, head of Access Asia, a research firm based in Shanghai, the same company buys the same report from him on the market for a particular product in China. That is because each year the company in question sends a new executive to China with instructions to break into the local market, who soon departs in despair—having failed to find an opening given the (brief) time and (insufficient) resources allotted.

The promise—and frequent disappointment—of doing business in China has been a common theme since at least the 19th century, when weavers in Manchester were said to dream of adding a few inches to every shirttail in China.

It is incredibly difficult to do business in developing markets (see So You Want to Do Business in a Developing Country), and China is no exception. The interesting thing to me about entry into developed markets is how managers systematically overestimate the benefits and underestimate the costs. And sadly, I am not aware of any evidence that suggests that we are becoming better at making these entry decisions over time.

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Shazam, Maker of Phone App, Draws Investment (New York Times)

Cellphone applications can turn your phone into a mobile dictionary, help you find your way when you are lost on a hiking trail and identify mystery songs on the radio. But can they make significant money?

That question has been hounding the entrepreneurs and venture capitalists behind the start-up companies that create the software programs.

An interesting ditty about how making apps may actually be a commercially viable business. Be sure to look for their IPOs in an equity market near you…

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Schumpeter Centenary (The Economist)

The centenary of Joseph Schumpeter’s birth has not brought forth an avalanche of academic tributes and retrospectives. There is no Schumpeter industry to compare with the one on Keynes. No pop biographies. No “Schumpeter and the Post-Schumpeterians”. Yet his academic reputation at the height of his powers was of the same order, and the impact of his analysis continues to be strongly felt.

An interesting look at the history of an influential economist. He certainly left his mark on the fields of innovation and entrepreneurship.

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Wall Street Smarts (New York Times, ht Neysa)

“IF you really want to know why the financial system nearly collapsed in the fall of 2008, I can tell you in one simple sentence.”

The statement came from a man sitting three or four stools away from me in a sparsely populated Midtown bar, where I was waiting for a friend.

“O.K.,” I said. “Let’s hear it.”

“The financial system nearly collapsed,” he said, “because smart guys had started working on Wall Street.”

Hysterical anecdote (with more than a grain of truth) about the near-collapse of the financial system (see Krugman’s post on same)

Happy weekend everyone!!

That was a nice gesture, and it certainly feels good to be recognized, …so my sincerest thanks to whoever selected me for that list.

I even had a chance to look over their compilation of blogs. Although I thought that there were some glaring omissions (e.g., Krugman, Roubini, Vermeulen, EconoSpeak), I was generally impressed with the quality of the blogs on that site. I therefore encourage you to take a gander at what some of my academic colleagues have been writing.

Transaction Cost Economics is a central theory in the field of Strategy. It addresses questions about why firms exist in the first place (i.e., to minimize transaction costs), how firms define their boundaries, and how they ought to govern operations.

In Transaction Cost Economics, the starting point is the individual transaction (the synapse between the buyer and the seller). The question then becomes: Why are some transactions performed within firms rather than in the market, as the neoclassical view prescribes.

The answer, not surprisingly, is because markets break down.

As a consequence of human cognitive limitations, coupled with the costs associated with transacting, the basic assumptions associated with efficient markets (e.g., anonymous actors, atomistic actors, rational actors, perfect information, homogeneous goods, the absence of liquidity constraints) fail to hold. For these reasons it is often more advantageous to structure transactions within firms. And this is why firms are not just ubiquitous in our society, but also worthy of study in their own right. This contrasts with the typical view of firms in neoclassical economic theory as, at worst, a market aberration that ought not exist, and at best, a black box production function.

Williamson’s contributions to the field of Transaction Cost Economics complement, and extend, those of Coase. First, Williamson started with an explicitly behavioral assumption of human behavior (bounded rationality). Second, he recognized that transacting parties sometimes behave opportunistically and take advantage of their counterparties. Finally, he identified features of transactions (e.g., specificity, uncertainty, frequency) that cause markets to fail; and hence, are likely to lead certain transactions to be organized within firms (hierarchies) rather than markets.

