Blockbuster Wants Circuit City?
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Ok, I’m no genius and certainly not an expert on all things business, but I have zero idea what the heck is going on with Blockbuster actively seeking to buy Circuit City. To me, and it seems a lot of the research analysts in the Reuters piece, it seems like one company that’s in serious trouble trying to buy another company in deeper trouble to save itself. It makes zero sense to combine these two businesses that very likely won’t be around in 20 years, unless it’s a last ditch effort by Blockbuster to stay in business.
Blockbuster is touting the synergies of the deal by saying that back office functions and real estate are two key areas that both companies could save money. A combined Blockbuster City could sell the iPods that can play movies that you rent from their location is the rationale, I guess. I don’t see how the two companies together would do any better against Best Buy than they are doing separately. Best Buy has simply eaten Circuit City’s lunch over and over again and I see little way for that to change anytime in the near future.
If I were a Circuit City shareholder, I would vote for the deal in a heartbeat (and the market agrees sending the stock up 33% as of this writing). If I were a Blockbuster shareholder, I would wonder WTF is going on (and the market also agrees sending the stock down 11% as of this writing).
Can anyone clue me in here?