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Some additional thoughts (over and above the excellent replies already posted):

Some 401(k) plans offer matching funds for a portion of your contribution in the form of company stock only. And most have some restrictions on when you can sell (usually related to vesting requirements). By all means, take this FREE stock. And then when you can sell it, evaluate the current situation and proceed accordingly.

Some plans offer company stock at a discount (up to some limit). If there are vesting or other sales restrictions imposed on this stock, then you have to evaluate the situation like any other stock. If, for example, you are offered the stock at a 20% discount, with a minimum holding period of 6 months, then you have to guess whether or not the stock will still be worth what you paid at the end of the 6 months. (Good luck finding a crystal ball!!).

Company stock CAN be a good buy. But with the double exposure you get by placing you source of income and retirement assets in the same (possibly incompetent) hands, I would recommend EXTREME care. I would recommend limiting you company stock holding to no more than 15% of your plan assets and then keep a sharp eagle eye open for the first hint of trouble. If things start to look down, then convert that company stock to something else in a hurry. Or if you have been checking out other investment options within your 401(k) and another option clearly looks more attractive, then move out of the company stock.

The biggest danger is falling in love with a stock (any stock, not just stock in the company for which you work). Or feeling that once you have bought a stock, you somehow have to Buy and Hold to make money. When a stock starts to slide, there is always the hope that the price will bounce back and we will recover any losses. And when it continues to slide, then we can't "afford" to sell because of all the money we'd lose. WAKE UP!! At that point the money is ALREADY lost. You're just preventing yourself from losing more! Or saving yourself a long, long wait until the price eventually moves back up to its former glory (if it ever does).
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