Icahn says he'll finance Circuit City buyout if no one else will

Blockbuster wants Circuit City. Carl Icahn is supporting the move. The question is why? The answer I think is that James keys CEO of Blockbuster wants to expand further into sales of video games and this is the one category performing well at Circuit City. It seems like they are paying a lot but both companies do have turnaround potential-- Circuit City's management has been severely criticized for things they have done over the past few years and I suspect Carl Icahn thinks this is a company that can make money with a stronger management team. Blockbuster's CEO does have a great rep. In the midst of a consumer slowdown it is surprising that Blockbuster would pounce now and at such a good premium-- they must think there are others interested in Circuit City so the premium will keep them away.

The writing is on the wall for Blockbuster. No one needs to rent movies from a store when they have 500 channels on their cable and video on demand from the internet. Blockbuster is a buggy-whip maker looking for a new business.

They pick CC because it is cheap and electronic gadgets are hot items.

I think Mr Icahn realizes that next year there are going to be literally hundred of millions of televisions that are n't going to work anymore and will need to be replaced

The idea of a Blockbuster/Circuit City merger seems very strange, but stranger things have happened in recent years: AOL's "tail wagging the dog" acquisition of Time Warner and the Sears/K-mart "two tails, no dog" merger, for example. This concept is reminiscent of both. The deal could go through if Carl Ichan and the Blocbuster board of directors can come up with a viable, workable business plan to present to potential investors. This plan would probably involve organizing the combined company as though Circuit City were the surviving entity. Is the Blockbuster management team prepared to pack its bags and move to Richmond? That's a question those executives should be asking themselves.