Rumor Mill Redux: Dell to Buy RadioShack
An unusually high number of options traded on RadioShack stock over the past couple of days have led some to speculate (hallucinate?) that Dell might be interested in purchasing the struggling consumer electronics chain.
As would be expected, neither company had any comment over a rumor that first got started last May in a column entitled Why Dell Needs RadioShack on the BusinessWeek website.
In that column, the author argued that Dell needed to consider making fundamental changes to its business model including moving away, at least in part, from its consumer direct model to establish a retail presence. The rationale was that acquiring RadioShack would provide the company with that presence. Of course, Dell has moved into retail with its products now being sold in a number of chain stores including Best Buy and Wal-Mart.
Mike McCoy, an analyst Retail Forward, told the Fort Worth Star-Telegram, “Personally, I just don’t see it. The only [thing] Dell would get is locations, and somehow they would have to acquire the retail expertise.”
If Dell were to purchase RadioShack, it would be buying into a business that hasn’t demonstrated it has a reason for being. The company has managed to use cost-cutting measures to prop up its earnings but has failed to demonstrate it has a real plan to drive revenues.
Discussion Questions: Assuming it were to happen, what would a Dell acquisition of RadioShack mean for the two companies? What is your assessment of the challenges and opportunities faced by each of the companies without a deal taking place?