Circuit City starts taking Blockbuster seriously - Top Stocks
 
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Circuit City starts taking Blockbuster seriously

Posted May 09 2008, 01:07 PM by Kim Peterson
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Blockbuster wants to buy Circuit City for $1.3 billion, but just about everyone has chalked up this proposal as ridiculous because Blockbuster doesn't have that kind of cash. Good thing the company has Carl Icahn in its corner. The billionaire investor -- and Blockbuster's largest shareholder -- said he'll buy Circuit City himself if Blockbuster can't cough up enough money for the $1.3 billion deal.

With an offer like that on the table, Circuit City has stopped giggling and is starting to seriously think about the deal. It's hired Goldman Sachs to help it explore options. Circuit City reminded everyone today that it hasn't made any decisions yet, but one thing is clear. this electronics chain is in play. And investors couldn't be happier; shares are up 9% today. Blockbuster shares are down slightly.

What would a CircuitBuster look like? For one thing, Circuit City stores would start offering movie and game rentals. And Blockbuster would expand into selling devices such as portable DVD players and iPods.

Perhaps it could work, but this deal will test all of Icahn's business skills. Both companies have been poorly managed for years, and are losing money and market share to rivals like Netflix and Best Buy. Icahn and Blockbuster's board will have to integrate both chains, energize a demoralized work force, close underperforming locations, revamp business models and develop a unified strategy to compete in retail and content distribution and delivery. Forgive my pessimism, but there's no way Blockbuster can pull this off.

Circuit City's board now has a few options to discuss. It could reject any offers and hope that CEO Philip Schoonover makes good on his struggling turnaround plans. It can load up Goldman Sachs' arms with chocolate and flowers and tell it to go find other suitors, hopefully instigating a bidding war. Or it can sit down with Blockbuster and talk numbers, emphasizing the cash part of the cash-and-stock acquisition proposal.

Cheers to Circuit City investors. This is the best thing to happen to the company in years. 

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Comments

 

A "CircuitBuster"? How exciting! Or maybe a "BlockCircuit"?

Regardless, Bestbuy finally has some crediable competition (besides Walmart who has battered them black and blue already).

Bottomline: Unless the new merger can create a profit, the company will be in a grave that they can't dig out of.

J. Maddison (Posted 05.12.08 11:15 AM)

Well' If Icon has anything todo with it ...it most asssuredly secures the destruction of both companies. I lives in k c when he took over TWA.

bob (Posted 05.12.08 12:30 PM)

Strange... I am in Arizona and our Blockbuster store went bankrupt and out of business because they didn't pay the taxes on the building they owned.  I thought they ALL went out of business.  Now the building sits empty yet Blockbuster still owns it.  I also read somewhere that Circut City was filing bankruptcy also.  Seems to me they both need to go.  

Sally Parker (Posted 05.12.08 12:54 PM)

Well, Let's wait and see how this plays out.  I still cant stand going into CC for anything other than movies.  Movies I can find myself.  Anything else, and I am in trouble.

Stiill@BBfornow (Posted 05.12.08 1:45 PM)

Gee, all we need is another Movie rental store!

J. Farminton (Posted 05.12.08 1:48 PM)

First!

Damon (Posted 05.12.08 2:25 PM)

As just an average consumer, the only comment I can make is that anyone

wanting to purchase Circuit City is getting a diamond in the rough. The right management could cash in on Circuit City's strong suit. Service and selection.

I have been made to wait too many times at Best Buy. Indifferent sales assc

and prices that claim to be the lowest but are not always.  Each time I go to

Circuit City they act like they want my business.  Just my opinion.

KCMO    

Clayton Sands (Posted 05.12.08 2:41 PM)

Kim hits it on the nose; Circuit-Buster.  Both Circuit City & Blockbuster are lost souls in the market place.  Their offerings are higher priced, and stores generate less traffic, than the competition. Llastly, their vision is fuzzy not just to the consumer, but to the share-holder.  Carl can afford the luxury of another TWA, but for the everyday share holder, unless he buys us out, this match-up is a loose-loose.

Phred in Phlorida (Posted 05.12.08 2:57 PM)

I am a former employee of Blockbuster who was let go due to a cost saving "workforce reduction".  I find it interesting that the company can come up with enough money to buy Circuit City yet can't keep their employees, give merit increases, provide managers with incentive meetings, or properly staff their stores.  Blockbuster should concentrate more on taking care of their employees who in turn provide customer service than trying to expand into an area they know nothing about.  I'm glad I had to sell my stock options when they were worth something as opposed to now.  By the way, I have a much better job with a mroe stable company.  Thanks Blockbuster!

James (Posted 05.12.08 3:07 PM)

yep

bob (Posted 05.12.08 3:22 PM)

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