While it may initially look a bad omen, the reality is that it is a very good move.
First, Marlboro and Marlboro Lights are the #1 cigarettes in the US, by a mile. Second, smoking is in decline and growth for the company will be had through increased market share of the above brands, cigars and smokeless products. Third where is the cash being used to develop and market this product better used?
The ongoing testing of smokeless products for the company are encouraging and being expanded to other markets.
This is where R&D dollars ought to be going. The company expects overall cigarette sales to fall at an annual rate of 2.5 percent to 3 percent in coming years. At the same time the smokeless market is experiencing growth of about the same percentage.
The move is a common sense one. Place dollars into a growth area vs a declining one. Eliminating smooth will have no negative effect on Marlboro sales for the company and having the flexibility to accelerate the smokeless products can only help.
Disclosure (“none” means no position):Long MO
Visit the ValuePlays Bookstore for Great Investing Books