Comment by ChuckMcM

This is all too true. The interesting thing is when companies get into this sort of death spiral you can usually spot it if you look carefully. If you're a competitor with an "800 lb gorilla" which has just entered this territory you have a good shot at killing them if you execute well.

I speculate the reason this sort of technique persists though is that the only people who get hurt here are the lower level employees and the customers. Smart investors make money on the short selling, the top management makes money/reputation on the original upside.