Is the Proposed Circuit City Deal a Blockbuster?
To most everyone this side of Edward Lampert, the combination of one poorly performing company with another adds up to a really bad deal.
Evidently, Blockbuster CEO Jim Keyes counts himself among the Lamperteers who believe that zero plus zero adds up to something more than nothing. How else could you explain his company’s unsolicited $1 billion-plus bid for the struggling Circuit City consumer electronics chain?
In a letter to Philip Schoonover, chairman and chief executive at Circuit City, Mr. Keyes described the combination of the two companies as a “game-changing retail concept with a sustainable competitive advantage” that would enable the new concern to capitalize “on the growing convergence of media content and electronic devices. We would seek to differentiate products in both Blockbuster and Circuit City stores by offering exclusive content and content-enabled devices.”
Where Mr. Keyes sees opportunities, others do not.
“The world is littered with remnants of bankrupt retailers,” Michael Pachter, an analyst with Wedbush Morgan, told Reuters. “It’s a bad idea.”
“Blockbuster has not yet completed its own turnaround,” he added. “Circuit City has serious problems and I’m not sure if Blockbuster management has demonstrated it has the skills to turn those around.”
Discussion Question: What is your reaction to Blockbuster’s proposal to acquire
- Blockbuster Proposes Combination With Circuit City – Blockbuster
- Blockbuster-Circuit City deal gets thumbs down – Reuters