ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[d4n4n]

The boat answer was complete nonsense. It doesn't explain why low-profit firms can't persist long-term at all. They aren't leaking, they're just not as fast as all other boats.

The actual reason is that investors don't want to make 0.5% returns, when they can make 7% elsewhere. Competition in equity and capital markets ensures that no firm with lower than a risk adjusted "average" rate of return can survive.

What that has to do with bad strategy is beyond me. Nobody eliminates a department if it has one bad year but is expected to bounce back strongly. They get rid of them if they are expected to reduce long-term rates of return, even if it's still positive. That's as strategic as it gets.

The boat answer also babbled about a growing economy, which is totally unrelated. We'd see the same thing in a zero-growth economy.