time_for_real_solutions

Circuit City: Outlook Is Grimmer Than Ever

CC's real problem is that it has no identity. They are a big store...so what...they have a decent selection of electronics...yawn....... the employees are demotivated. If they want to turn this company around they would have to start by getting rid of management. To make that happen they would likely have to get rid of the board. I think BBI did hte right hting here. Instead of buying the whole company you can wait and purchase the pieces you really want out of bankruptcy!

The real question right now is how long it will take the board to realize they can not support this management team? Too many boards get to close to management and allow themselves to be blinded to what is happening. My guess is that they are not adequately informed about the business and that is their fault for not demanding more information. I have to believe though that eventually the desire to protect their own backsides will kick in and they wil do the right thing. Will it be too late?

A Desperate Blockbuster Tries Something Else

What I don't understand is why everyone is so quick to say that BBI is done and NFLX is killing them. Last I checked BBI had revenue of well over $4 Billion with a capital B and little NFLX just had revenues of a little over $1. That makes BBI about 4 times their size and yet all the analyst want to declare BBI the runner up!

To many uninformed and lazy investors it may look like BBI has embarked upon some fragmented desperation moves to save itself but that's because they don't really have a clue about the business to begin with. First, I suggest that you read a transcript from the CC call or listen to a replay there are some clues in there. They would not have embarked upon this venture to begin with unless Icahn had already agreed to fund the acquisition. It sure must be nice to have a Billionaire in your back pocket!

BBI needs the purcashing scale that CC brings for personal electronics. They are not trying to become an Apple store so you can alleviate yourself of that fantasy right now. Everybody is always trying to say that this thing is the next big thin or just like that company. I don't know how many clown analyst popped into my office trying to tell me that KKK was the next SBUX!

Anyway, the CC acquisition gives BBI better distribution for their current inventory. Anybody that knows the company understands this aspect of their business sucks. It gives them economy in purchasing. They should be able to offer products in their stores that they can't economically offer today. They should be able to close some locations and relocate the movie rentals into a CC driving traffic to those stores. They may also be able to off some additional electronics out of BBI locations and close CC locations where it is not economical.

Anyone curious what the new stores are going to look like should go look at the location in Frisco Texas near Lebanon and Legacy.