Ars Deathwatch 2016: Companies and tech whose time may have come

The coming of the new year gives us an opportunity to both look back wistfully and look forward with hope. It also offers a chance to look back with anger and toward the new year with a sense of cynicism and schadenfreude. So, in the interest of curdling your eggnog a bit, we're dusting off Ars' tech company "Deathwatch" list to see which companies we've tracked in the past have managed to survive, which have slipped into various levels of oblivion, and which companies need to be added to the stack to replace those that have either emerged victorious or have fallen irrevocably into corporate limbo.

First, a clarification of our criteria for what places a company on Deathwatch. To be considered, companies need to have experienced at least one of the following issues:

• An extended period of lost market share in their particular category
• An extended period of financial losses or a pattern of annual losses
• Serious management problems that raise questions about the business model or long-term strategy of the company

The Deathwatch took a holiday last New Year's, but our 2014 picks proved to be good for another 12 months of pain: RadioShack, BlackBerry, Zynga, HTC, and AMD. RadioShack, our most sickly suspect, restructured and then sold some of its stores to Sprint, closing the rest. While it still exists as a brand in some locations, the company has essentially ceased to exist. We rule that RadioShack has earned a toe-tag, while the others…well, they're largely in the same delicate condition they were in when we last did this list.

A target rich environment

That said, we only have one real returnee (well, two, sort of) from our end-of-2015 list—simply because there are other companies in play that are worth closer attention, and some of the companies still alive from our previous lists are effectively "undead"—greatly declined from their past position, but refusing to die outright because they've managed to downsize themselves into a survivable niche. Zynga and AMD fall largely into this categorization—their market shares have dwindled, but there's seemingly always someone who will play Farmville or who needs a cheap video card.

Adding to the list of potential publicly-traded candidates for our latest list, there is a herd of "unicorns" to consider—tech startups with paper valuations of over $1 billion that seem more likely to be acquired for a fraction of that or quite possibly never emerge from their venture-capital chrysalis at all. Good Technologies would qualify for deathwatch status if it hadn't already been acquired for a fraction of its previous paper value by BlackBerry in September, administering a double beatdown to employees who had been granted stock.

With all that in mind, we conducted a highly unscientific staff poll for candidates, and then whittled them down to five we believe to be dead, or in some cases undead, companies walking. Their inclusion on this list doesn't necessarily mean we expect them to outright fail, RadioShack-style, in the coming year, but rather that we believe they have the greatest chance of slipping into some sort of oblivion—acquisition, patent zombiedom, bankruptcy, or just total market irrelevance. In no particular order, here are our five (or slightly more than five) picks:

Yahoo!

Credit: Scott Schiller

Yahoo is hardly on death's door, but the company's relevance as a technology player is definitely in question. Say what you will about the past of Yahoo, including cracks about the exclamation point: the company has broken ground with solid engineering in the past, even when it's failed to turn that innovation into revenue-generating services. When the company brought on Google veteran Marissa Mayer to be President and CEO in 2012, there was hope that Yahoo would be revitalized as a technology leader.

Instead, it became a media company shell wrapped around an investment in a Chinese e-commerce site. If you look at Yahoo's earnings from sales after "unusual expenses" (the costs associated with restructuring, layoffs, and shutting down business units) but before applying income from its equity in Alibaba, it's clear that the Internet business at Yahoo has been losing more and more money every year.

Take away Alibaba, and Yahoo actually loses money.

Earlier this year, with earnings declining and senior executives jumping ship, it looked like there was one way for the company to re-invigorate itself one more time: by selling off the Alibaba holdings as a spinoff company to fuel new investment in the company. But with a huge tax bill (a 40 percent capital gains tax) potentially hanging over their heads, the company was being pushed by some to do the exact opposite: hang on to the Alibaba investment while selling off the core businesses.

As of the end of this year, Yahoo executives have said that they are not putting their core businesses up for sale—but will spin off the Internet business as a separate company. That move appears to be a stop-gap measure to buy time. Mayer, who just gave birth to twins, is currently on maternity leave, but will face demands for further cost-cutting when she returns, which might mean shedding some of the things Mayer's team acquired over the past three years.

