Looks like we may have Circuit City to kick around for a while longer!
Faithful readers of CtW Connect know that Circuit City is one of our favorite examples of how decisions by management to throw workers overboard can backfire on them. The Story So Far, from my last post on the subject:
If you’ve been following CtW Connect since the beginning, you’ll remember how a little more than a year ago they made the stunningly boneheaded decision to fire 3,400 of their best workers in order to replace them with cheaper labor. And how that predictably led to a sales slump so dramatic that Fortune magazine included the decision in its list of the 101 dumbest business moves of 2007. And how that led the company to try to reinvent itself by staffing its sales floors with teenagers clad head to toe in black, spouting mantras like “keep it real” — which, also predictably, didn’t exactly turn things around.
Well, now it looks like CC management have (after driving their stock down from $20/share to five and a quarter) decided to throw in the towel — word is that they have retained Goldman Sachs to broker a sale of the company to some third party, most likely Blockbuster Video.
As we noted then, Blockbuster isn’t exactly doing great themselves these days, which made them an unusual “white knight” to ride in and save CC.
Turns out that “unusual” might not have been a strong enough word — yesterday, Blockbuster announced that they were waving off the merger:
“Based on market conditions and the completion of our initial due diligence process, we have determined that it is not in the best interest of Blockbuster’s shareholders to proceed with an acquisition of Circuit City,” said Jim Keyes, Blockbuster Chairman and CEO. “We continue to believe in the strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand. We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment.”
Maybe they were afraid that their people would catch Stupid Disease if they had to work closely with Circuit City’s managers? Who knows. But it looks like the deal that was supposed to save CC from itself is no more.
Just think, back in December I called “FAIL” on CC because their stock had dropped to $6.69/share. Well, today those same shares opened at a whopping $2.21 — and after an hour of trading they’d dropped to $2.11.
Losing an additional 67% of your value after reaching the “FAIL” level is pretty remarkable. We’ve clearly moved from regular “FAIL” territory to “EPIC FAIL” here, so I’ve updated our stock chart graphic to reflect that.
It takes a special kind of leader to achieve results like this — which is probably why Wall Street Journal columnist Herb Greenberg named Circuit City’s CEO, Philip Schoonover, as the most likely candidate for Worst CEO of 2008 back in January.
Somebody call Herb and tell him it looks like he’s won his bet!
UPDATE (1PM): Don Reisinger at CNet says “Circuit City is doomed”.
