Shares of Circuit City stocks rose dramatically this morning after it was announced that Blockbuster Inc. has offered to buy out the electronics retailer at about seven dollars per share. Curiously, Blockbuster shares have been down for the last several quarters, leaving many Wall Street analysts scratching their heads, wondering why the company would choose to go after Circuit City at this time.
Shares of Circuit City stocks were up by $1.40 per share this morning, while Blockbuster shares plummeted approximately 11%. It would seem that the word on Wall Street is that the takeover — if it happens at all — would be better for Circuit City that it would for Blockbuster.
The Dallas Business Journal is reporting that Blockbuster has offered $1 billion to buy out Circuit City. However Circuit City executives have voiced doubts about Blockbuster’s ability to raise one billion in capital or financing. The company is offering approximately seven dollars per share for a stock now trading at $3.90 per share (as of the 11th of April, 2008).
So far, Blockbuster has not revealed how they plan to raise the $1 billion offered to buy out Circuit City. Blockbuster CEO Jim Keyes said that the buyout proposal “offers Circuit City a significant premium to its existing stock price and create a game changing retail concept with a sustainable competitive advantage.”
Circuit City has been struggling over the last few quarters, reporting significant losses, and making the company an attractive prospect for “unsolicited” takeovers. If the Blockbuster deal were to be accepted, the combined company would have a street value of approximately $18 billion, and provide Blockbuster with nearly 700 electronics retail outlets in the US, and 779 and Canada.
Blockbuster, on the other hand, boasts 7,800 stores globally, with the majority of those being located in the North American market. The combination of Blockbuster’s retail video rental outlets with Circuit City’s electronics superstores would create a huge media and electronics company with nearly 10,000 retail outlets.
But it wasn’t so long ago that Blockbuster was struggling itself. The success of Netflix online video rental service caused Blockbuster to lose significant market share over the past four years. Most of those losses had been regained though, as Blockbuster introduced its own online film rental service to directly compete with Netflix, and bolster the sales of its existing retail outlets.
Buying out Circuit City for $1 billion would likely require a major restructuring of Blockbuster’s debt, and the deal would also need to be approved by the Securities and Exchange Commission. Circuit City is reportedly reviewing the offer carefully, but many analysts believe the company may have no choice other than to accept the buyout agreement.
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It’s been called the “kitchen sink strategy.” That is the name Hillary Clinton’s team have given to the strategy of “throwing everything but the kitchen sink” at Senator Barack Obama in an attempt to make his candidacy less palatable to the American public.
So far though, the “kitchen sink” hasn’t done any significant damage to the junior senator from Illinois. In fact, the latest Los Angeles Times/Bloomberg poll finds that Senator Obama is continuing to make gains against the Clinton campaign in Pennsylvania, Indiana and North Carolina.
The poll found that Clinton’s double-digit lead over Obama in Pennsylvania has all but vanished. She is now leading by just five points in Pennsylvania, and Obama has taken a sizable lead in neighboring Indiana, another critical primary state.
Voters in both Pennsylvania and Indiana have expressed disappointment and even outrage over the negative tone the Democratic presidential race has taken in the past month. And it would appear that most voters in these critical states find Hillary Clinton to be the more negative of the two candidates, and the quickest to criticize her opponent.
So it would appear that simply throwing anything and everything at Senator Obama in an attempt to diminish his popularity hasn’t actually been effective, and in fact, in Pennsylvania at least, it appears that this strategy has backfired and actually increased Senator Obama’s popularity in the Keystone State.
As the race continues, it begins to look less and less likely that Senator Clinton will be able to clinch the Democratic nomination for president. When all is said and done, the Democratic primary race is all about numbers — who can garner the most delegates and super-delegates. With Barrack Obama now firmly in the lead, it is beginning to look inevitable that he will be the Democratic nominee for president.
With the numbers stacked so firmly against Hillary Clinton, many Democratic Party “bigwigs” are beginning to call for her to drop out of the race for the good of the party. While some senators and congressmen have dared to say so publicly, there are rumors that many others are encouraging Clinton to drop out in private.
Meanwhile, the Republican presumptive nominee, John McCain, is touring the country and raising money for the upcoming general primary. The bitterly disputed contest between Clinton and Obama has actually encouraged the Republican Party, and some Republican insiders are hoping the struggle continues right up through the summer. Republicans see the negative tone of the Democratic primary as effectively “tearing the Democratic party apart.”
If Senator Clinton fails to win the Pennsylvania primary — coming up next Tuesday– by a substantial margin, there will be an enormous amount of pressure for her to drop out of the presidential race. Many concerned Democrats are hoping she will do just that.
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The Newspaper Association of America is reporting that the sharpest decline ever in newspaper advertising revenue took place in 2007. Overall ad revenues for newspapers in the United States dropped 9.4% from the previous year, a record low. At the same time, Internet advertising saw a 19% increase in revenue, with the biggest chunk of that going to Google Inc.
As online advertising continues to grow, newspapers are feeling the squeeze, and especially newspaper classified ads are showing significant losses. Overall, print classified advertising fell 17%, and a few categories, such is real estate classifieds, fell as much as 23% in 2007.
Even national brand retail advertising — traditionally a big supporter of print media — slowed significantly last year, and experts predict that the trend will continue. Forecasts by analysts expect print advertising will continue to nosedive through 2013.
While the print media in general continues to suffer decreasing revenues, more and more newspapers are expanding their online presence. Even small town newspapers in the South and Midwest are building up ever larger web sites, and becoming more savvy about marketing and promoting their online content.
At the same time, the lines are being blurred between print media and broadcast media. For example, more and more local newspapers are including broadcast quality video reports on their web sites. It’s getting to the point where there will likely be no such thing as a print media outlet, or a broadcast media outlet, or a web media outlet. They will ALL be multi-media outlets.
There’s no doubt that things are changing quickly in the newspaper business, and that, barring some extreme unforeseen circumstance, print newspapers will continue to decline into the foreseeable future. The newspaper outlets that survive this change will be the ones that accept their role as a multimedia information and advertising service, and throw off the shackles of the traditional printing press.
In some ways, this is great news. Ecologically speaking, newspapers have always been a bad idea. The amount of trees it takes to print a few hundred thousand Sunday papers is staggering, and the amount of pollution and waste involved in the process of manufacturing paper is also sizable. For these reasons, switching over to digital, or online versions of newspapers makes a whole lot of sense, both economically and ecologically.
Of course, there will be those who miss unfolding and spreading out the Sunday paper all over the living room floor, and don’t mind the inevitable ink stains all over their fingertips. But that’s progress for you — we always have to take the good with the bad.
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