It's highly unlikely that the spun-off Yahoo Internet products company will, once cut free of the benign cash tumor that is Alibaba stock, somehow thrive and succeed again, breaking into mobile in a more meaningful way and reinventing its mélange of media, social networking and unrestricted Internet schadenfreude (Yahoo Answers, anyone?) into a profitable, sustainable thing. Or, it might get bought by Microsoft and incorporated into Bing, or slowly collapse on itself like a dying sun to become an Internet black hole. Yahoo!

HTC

When we put HTC on our list in 2014, it was for good reason: in 2013, six HTC employees were indicted on charges of bribery, fraud, and theft of company trade secrets—including Thomas Chien, the former vice president of design for HTC. There was also the small matter that the Taiwan-based company was having a hard time selling its flagship phone. Well, things have gone from bad to worse in 2015, as the company has tried to re-cast itself as the maker of…virtual reality headsets.

Things were looking promising for HTC as the company prepared to announce the HTC One M9. Then, as Ron Amadeo discussed in great detail earlier this year, the company proceeded to screw almost every single aspect of the launch up. Combined with the already weak sales of its previous models, the poorly-managed release of a phone crippled by heat management problems that was widely panned by reviewers succeeded in one respect—it succeeded in helping the company's stock lose half its value in three months.

So, how did HTC attempt to recover from the softening demand for its phones? By shifting focus to…other things. And it turned out HTC couldn't get those things right, either.

At the same time that the M9 was being introduced, HTC announced that it was launching a fitness device called the HTC Re Grip. But the Re Grip (made in conjunction with Under Armor) turned out to be so bad in early testing that HTC executives killed the product before it got to market. Then there was the HTC Vive, a virtual reality headset being developed in partnership with Valve. Despite being heavily marketed (including a thinly-veiled product placement in an episode of NBC's Chicago Med), the company announced in a blog post that it was delaying commercial release of the Vive until April 2016, with a limited release of 7,000 units to developers earlier in the year.

In the meantime, the company has continued to take a financial beating, and its phones go largely ignored in many markets. The company's HTC One A9—which has been widely ridiculed or at best ignored in the US, and has failed to be picked up by any major carriers in North America—is essentially an iPhone knockoff that runs Android. And the losses keep mounting, with revenue running a third below last years'. In September, HTC announced a quarterly operating loss of 4.9 billion New Taiwan Dollars ($149 million US)—nearly a quarter of the company's total revenue of NT$ 21.4 billion.

To fix this, the company has a "comprehensive program of restructuring and streamlining", as an HTC spokesperson described it, aimed at bringing HTC "back to basics". That's usually corporate doublespeak for "massive downsizing" or "positioning for sale", but it's unlikely that HTC could sell to its most likely suitors in China because of the political firestorm it would create.

BlackBerry OS

The BlackBerry Priv..the death knell of BlackBerry OS?

Credit: BlackBerry

You'd think we'd get tired of putting BlackBerry on the Deathwatch list. And certainly, the company has proven to be resilient—even making acquisitions to build its software portfolio after shedding so much early in CEO John Chen's tenure. But it's not so much the company we're putting on the list this year—it's the BlackBerry OS.

BlackBerry has been edging toward taking the Android red pill for the past few years, integrating Android compatibility into BlackBerry 10 OS in 2014. We reviewed (and sort of kind of were positive about) the Passport, BlackBerry's flagship business phone, when it released in November 2014, though its Android compatibility was a bit limited.

With the release of the Priv in 2015, BlackBerry finally caved and produced an all-Android phone with BlackBerry features…features that were more designed to keep BlackBerry's core audience onboard. As we reported in October, Chen said that "Android in enterprise is a very underserved space. With our connection, our accounts, our knowhow, it has expanded our servable market." Considering BlackBerry OS only has a 0.3 percent market share, that's a massive understatement.

While Chen said that BB10 OS was still appropriate for the "very high-end" portion of BlackBerry's market, he admitted that was a tiny market. And with developments elsewhere in the Android space, Android is increasingly edging into those edge cases where BB 10 OS would have held out (developments such as the Blackphone, for example).

