Some mergers make less sense than others. The Blockbuster (NYSE:BBI) effort to buy Circuit City (NYSE:CC) makes no sense at all. It is based on the hope that putting together two zombies will create one live person.
According to Reuters "Blockbuster Inc. said on Monday that it has offered to buy electronics retailer Circuit City Stores." The price for the offer was in a range of $6 to $8 pending due diligence.
Why putting a consumer electronics business together with a movie rental company makes sense is anyone's guess. Each company is having remarkable trouble staying in business.
Blockbuster's current share price is just above $3, down from a 52-week high of $6.67. The company is being ruined by competition from online DVD sales and VOD products delivered over the internet or by cable companies. In its last fiscal year, Blockbuster made only $39 million on revenue of over $5.5 billion.
Circuit City is even worse off. It made a tiny profit in its most recently reported quarter, but has been losing customers to larger operators like Best Buy (NYSE:BBI) and Wal-Mart (NYSE:WMT). Circuit City shares are down from a 52-week high of $19.12 to $3.44
It is hard to see how a merger would allow for either cost cuts or revenue enhancements.
1+1=0
Douglas A. McIntyre is an editor at 247wallst.com.
Comfort Zone Investing: Keep your recovery expectations real
Will Americans have to slim down to fit into their cars?
Starbucks: The next McDonald's
Reader Comments (Page 1 of 1)
4-15-2008 @ 3:52AM
Tiger said...
Recently I bought a printer online from clueless city
and never recieved and there is no record of it being delievered. And now CC is giving me the run around so sooner or later I will probably have to sue this idiot company for the $99.00 they owe me. I cannot imagine Blockbuster even wanting CC with the finacial past they have had with that CEO that remains clueless about customer service.
4-16-2008 @ 11:58AM
Charles Lattka said...
Just a thought, maybe 2 companies will work better than one. Someone may know more than the rest of us. If they want to do it, give it a chance and let's see what happens.
4-16-2008 @ 4:03PM
Charles Lattka said...
For BBI and CC its not over till the fat lady sings, and she hasn't sang yet. Let it take its course, good or bad!!!
4-16-2008 @ 4:05PM
Charles Lattka said...
I've got faith, buying both and buying heavy, make or break deal, go for it
4-16-2008 @ 4:48PM
Charles Lattka said...
It's a give and take here, you give some and you take some if you play your cards right!