I was pleased to see Oliver Williamson recognized not just because of my inherent intellectual bias — my research has drawn on, and contributed to, the field of Transaction Cost Economics and I have worked with students of Williamson (see my research page for details) — but also because of what his selection implies for the broader field of economics. It implies that the field is moving in the direction of greater inclusion of economic perspectives that are based more on behavioral theories (see Krugman on the Future of Economics).

It was also fun to watch establishment economists make sense of the selection (see the Economists View post for some perspective). For example, Steven Leavitt writes:

When I was a graduate student at MIT back in the early 1990’s, there was a Nobel Prize betting pool every year. Three years in a row, Oliver Williamson was my choice. At the time, his research was viewed as a hip, iconoclastic contribution to economics — something that was talked about by economists, but that students were not actually trying to emulate (and probably would have been actively discouraged from had they tried to do so). What’s interesting is that in the ensuing 15 years, it seems to me that economists have talked less and less about Williamson’s research, at least in the circles in which I run.

MY COMMENT: I think Leavitt underestimates the impact of Williamson’s work because he is neither a Strategy scholar, nor is he in a Strategy or Management department. Go to any Strategy or Management department and you will find oodles of researchers (and doctoral students) working on Transaction Cost problems. It is a dominant paradigm.

Paul Krugman (in his post An Institutional Economics Prize) writes:

The way to think about this prize is that it’s an award for institutional economics, or maybe more specifically New Institutional Economics.

Neoclassical economics basically assumes that the units of economic decision-making are a given, and focuses on how they interact in markets. It’s not much good at explaining the creation of these units — at explaining, in particular, why some activities are carried out by large corporations, while others aren’t. That’s obviously an interesting question, and in many cases an important one.

…Oliver Williamson’s work underlies a tremendous amount of modern economic thinking; I know it because of the attempts to model multinational corporations, almost all of which rely to some degree on his ideas.

MY COMMENT: Krugman gets it partially right, but he does a lot of handwaving with respect to Williamson’s specific contributions. But with all due respect, he certainly makes no claim to be a Strategy scholar. He is right in the sense that the award speaks volumes about New Institutional Economics, broadly defined. However, in the case of Williamson, the specific contribution is to the field of Transaction Cost Economics. Moreover, the contributions of Williamson’s work extend far beyond the field of international business (or international strategy), but I agree that Transaction Cost Economics has been influential in those fields as well.

Nevertheless, my congratulations to Oliver Williamson, and to his students (many of whom I know well), who have long carried the torch for this important, yet underappreciated, branch of economics.

Newsworthy Items:

Thriving on Adversity (from The Economist)

Although they are often called “slowdowns”, recessions shake things up rather than slowing them down. They reward strengths and expose weaknesses, create new opportunities and kill old habits, release pent-up energy and destroy old business models. Distressed assets can be bought for a song, talented people hired cheaply and new ideas given an airing.

The basic idea is that, however painful, recessions sow the seeds of creative destruction and present lucrative business opportunities.

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Profit for Buyout Firms as Company Debt Soared (from The New York Times):

Simmons [the famous bedding company] says it will soon file for bankruptcy protection, as part of an agreement by its current owners to sell the company — the seventh time it has been sold in a little more than two decades — all after being owned for short periods by a parade of different investment groups, known as private equity firms, which try to buy undervalued companies, mostly with borrowed money.

Thomas H. Lee Partners of Boston [Simmons private equity owner] has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it. Last year, the firm even gave itself a small raise.

This is not entirely uncommon. The dividend recapitalization strategy was wildly popular among private equity firms over the past few years. The strategy was quite simple: buy a firm with lots of cash and/or little leverage, lever it to the hilt, and use the cash generated to pay dividends to the private equity owner. Since the days of easy money are now gone, such a strategy is unlikely to return anytime soon (see Private Equity: The End of an Era and Private Equity – Stupid Money Chasing Stupid Deals). In fact, watching several stories unfold similar to that of Simmons led me to call an end to the cheap money, cov-lite, excessive leverage-feuled private equity binge.

For a nice video complement to the Simmons story and a look at the dividend recapitalization PE strategy (although with some minor factual inaccuracies) see the New York Times video series Inside the Private Equity Game.

