[nayroclade]

They are not selling at a loss though. The real issue here is that businesses such as Microsoft do not exist to serve a market or make enough money to survive and pay their employees. They exist to increase the value of their owner's shares. This is predicated on an unsustainable model of continual growth, with the expectation that every market they operate in can produce high margins and endless expansion. But demand is not infinite and persistent high margins are the exception, not the norm.

[bluGill]

Maybe it isn't a loss, but as an investor (never directly in them), I consider 3% profit margin a bad sign - at that return I'd prefer a savings account: FDIC insurance means that after accounting for risks the savings account is better. I know stock returns don't directly track profit margin, but that is one input into the complex consideration of stocks.

[vouwfietsman]

You are right, and this is why not everything should be a stock. Whatever they will cut to avoid emitting "a bad sign", may involve:

* firing people * making services worse * sacrificing their own future

Whether it actually does involve those things is effectively arbitrary, because the consideration of the "bad sign" is also arbitrary. If there is no objective value judgement of their operation there is no objective value judgement in their streamlining either, so all bets are off.

no percentage no good

"complex consideration"

[pfdietz]

Overall they are not selling at a loss, but parts of what they're selling are being sold at a loss. The market is telling them to slim the f- down and get rid of those money-losing parts.

This is all normal and justifiable. Where is the logic that corporations need to preserve dysfunctional parts of their operations?

[tfigueroa]

Corporations don’t need to, no. But they are systems, and it’s a beginner mistake to assume changing one part is going to affect the whole in some simple, predictable, logical way.

[pfdietz]

That sounds like an extremely lame excuse to preserve money losing activities.

I'll counter by saying that pruning off failing things is not only good, it's the core of capitalism. Creative destruction, as Schumpeter called it. You get efficiency by hunting down and eliminating inefficiency, redeploying the resources elsewhere.

[vouwfietsman]

> pruning off failing things is not only good, it's the core of capitalism

It's quite serious that you see "being good" as something inferior to "the core of capitalism".

Also, the core of capitalism is making money for private individuals, nothing more, nothing less. Whether that's done with or without "failing things", is really beside the point.

[jayers]

The core of capitalism is about where ownership of capital (value producing assets) resides, that is, by private individuals.

What private individuals choose to do with their capital, chase infinite growth and profit or sit on it, is up to them. This is as opposed to say, state ownership of capital.

People confuse the stock market with capitalism. You don't need a stock market for capitalism to function. Publicly traded companies in the United States are legally bound to maximize profit (Dodge vs. Ford Motor Co.)

[xerox13ster]

> You get efficiency by hunting down and eliminating inefficiency, redeploying the resources elsewhere

Plants do this. What’s it got to do with capitalism?

[pfdietz]

Error is rampant. I saw a quote saying the difference between a good business and bad one is the good one makes the right decision 60% of time, the bad one 40% of the time.

So errors abound, and have to be subsequently corrected. This correction process is as natural to capitalism as breathing is to you being alive. Without it, things would rapidly grind to a halt. We see this in sclerotic centrally planned economies where errors persist for much longer.