Asif Suria

Blockbuster Poised for a Turnaround

Thanks for engaging in an healthy discussion Davis.

I encourage you to be as pessimistic as possible and by no means is Blockbuster a screaming buy because of all the challenges it faces. I have stated this clearly in the article.

However I feel that a lot of that pessimism is already priced into the stock. Assuming that the company will only lose more money as the number of subscribers grow would be ignoring a few facts. The fact that all users are not likely to be heavy users and could actually help the bottom line. The fact that an internet model is best suited for economies of scale and the fact that regular "fixed margin" customers who are being converted to their online service may actually bring in more revenue over a period of time.

Blockbuster Poised for a Turnaround

Davis, there was a section in the newsletter that preceded this write-up of Blockbuster that discussed the effects of management change at a company in trouble. If you are interested, you can read the entire newsletter here,

www.sinletter.com/arch...

There are three factors that may result in a turnaround at Blockbuster. Activist investors, new management and an increasing number of subscibers from a product that may be more appealing than Netflix to some movie lovers (no throttling of active users as Netflix does). The catalyst at this point that did not exist six months ago is the former 7-Eleven Chief Executive James Keyes as the new CEO of Blockbuster.