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Business School Reform (from The Economist):

This has been a year of sackcloth and ashes for the world’s business schools. Critics have accused them of churning out jargon-spewing economic vandals. Many professors have accepted at least some of the blame for the global catastrophe. Deans have drawn up blueprints for reform.

The result? Precious little.

That is too bad. You do not have to accept the idea that the business schools were “agents of the apocalypse” to believe that they need to change their ways, at least a little, in the light of recent events.

The real question is not whether business schools need to change, but how.

I have written a bit about the need for changes to the curriculum at business schools (see Op Ed on Business Schools and The Financial Crisis). I have suggested that we need to encourage our students to think more deeply about concepts, tools, and formulae rather than simply seek to apply them. Moreover, I have advocated for a curricular approach that favors analytical skills over technical skills.

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Hain to Sell Organic Food in China

A London-listed unit of Hong Kong’s Hutchison Whampoa Ltd. and Hain Celestial Group, the U.S.-based maker of Mountain Sun juices and Health Valley soups, are hoping that China has an appetite for organic products.The two companies announced a joint venture Thursday to sell Hain’s natural foods and organic household products in mainland China.

As my students can attest, I am generally not a fan of investments into retail businesses in China (especially in branded food goods). And I’m not convinced China is the right growth opportunity for Hain at the moment. I think they have plenty to keep them occupied in the domestic market.

The China retail market has caused headaches for most Western branded-goods firms. On its face, Hain’s investment seems no different, and it has the potential to bog Hain down for years.

I hope Hain’s executives have the fortitude to cut their losses quickly if the deal doesn’t meet profitability targets. Otherwise, it could develop into a money pit, not uncommon among Western investments of the sort.

The equity market clearly thinks I’m nuts. It applauded the deal, sending the share prices of both firms up handsomely. Although I could be mistaken, I think the market might have gotten this one wrong given the track record of Western firms in China, especially in this industry. The nice thing for shareholders of Hain is that their commitment to China appears to be limited, as according to the WSJ article, the capital committed was “not material to either company”.

Below are excerpts from that interview.

[Y]our current research centers on the management and economics of international expansion. However, with the US financial crisis hitting the world economy hard, even the developed countries seem to be contemplating on going very slow on globalization. And in fact, there is a wide rhetoric about developed world (including most of the G-15 countries) embracing protectionist attitudes. Do you think such a move would indeed undo all the progress that has been made in the last decade?

The benefits of globalization are many. Not only does globalization allow countries to specialize in the productive activities in which they have an advantage, but it also provides an important conduit for the exchange of ideas across countries. As my research points out, the exchange of ideas across countries is critical to innovation and growth.

Therefore, I think it would not only be a mistake for countries to enact protectionist policies, but in the extreme, such policies could threaten the currently fragile economic recovery. Economies have become so intertwined that restricting the cross-border flow of goods and services (and capital) could lead to severe disruptions for developed and developing countries alike. For students of history, a refresher on the impact of the Smoot-Hawley Tariff Act (and protectionist policies adopted by other world economies) during the Great Depression might serve as a guide for the potential deleterious consequences of protectionism.

That said however, I think we are a far stretch from undoing all the progress brought about by globalization over the past decade. I would like to believe that most interested parties (politicians, lawyers, managers, etc.) recognize how important globalization is to economic growth and prosperity. But certainly, the emerging level of protectionist rhetoric bears some monitoring.

What are the best practices that you have, over your distinguished research and teaching career, noticed regarding market entry strategies and international expansion strategies? Any interesting observations that you have noticed either from American companies, European Companies or Asian companies?

One of the things that I have noticed both in my research, and in my interactions with managers, is that managers often exaggerate the benefits and underestimate the difficulty of foreign expansion. Managers are quite good at identifying the demand-side benefits (the ability to tap into additional demand in the foreign market) and supply-side benefits (decreasing input and labor costs) associated with expansion, but systematically underestimate the additional costs imposed by operating businesses across differing institutional environments. Cultural, political, and economic environments vary greatly across countries. These differences manifest as real costs to firms, as research demonstrates that foreign entrants take a longer to set up operations in foreign countries, are forced to pay higher wages than local domestic competitors, run afoul of the law more frequently, and are generally less likely to succeed than similar domestic businesses.