All this plays into Chen's big vision for BlackBerry—becoming a software company that just happens to make some handsets. Focusing on mobile device management and security for Android devices means BlackBerry will be more competitive going forward, and BlackBerry OS (and the BlackBerry devices themselves) will become increasingly marginalized. The acquisition of Good Technology, with its mobile security offerings, is just another indication of that strategy. And Chen hasn't committed to future BlackBerry OS versions or phones. So, 2016 may be the year where the "crackberry" faithful finally say, "BlackBerry OS is dead, long live BlackBerry."

Groupon

Some businesses really, really don't like Groupon.

Credit: thisisbossi

We put Groupon on Deathwatch in 2013, and took it off the following year because it refused to die like we expected. But we're putting it back on again based on the company's horrific 2015 performance. The company's valuation hasn't budged since founding CEO Andrew Mason, the original bro-manager, was fired by Groupon's board.

Yes, Groupon is technically not really a technology company. We know that. It's one of the great disconnects of the financial realm that businesses that simply take old business models (the coupon book) and add "on the Internet" to them are considered technology companies. But Groupon used technology (and some pretty serious arm-twisting) to gain a major advantage over other Internet "deal" sites, crushing the formerly high-flying startup LivingSocial (which the Irish Times recently referred to as "more unicorpse than unicorn") and the rest of the crowd.

But Groupon has hit peak coupon—the company is getting by with extremely slow growth in North America, and has failed to grow overseas. The company's revenue has been slowly shrinking, and its losses growing. And now the company faces potential legal trouble—a law firm that specializes in stockholder class action suits delivered an early Krampus present on December 23, announcing an investigation into "potential securities violations and breach of fiduciary duty claims" against Groupon.

Still losing money after all these years.

That news comes on the heel of Groupon pushing out co-founder CEO Eric Lefkofsky and promoting Rich Williams, Groupon's former COO to replace him in November. Williams has announced that he intends to sell off overseas businesses; in September, the company said it would lay off 1,100 more employees (about 10 percent of the company's staff) as part of "streamlining." Given the company's current burn rate, and the fact that it's losing money every day it operates outside of North America, Groupon may not be able to streamline fast enough.

Don't Cross the Streams: Rdio and Tidal

Rdio is Info-highway roadkill.

The music streaming business is hypercompetitive, especially with the entry of Apple and Google into the mix. So it's not a surprise to find a disproportionate number of services deserving of deathwatch status. Of course, one of them is a bit of a gimme, because it's already terminally ill.

There are few sure things in Deathwatch, but this one is: Rdio will see the new year, but not much of it. The music streaming business has sold off its technology (and transferred some of its staff) to Pandora for a mere $75 million in cash. The cash will be fought over in bankruptcy proceedings as Rdio is dissolved by creditors, whom the company owes about $220 million. Pandora likely opted not to buy Rdio outright because of that debt—and the fact that Rdio was reportedly losing $2 million every month.

Rdio was hardly the only streaming service with a cash burn rate close to its streaming bitrate. Take Jay-Z's Tidal streaming service…please.

Since being acquired, the company previously known as Aspiro has reportedly been losing money faster than it has been losing CEOs since its March 2015 re-launch (the company is now on its third—former SoundCloud chief business officer Jeff Toig).

Tidal's service is subscription based—either $10 a month for "Premium" or $20 a month for the lossless "HiFi". Tidal representatives have said that the service now has over 1 million subscribers, and about 45 percent of new subscribers get the lossless service. But whether the company is making money or not is hard to tell, because the business operations of Tidal are as opaque as LP vinyl. While co-owned by a group of high-power artists, some parts of Tidal's operations appear to be handled by Jay-Z's Roc Nation production company. Unless Toig can do something to turn things around decisively, Tidal's wave may break on the rocks.

Dishonorable mention: Encryption backdoors

The recent discovery of multiple backdoors hard-coded into some Juniper Networks network security devices—providing remote administrative access and the ability to decrypt virtual private network traffic—was almost certainly planted by a government agency. In the best case scenario, it was code put in place by a developer for system testing and then left in place—but that best case scenario is highly unlikely, given how the code was obscured. And there's been evidence published that indicates certain government intelligence organizations knew of the backdoors for years. The fact that the backdoor is now public, long after the products have reached "end of life" for support, is not in itself very assuring.