Lehman Brothers Bankruptcy. Millions Lost In Residual Passive Income

by Scott on September 16, 2008

The bankruptcy filing from Lehman Brothers over the weekend will not only impact thousands of employees, families, students, foundations, and stock holders, but it will be felt by small and large companies that will have millions lost in residual passive income. Lehman will be different from Fannie Mae and Freddie Mac that will continue to operate and provide loans to thousands of households across the country. Lehman may have assets sold off to other investment firms, including the asset management firm Neuberger Berman who will be sold to the highest bidder. I don’t want to gloss over the significant loss of income for thousands of families who will be looking for work after the bankruptcy or the investors who had assets in Lehman stock and bonds. Since this is a personal finance blog with an emphasis on passive income, I do want to look at the impact the Lehman Brothers bankruptcy has for other companies. Thousands and millions of dollars will be lost with this bankruptcy to companies that earn residual passive income through software licenses, research, suppliers, and even vending sales. Microsoft, Cisco, Bloomberg and even small mom and pop vending machine companies will all feel the financial impact of the Lehman bankruptcy.

So how will the Lehman Brothers Bankruptcy impact these companies residual passive income?
1. Microsoft will lose millions through lost license revenue from windows vista, xp and server sales. Each computer, laptop, and server running Windows software must have a valid license. Lehman is probably just one of Microsoft’s many licensees, so the impact would not be as significant as the others down this list.

2. Cisco, Nortel, or Juniper are also going to lose out on lost server revenue from Lehman Brothers. Lehman must have spent thousands, if not millions on network servers and security for client data.

3. Bloomberg, the company founded by Michael Bloomberg will also lose thousands if not millions from Lehman Brothers. Traders and brokers utilize the Bloomberg terminal on a daily basis for bond prices, news, and even researching mortgage backed securities and municipal bonds. These terminals are a tremendous source of residual passive income for Bloomberg and Lehman probably had hundreds of them worldwide.

4. Staples or Officemax, two of the countries biggest office supply distributors may be impacted by the Lehman bankruptcy as well. Staples may have lost thousands of dollars in passive income from sales of pens, paper, toner cartridges, and office supplies.

5. Xerox, Fuji, or Konica Minolta. These large printing companies could also lose thousands for lost revenue from printing supplies like toner cartridges and ink for large color copy machines. Lehman Brothers probably had a copy room on every floor and would print thousands of color copies each day.

6. Office Lease. Lehman Brothers had numerous offices around the world and landlords will feel the impact of the loss in passive income. Real estate can offer a tremendous passive income opportunity for investors once the initial investment is purchased.

7. Stock research. Lehman Brothers probably spend thousands of dollars each year on stock research updated daily from Goldman Sachs, Merrill Lynch, or even Bear Stearns. Research material would have been utilized for clients and website information. Stock research or analysis can be an incredible source of residual passive income for other brokerage firms. In fact some smaller websites have profited from stock research newsletters, showing this to be passive income to the writer.

8. Coke, Pepsi, and vending machine companies.
Even the big two Coke and Pepsi, will feel the impact of the Lehman bankruptcy. A vending machine can offer passive income as the cost of running the business is very little and cans of Coke and Pepsi sell themselves.

9. Newspaper and magazine subscriptions. The Wall Street Journal, Barrons, New York Times, and others will all be impacted by the Lehman Brothers bankruptcy. Thousands of subscriptions were probably delivered daily to brokers, traders, and analysts and will not be suspended. If these Lehman employees move to another firm, the residual passive income for the newspapers would be reinstated again.

10. Service industry. With thousands of Lehman Brothers employees being impacted by a bankruptcy numerous service industries will feel the impact from lost income. Many service companies offer subscription based models that will certainly feel an impact on residual passive income streams. Cable companies like Time Warner, At&t, Comcast may have a reduction in subscriptions. At&t wireless, Sprint, and Verizon may not sell as many phones and might even have Lehman customers cut back on cell phone plans.

The impact from the Lehman Brothers bankruptcy will be felt not only by the thousands of employees, but by businesses around the world. Fortunately for companies like Microsoft, Cisco, AT&T, Coke, Pepsi, Staples, Xerox, and The Wall Street Journal, they will be able to offset the loss in passive income with new customers. But what about the small business owner or catering company that held exclusive contracts with Lehman Brothers?

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1 passivefamilyincome September 16, 2008 at 9:23 am

Excellent post! I really wasn’t even thinking of these impacts on the bankruptcy. I think I saw that someone expected about 30,000 layoffs (I think just in New York city) from this event. The trickle down could go even further into apartment leases from employees who don’t have a job. Or from less money being spent on food and entertainment in the city. It is very scary to me to witness this but something I think needs to happen to get us back on track.

2 Scott September 23, 2008 at 3:28 pm

@ PFI Even with the $700 billion bailout, the down stream impact will be felt by everyone. If you were going to lose your job and your company was just rescued from the federal government, I doubt that you would go out and buy a lot of Christmas presents, a new car, or move. On the other hand, if people live for the moment, I guess nothing is really rational. I hope people will start to save more for rainy days and set aside emergency cushions in case a job is not covered by the $700 billion rescue plan.

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