All of this makes it critical for companies to have a sound understanding of how the cultural, political, and economic differences that they face across countries are likely to affect their business. Firms should first see if their business (and business model) is appropriate to the environment, understanding that it might be better, in some cases, not to enter a country. However, once they’ve decided which countries are appropriate targets for entry, they should choose an entry mode appropriate to the environment.

In my experience, I have found that those firms that perform best in this respect pay special attention to the cultural, political, and economic risk factors present in the host country.

Did you find any interesting insights from Chinese companies’ market entry strategies and their international expansion strategies as opposed to let’s say either South Korean or Japanese companies? Do you think Chinese companies are taking the same route as South Korean or Japanese companies followed several years ago or are they chalking out their unique strategies?

This is an interesting question. When I think about China, Japan, and South Korea, certainly some similarities can be drawn. All three followed an export-led growth path to prosperity. However, once a certain level of prosperity had been achieved through trade, the three countries diverged with respect to international investment. South Korean firms have generally followed a more organic growth strategy – eschewing acquisitions of foreign targets in favor of building businesses from scratch. Japanese firms followed a similar strategy up to a point. While many of Japan’s industrial firms preferred organic growth, Japanese firms acquired a vast portfolio of real estate holdings in the late 1980’s and early 1990’s. Insofar as China is concerned, although we are in the early stages of China’s international expansion, it seems so far that Chinese firms are following a more growth-through-acquisition type of strategy, acquiring foreign firms in both basic materials and high-tech industries.

My sense is that this has a lot to do with the capabilities of the firms from these countries. That is, by the time Japanese and South Korean firms began to expand, they did so from a position of technological strength. For this reason, they were able to organically extend existing advantages to other countries. China, by contrast, is expanding from a relatively weak technological position not only vis-à-vis Japan and South Korea, but also vis-à-vis the rest of the developed world. In this sense then, Chinese firms are embarking on a strategy of acquisition in order to acquire the technological capabilities their firms currently lack.

There was more to the interview. The soft copy is currently in newsstands (mostly in India). I am assuming they will post the interview on-line in a few months time. I will update when a link to the on-line version becomes available.

According to Bankruptcydata.com, there have been 208 “major” filings thus far in 2009. Assuming that bankruptcies are equally distributed throughout the year, this puts us on pace for 277 bankruptcies. That is tracking well shy of my prediction. In fact, bankruptcies were down significantly from Q2 to Q3, and have been trending downward throughout the year.

That stylized fact begs the question: Is that a “green shoot” dip in bankruptcy filings, or might the Fed/Treasury liquidity programs be keeping weaker firms on artificial life support?

Although I cannot be sure why bankruptcies have tracked lower than forecast — whether due to a better-than-expected economy or government intervention (or some combination of the two) — I am certain that my prediction was way off. At this point then, if the bankruptcy pace quickens in the 4th quarter (as is typical), the final number will likely come in around 300. With 300 major bankruptcies, we would exceed last year’s number by 30% (see Notable Bankruptcies of 2008: Final Tally).

But looking forward, the question now becomes: What should we expect for 2010? I will wait for the final 2009 numbers to make a definitive prediction, but right now, my informed guess would be 350, …and that’s even if the economy rebounds in 2010, barring a double-dip recession scenario.

Anyhow, below you can find an updated list of what I see as the “noteworthy” bankruptcies of 2009, as reported by Bankrupctydata.com. New additions since January appear in RED (please note that this is not an exhaustive list):

• 1st Centennial Bancorp (Banking)
  
• AbitibiBowater Inc. (Paper)
• Adamar Inc. dba Tropicana Casino & Resort (Gambling)
• American Community Newspapers Inc. & LLC (Newspapers)
• ARG Enterprises, Inc. (Restaurants)
• Aurora Oil & Gas Corporation (Energy)
  
• Aventine Renewable Energy Holdings, Inc. (Energy)
  
• BankUnited Financial Corporation (Banking)
• Barzel Industries, Inc. (Manufacturing)
• Baseline Oil & Gas Corp. (Energy)
  
