The problems at RadioShack (RSH), a 90-year company with 7,200 stores, are pretty well known. In fact, there is a growing consensus the firm is just a few quarters from going under. Certainly its dividend, which now yields 12.4% , seems to be under dire threat.
If there is a way back, I don't believe it's through the finance department, as Tim Cunningham suggests. The problem is more fundamental.
What are you going to a RadioShack for?
The answer is parts. RadioShack is not a mobile phone company, and while it used to sell computers, it's not a computer store either. It's a parts store. It sells parts. When you think of RadioShack, you think of parts.
So who needs parts? Not computer people. Not phone buyers.
Hobbyists and makers.
Don't know who "makers" are? Makers are doing for mass customization and robotics what the Homebrew Computer Club did for PCs back when Steve Jobs and Steve Wozniak were teenagers. They even have their own conventions.
RadioShack has been slowly trying to identify itself with the maker movement. It's sending people to the shows, it's building a social media presence within the maker community. And it's starting to sell maker merchandise.
Not all the company's stores are in on this. Only about one in 10 seems to be. But it's definitely a start. The company seems committed to small stores, and now has a joint venture to expand this footprint in China.
There are different ways this could go:
RadioShack could remake itself, but it may be too early in the evolution of the space for that.
It could build all-maker stores in maker-centric communities like Silicon Valley, New York City, and the Midwest.
It could expand its footprint in this line through company-owned stores, franchisees, or both.
I'm not the only blogger looking at RadioShack in these terms. There is a growing (although admittedly, so far, small) market for this stuff, everything from 3D printers to robotics kits to classes in "making." There is almost no competition in the space. The company could grow into it and minimize its financial exposure with a web-centric launch, selling parts and kits from a warehouse first, building a mailing list, and then building or retrofitting stores based on proven demand and hosting local maker events and classes.
RadioShack still has assets. Believe it or not, it has almost $600 million in cash. It still generates nearly $250 million in operating cash flow per year. If it were aggressive in closing what isn't working, if it focused on the new, it could gain a new patina in just a year or two.
Is this likely? Investors might want to keep searching the terms "RadioShack" and "makers" over the next six months to see. If decisive moves are made, it might be worth an investment. But I would like to see some proof of commitment before putting out any money.