Circuit Breakers

Posted by Equity Private, Apr 15, 2008, 7:39am

"Our view of the change that's occurring in consumer electronics and the movie-rental business is one of convergence," Mr. Keyes said. He sees Apple Inc.'s stores as an example of "a user-friendly one-stop shop with solutions for the consumers" that could be a model for Blockbuster-Circuit City combination.

You have to give the Wall Street Journal some credit, at least, for reprinting the CircuitBlock = Apple concept. If nothing else it shows us that the News Corp takeover hasn't blunted the paper's sense of humor.

There are any number of things that baffle me about the proposed deal, but most can be explained away with simple two-word combinations like "last-ditch," "desperate-hours," or "spin-doctor." One that cannot is "Carl Icahn." I suppose, having a "pre-existing condition" in Blockbuster, Icahn is looking to extract as much value as possible quickly. Can you blame him?

The inability of firms to recognize the declining nature of content distribution as a business model baffles me. Moving the Blockbuster point of sale out of expensive front-line retail space and into Circuit City stores because revenue is no longer sufficient to maintain the expensive store network Blockbuster must support (6000 stores costing on the order of $1.5 billion a year) so they can move a bunch of plastic discs back and forth is not a brilliant merger plan. It is delaying the inevitable.

A Blockbuster Raid on Circuit City [WSJ]

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Tags: Carl Icahn

Comments

Posted by guest, Apr 15, 2008 7:53AM

Just wait - this is more retail space that will shortly be available for cheap.

Posted by Investorcluzo, Apr 15, 2008 8:21AM

delta + northwest = luv, I get;
busted blocks + broken circuits = $hit $how?

perhaps my experience as a FIG banker has reduced my ability to see the strategic rational of this deal. please, someone, anyone, explain to me why this deal makes sense. wattles got his $6, now he should run, not walk away...keyes has no idea!

http://www.youtube.com/watch?v=GKZgfrsItmw&feature=related

Posted by Tex Appeal, Apr 15, 2008 8:21AM

So which banks have the most exposure to retail related CMBS? Guessing they can just structure up some stuff and drop it off at the fed window anyway with the rest of their crap assets...

Posted by Anal_yst, Apr 15, 2008 8:57AM

This deal makes no sense. NONE. Kinda like Alcatel-Lucent, except with zero possibility of meaningful 'synergies'. Just hope they merge, and short the $shit out of the combined entity.

Posted by guest, Apr 15, 2008 10:00AM

Hmm... two crappy out-of-date chains merging? Why not, it worked out so well for ESL.

Posted by guest, Apr 15, 2008 10:45AM

Circuit city, I buy all my Wang word processors there!

Not sure what this Blockbuster is, do they rent Betamax cassettes?

Posted by guest, Apr 15, 2008 11:01AM

@10:45 I go to CC sometimes, also sometimes to Best Buy now that they're also in the nabe. Why all this wrath for CC and not BB too? Is there really a difference. Educate me.

Posted by Tourbillon, Apr 15, 2008 11:20AM

Does no one else remember divx? In the next few years movies will move from physical distribution to distribution over broadband. I imagine Blockbuster is trying to open the door for some sort of home appliance that handles renting/buying movies that you can sling right to your tv.

Posted by guest, Apr 15, 2008 11:28AM

You guys are all wrong. The added space available to Blockbuster at Circuit City stores will allow for a massively improved VHS and Betamax section, which the current CC stores just can't house.
Somebody beat me to it, but Eddie L's Sears-Kmart merger now has competition for Stupidest Retail Combination of the Decade.

Posted by guest, Apr 15, 2008 11:40AM

@10:45 Vera Wang makes word processors? I thought she just did bridal? Wow...

Posted by guest, Apr 15, 2008 11:43AM

Whoever is advising Blockbuster on their "strategic options" must have scraped this idea up from the absolute bottom of their pitchbook barrel. Whoever led that presentation is a salesman on par with JR "Bob" Dobbs. The fees on a billion dollar takeover may not be earthshaking, but hey, take what you can get these days.

On the other hand, both companies are doomed anyways, why not profit from it?

Posted by guest, Apr 15, 2008 11:51AM

Of course Icahn "loves" the deal. If you bought in at $10 and now see it with a %70 haircut of course you'd love it.

Icahn also extracts about $17.50 in dividends per share (those preferred shares are great if you can get them) each and every quarter. Which is one of the reasons that BBI can't do anything because all of it's cash pays off Icahn for the "loan" he made them in 2005.


-70% on the original purchase......of course it's great!!......

Ciao
MS

Posted by Suits, Apr 15, 2008 12:05PM

@10:00,

It should be noted ESL is still up 10X their investment in SHLD.

Posted by guest, Apr 15, 2008 2:35PM

Talk about tying two boulders together to see if they float...

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