• Bearingpoint, Inc. (Consulting)
• BI-LO, LLC (Supermarkets)
• Bruno’s Supermarkets, LLC (Supermarkets)
• Butler International, Inc. (IT Services)
• Cape Fear Bank Corporation (Banking)
• Capital Corp of the West (Banking)
• CCS Medical, Inc. (Medical)
  
• Charter Communications, Inc. (Telecom)
• Chemtura Corporation (Chemicals)
• Chrysler LLC (Automobiles)
• CIB Marine Bancshares, Inc. (Banking)
  
• Colonial BancGroup, Inc. (Banking)
• Cooperative Bankshares, Inc. (Banking)
  
• Cooper-Standard Holdings (Automobile)
  
• Crescent Resources, LLC (Real Estate)
• Cynergy Data, LLC (Banking)
  
• Eddie Bauer Holdings, Inc. (Retail)
• Ennis Homes, Inc. (Real Estate)
• Extended Stay Inc. (Hotels)
• Filene’s Basement, Inc. (Retail)
• Finlay Enterprises, Inc. (Jewerly)
  
• Fleetwood Enterprises, Inc. (Recreational Vehicles)
• Fortunoff Holdings, LLC (Retail)
• Fountainbleu Las Vegas, LLC, (Hotels)
• Freedom Communications Holdings, Inc. (Media)
  
• Fulton Homes Corporation (Real Estate)
• General Growth Properties, Inc. (Real Estate)
• General Motors Corporation (Automobiles)
• G.I. Joe’s, Inc. (Retail)
• Goody’s LLC (Retail)
• Gottschalks Inc. (Retail)
• Guaranty Financial Group Inc. (Banking)
  
• Herbst Gaming, Inc. (Gambling)
• Holley Performance Products, Inc. (Automotive)
  
• ION Media Networks, Inc. (Television)
  
• Idearc (Publishing)
• Irwin Financial Corporation (Banking)
• JL French Automotive Castings, Inc. (Automotive)
  
• Journal Register Companies (Newspapers)
• Lear Corporation (Automobile)
  
• Lyondell Chemical Company (Chemicals)
• MagnaChip Semiconductor LLC (Semiconductors)
  
• Magna Entertainment (Gambling)
• Masonite Corporation (Real Estate Manufacturing)
• Metromedia International Group, Inc. (Media)
• Midway Games, Inc. (Entertainment Software)
• Monaco Coach Corporation (Recreational Vehicles)
• Muzak Holdings LLC (Entertainment)
• Nortel Networks, Inc. (Telecom)
• Oscient Pharmaceuticals Corporation (Pharma)
  
• Pacific Energy (Oil & Gas)
• Philadelphia Newspapers, LLC (Newspapers)
• Proliance International, Inc. (Manufacturing)
• RathGibson, Inc. (Manufacturing)
  
• Reader’s Digest, Inc. (Media)
  
• Recycled Paper Greetings, Inc. (Greeting Cards)
• R.H. Donnelley Corporation (Marketing)
  
• Ritz Camera Centers, Inc. (Retail)
• Samsonite Company Stores, LLC (Retail)
  
• Security Bank Corporation (Banking)
  
• Shane Company (Jewelry)
• Silicon Graphics, Inc. (IT/Computing)
• Silver State Bancorp (Banking)
• Six Flags, Inc. (Entertainment)
  
• Smurfit-Stone Container Corporation (Paper Manufacturing)
• Source Interlink Companies, Inc. (Marketing)
• Southern Community Bancshares, Inc. (Banking)
  
• Spectrum Brands (Consumer Products)
• Star Tribune Companies (Newspapers)
• Station Casinos, Inc. (Gambling)
  
• Sun-Times Media Group, Inc. (Newspapers)
• Tarragon Corporation (Real Estate)
• Team Financial, Inc. (Banking)
  
• Thornburg Mortgage, Inc. (Banking)
  
• Trump Entertainment (Gambling)
• U.S. Shipping Partners L.P. (Marine Transportation)
• Velocity Express Corporation (Delivery)
  
• Vineyard National Bancorp (Banking)
  
• Visteon Corporation (Auto Supplies)
• Wall Homes, Inc. (Real Estate)
• WL Homes, LLC (Real Estate)
• Young Broadcasting, Inc. (Television)