Blockbuster's big joke
Movie rental chain Blockbuster added some comedy to the business pages this week by making a $1.35 billion unsolicited bid for consumer electronics chain Circuit City. They are kidding, aren't they?
The real difficulty is deciding which company is more likely to go belly up first. But, even forgetting that, there is not even a whiff of synergy between the two companies. There is some talk of setting up Blockbuster kiosks in Circuit Cities, but the problem is that 1) people are not going into Circuit City stores very much; 2) they certainly aren't likely to drop in every week to pick up a movie; and 3) while Blockbuster stores are in easy-in, easy-out strip malls, Circuit City stores are in large shopping centers with a long walk in and out of the store. The other thought is that maybe Blockbuster could sell electronics on the side. Wrong, the company tried that a decade ago and it failed miserably.
In short, the businesses have almost nothing in common. A Bloomberg News story ("Blockbuster Bids Up to $1.35 Billion for Circuit City", 1/14/08) quotes an analyst who said "There are no historical examples of success of a company that does one thing trying to acquire infrastructure to do something different."
Blockbuster has over half a billion dollars in long-term debt, and has had profits in only one of the last ten years. Anyone extending the company a billion dollars more credit at this point would be insane.
The headline at the Grand Rapids Press website says it best: "Blockbuster and Circuit City: A match made in ... whaaaa?"
9:38:00 PM 
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