Vision

“Circuit City is finally throwing in the towel. Confronted with weak sales, impatient shareholders, and a U.S. consumer pummeled by recession, the electronics chain capitulated on May 9 and retained Goldman Sachs to help negotiate a deal. The same day, Circuit City Stores agreed to allow three board nominees from activist shareholder Mark Wattles to stand for elections.

“The moves almost certainly presage a sale of the chain, likely to Blockbuster, where Carl Icahn has stepped up and agreed to finance a Circuit City acquisition. The billionaire -- Blockbuster's largest shareholder -- has bought into a ‘game-changing’ scheme announced last month in which the troubled electronics retailer would be combined with the troubled movie retailer to create a new national chain selling consumer hardware and software.

“Wall Street is dubious, and no other buyers have emerged wanting Circuit City…

“Last year, several electronics stores were decimated, CompUSA shuttered all its stores before being bought by a restructuring firm in December, and Tweeter Home Entertainment, Harvey Electronics, and Rex Stores all filed for bankruptcy. ‘This is the kind of mess the electronics business is in -- it's like buying a sinking Titanic,’ says Howard Davidowitz, chairman of Davidowitz & Associates...

“Blockbuster has its own litany of troubles. Blockbuster has been forced to reckon with a shift from on-site movie rentals to new venues, with increased competition from video rental models like the one from Netflix and downloads from Apple. ‘The question is will the combination of two crippled companies end up crippling both even further,’ says Burt Flickinger III, managing director of Strategic Resource Group…

“Almost all of Wall Street, and many in the tech community, are puzzled by [Blockbuster CEO Jim] Keyes' pursuit of Circuit City. Keyes envisions a new digital retail company that leverages complementary products and higher-quality, better-focused store sites.

“‘Combined, our companies would create a game-changing $18 billion global retail enterprise that is uniquely positioned to capitalize on the growing consumer appetite for content-enabled consumer devices,’ Keyes said…

“He also anticipates cross-merchandising opportunities, and the opportunity to sell electronics with access to personalized preloaded movies and digital subscriptions. ‘That is what I mean when I say game-changing entertainment retail concept,’ Keyes said. Yet Wall Street smells the potential for a very expensive flop.”

(“Circuit City Gives Up the Fight; The electronics chain puts out the "For Sale" sign, hiring Goldman Sachs to assist on a deal, most likely with Blockbuster.” Pallavi Gogoi. businessweek.com. May 12, 2008)

CHANGING THE RULES of the game, built upon imagined revenue synergies, disparate cultures and the anticipation of consumer shifts is only for the most robust and well-adjusted of firms.

Maybe they should call the Sears / K-Mart team...

"You say you got a real solution
Well, you know
We'd all love to see the plan.

"You ask me for a contribution
Well, you know
We're doing what we can."