In May, we down graded Lehman Brothers (LEH) in PortfolioGrader Pro from a hold to a sell. Today, the company has finally reached the breaking point. In the last three days, the stock has lost 55% of its value:

At Lehman, the bank's embattled chief executive, Richard S. Fuld Jr., announced his plans in a conference call Wednesday with analysts and investors. Inside Lehman's Midtown headquarters, anxious employees huddled around trading screens to watch the reaction in the stock market.

Lehman, one of the nation's largest investment banks, said it expected to report a $3.9 billion loss for the third quarter, an even bigger deficit than analysts had forecast, and cut its dividend to shareholders. It also announced long-expected plans to sell most of its prized investment management division and, more radically, to split itself into a "good" bank and a "bad" one.

The split, a strategy employed with mixed success by several other banks in the 1980s and 1990s, would enable Lehman to isolate worrisome commercial mortgages and real estate.

Lehman plans to spin off about $30 billion of such problematical assets into a separate company -- the "bad" bank -- which would be owned by Lehman shareholders. The hope is that the holdings of the bad bank will eventually increase in value, yielding profits for its shareholders.

While shrinking the bank might improve Lehman's short-term prospects, this strategy could pose long-term issues. To remain viable in the future, analysts said Lehman might need to be part of a larger institution, perhaps a foreign entity like HSBC of London or Nomura of Japan.

"In the current market you have to be either really huge or you have to be dominant in one business or in a good niche," said Len Blum, a managing director at Westwood Capital, a financial advisory group. "They are not huge and they were dominant in fixed income, but that game is over in the near term."

The measures announced by Lehman Wednesday came as somewhat of a disappointment to Wall Street analysts and investors, because they were expected and because some of the moves could take months to complete.