Many major companies like CircuitCity and Linens 'n Things went bankrupt during the economic crisis of 2008-2009. These companies folded under high debt levels and a decline in sales. Just because some companies were able to survive the economic downturn of the past few years doesn't mean they are out of the woods yet. Companies like Blockbuster (NYSE:BBI) and Borders (NYSE:BGP) are going down with their industries, meaning that making drastic changes is their only option. Here are five major companies that are struggling - it is unlikely that all will survive.

In Pictures: The Biggest Bank Failures

The former king of video rentals is on life support. Blockbuster's shares are trading under 30 cents per share and the firm is saddled with debt. Blockbuster has over $963 million in debt. The company's biggest problem is that its business model no longer works. Blockbuster rose to prominence by renting videos and DVDs to customers from its traditional brick and mortar stores.

However, Netflix has become the new king of movie rentals with its DVD by mail strategy. To make matters worse, Redbox is quickly gaining market share with its $1 DVD rentals from kiosks set up at grocers, fast food chains and convenience stores. Blockbuster is trying to change its business by adopting a DVD rental kiosk model and offering mobile movies via smartphone. But unless Blockbuster can rid itself of its onerous debt burden, these changes may be too little, too late.

Rite Aid
Things haven't been right at Rite Aid (NYSE:RAD)in quite a long time. Rite Aid's biggest problem is that the drug store giant just doesn't make money. Rite Aid has been losing money and is expected to have negative earnings for the foreseeable future. Add in that Rite Aid has only $150 million in cash and more than $6 billion dollars in debt and you can see why the outlook isn't so rosy.

The ill-advised Brooks Eckerd acquisition has buried the company under a mountain of debt. Rite Aid has seen its same store sales decline for nine consecutive months. With Walgreens, CVS and Wal-mart all competing for pharmaceutical sales, it doesn't appear that there is any viable plan that can save Rite Aid. (For related reading, see Analyzing Retail Stocks.)

Borders Group
The printed book market just doesn't seem large enough for Borders anymore. Borders is the second-largest bookstore chain in the U.S. behind Barnes & Noble. Unfortunately for these companies, bookstore chains are going the way of the dinosaur with Amazon digitizing books and becoming the largest online seller of books in the United States. Borders is developing a Kobo e-reader to try and compete, but with e-book readers from Amazon, Apple and Barnes & Noble, Borders may be living on borrowed time.

How troubled is Borders? The company's stock currently sells for under $2 dollars a share. Borders has to repay a $42.5 million dollar loan due on April 1. If Borders can raise this money, the bookstore chain still faces a $360 million dollar note payment due July 2011.

Perhaps the most damning sign was that the company's CEO left to take a job at a supermarket chain. The company's short-term hopes lie in getting creditors to refinance debts. The best hope for long-term survival is an acquisition by a larger bookstore chain like Barnes & Noble.

Palm (Nasdaq:PALM) was counting on the Pre and Pixi Plus to lead its resurgence back to the top of the smartphone market. Unfortunately for Palm, these two smartphones have failed to deliver. Although the initial response was good, Palm has been unable to sustain its momentum. Palm reported a non-GAAP net loss of $102 million last quarter. (Find out what these numbers really mean in How To Evaluate The Quality Of EPS.)

Palm has found it increasingly difficult to compete in the crowded smartphone market with Apple, Research in Motion and Google. Shares have been slaughtered, dropping 77% over the past six months to $3.75 – and this valuation may be overly generous. Some Wall Street analysts have valued the smartphone marker's shares as worthless and are speculating on a Palm bankruptcy.

So, what can Palm do to survive? Palm's best chances at a turnaround may be for a larger industry player like Nokia or Motorola to buy Palm out. Palm is burning through cash at an alarming rate and would need a technology company with deep pockets to keep them afloat.

YRC Worldwide
YRC Worldwide (Nasdaq:YRCW) is a Fortune 500 Company with a whole lot of problems. YRC Worldwide competes in the trucking industry - an industry in which carriers have very little pricing power and intense competition. The trucking company was on the verge of bankruptcy last December before doing a $470 million dollar debt for equity swap. Existing shareholders were diluted and shares now trade below 50 cents.

The equity swap may have only saved the firm over the short term. YRC Worldwide is still awash in red ink due to massive losses and mounting pension obligations. The trucking firm has tried everything to lower costs including employee layoffs, property sales and plant closures. Despite all of these actions, YRC Worldwide has not posted a profit since 2006. All of these moves may just be delaying the inevitable.

The Bottom Line
Saving these companies may be an impossible task. Unless these companies undergo a major restructuring or are acquired by a competitor, they may collapse before the calendar year is over. (Even in bankruptcy, some companies can be a good investment. Find out more in Taking Advantage Of Corporate Decline.)

Still feeling uninformed? Check out last week's business news highlights in Water Cooler Finance: Zombies File Taxes, Dead Bills Rise Again.

Related Articles
  1. Taxes

    Internet Sales Tax Vs. Brick & Mortar Sales Tax

    Learn about the differences between sales taxes and Internet sales taxes, and the goods and services that typically incur each type of tax.
  2. Entrepreneurship

    10 Ways to Be a Successful Entrepreneur

    Are you hoping to launch your own business and work for yourself? If so, here are the top 10 tips for entrepreneurs.
  3. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  4. Entrepreneurship

    5 Biggest Challenges Facing Your Small Business

    Would-be business owners must consider the unique challenges that lie ahead when they start a small company. Following are five they are likely to face.
  5. Investing

    5 Iconic Airlines That No Longer Exist

    Learn the stories behind the disappearance of a number of formerly iconic airlines that no longer exist following financial difficulties or other problems.
  6. Investing

    5 Fortune 500 Companies That No Longer Exist

    Discover where the concept for the Fortune 500 list came from and learn about companies previously on the list that no longer exist.
  7. Investing Basics

    7 Iconic Brands That No Longer Exist

    Understand the value of branding and what makes good brands great. Learn about seven iconic brands that failed and no longer exist.
  8. Investing Basics

    The Biggest IPO Flops

    Even with the uncertainties of IPOs, companies will keep issuing them in efforts to grow their enterprises, and some will end in disaster.
  9. Economics

    What Does Brick and Mortar Mean?

    Brick and mortar stores are traditional street-side businesses that deal with customers face-to-face.
  10. Personal Finance

    Mobile Payments in 2015: When Will Cash Be Obsolete?

    A wave of new mobile payment technology is setting the stage for a revolution in how we buy in stores.
  1. Does working capital include stock?

    A certain portion of a company’s working capital is generally composed of earnings; however, current short-term assets that ... Read Full Answer >>
  2. What are some alternatives a company can attempt prior to resorting to liquidation?

    Some alternatives a company's owners can attempt prior to resorting to liquidation are selling the company, raising money ... Read Full Answer >>
  3. Under what circumstances might a company decide to liquidate?

    There are many reasons a company may decide to liquidate. A smaller company may decide to liquidate if one of the main owners ... Read Full Answer >>
  4. What happens to the shares of a company that has been liquidated?

    The fate of a liquidating company’s shares depends on the type of liquidation the company is undergoing. The most common ... Read Full Answer >>
  5. What is the difference between compulsory and voluntary liquidation?

    Liquidation is the process where a firm's assets and liabilities are terminated, realized and subsequently distributed. In ... Read Full Answer >>
  6. What can cause a merger or acquisition deal to fail?

    When two large companies announce plans to merge, or when the larger of the two acquires the smaller entity, the surviving ... Read Full Answer >>

You May Also Like

Trading Center