Circuit City Files Chapter 11 Bankruptcy

This is no suprise to us, right? I've posted about Circuit City and their woes going back to April 15th, when Blockbuster said they would buy them. At the time of the anouncement I believed it was one of the dumbest acquisition announcements I have EVER seen in my life (or read about from older times). Blockbuster, a struggling retailer in their own right and one without a spectacular balance sheet thought they would buy Circuit City on April 15th (tax day as well).
http://betterbizbooks.blogspot.com/2008/04/blockbuster-to-buy-circuit-city-doh.html

By July, Blockbuster woke up (management probably was tired of being told they were the biggest idiots in the room) and backed out of the deal. I know this is bold language but it seemed like a complete "NO BRAINER" type of deal NOT TO DO.

http://betterbizbooks.blogspot.com/2008/07/blockbuster-to-not-buy-circuit-city.html

So lets take a look at some interesting facts about Circuit City and their industry.
1) Their stores are DEAD when it comes to foot traffic vs. Best Buy.

2) I find it interesting that Ultimate Electronics, Tweeter and Circuit City have all died a painful death in the last few years.

3) Linens N Things went into Chapter 11 earlier this year. Recently they went Chapter 7 and began liquidating assets (ie. completely shutting down.) Circuit City announced a 20% store closure last week, big cuts in management LATE last week, Chapter 11 this week and likely, in my opinion, Chapter 7 eventually.

Seriously, these guys have been HEMORHAGING cash for some time, they have NO differentiation vs. Best Buy (me too concept) and people have STOPPED shopping there altogether (at least people I know.) Who will buy a $2000 TV from a bankrupt retailer? We'll see how it plays out in the stores but I am NOT optimistic re: their future.

Dan Ross
http://www.betterbizbooks.com/

Blockbuster to NOT buy Circuit City - Bout Damn Time!

Ever since this deal was accounced back in April I thought it was the dumbest deal I had EVER heard of. I SERIOUSLY question the intelligence of Blockbuster's CEO, their board and Carl Icahn who apparnetly blessed the deal. At least the CEO of Blockbuster eventually wisened up but I am still DUMFOUNDED that him, Icahn, and the board of Blockbuster all wanted to go through with this deal initially....

http://betterbizbooks.blogspot.com/2008/04/blockbuster-to-buy-circuit-city-doh.html

So tonight, we bid farewell to the acquisition that would have been the STAR case (piece de la resistance) for Harvard Business Cases moving forward.

As of tonight Blockbuster pulled the deal. Circuit City will trade down and Blockbuster should pop tomorrow.
http://biz.yahoo.com/ap/080701/blockbuster_circuit_city.html

Dan Ross
http://www.betterbizbooks.com/

Blockbuster to buy Circuit City - DOH!

http://biz.yahoo.com/ap/080414/blockbuster_circuit_city.html

Anyone else lose complete respect for Carl Icahn and his investment ideas? I mean, one declining franchise, without a good balance sheet, is going to purchase a #2 electronics franchise that is losing billions. Have the Blockbuster executives (based here in Dallas) walked through a Circuit City recently? Talk about DEAD FOOT TRAFFIC.....Everyone goes to Best Buy now because they don't know if Circuit City will be around 2 years from now!

This will be interesting to watch. Lets see if they truly can raise financing for what I believe, at face value, appears to be one of the strangest deals/acquisitions in the last 10-20 years. This is the kind of business scenario that Harvard Business Cases are created out of.

Dan Ross
http://BetterBizBooks.com/

Related Sites:
http://www.circuitcity.com/
http://www.bestbuy.com/
http://www.amazon.com/