Blockbuster to buy Circuit City: Um, what?
Subject: General Tech | April 14, 2008 - 04:51 PM | Ryan Shrout
I think most people will have my first reaction when reading this headline, but Blockbuster is indeed making a bid to purchase Circuit City. Why? So that they can become the "most convenient source for media entertainment." Uh, sure....
“Our vision for the "new" Blockbuster is to be the
most convenient source for media entertainment. We have undertaken a series of
strategic initiatives including enhancement of our core rental business; a
transition from solely rental to a concentration on consumer retail; and
development of the fast-growing digital download market,” Keyes wrote, adding
that the combination of Blockbuster and Circuit City would result in an $18
billion retail enterprise.
Keyes continued to describe how the two seemingly different
businesses would complement one another. “We would seek to differentiate
products in both Blockbuster and Circuit City stores by offering exclusive
content and content-enabled devices. Both companies would benefit from
complementary products, marketing, management strengths, technology and distribution
and the resulting synergies would significantly improve consolidated financial
performance,” he wrote.
In his letter, Keyes requested from Schoonover a response no
later than February 21. With that date past, Blockbuster is now turning to
Circuit City’s shareholders to determine the future fate of the second largest
electronics retailer in the U.S.
“Our proposal offers Circuit City a significant premium to
its existing stock price and creates a game-changing retail concept with a sustainable
competitive advantage,” Keyes said on Monday. “We believe the combination will
result in a compelling consumer proposition that will drive significant revenue
and margin enhancements as well as cost synergies.”