Friday, January 16, 2009

I Came Here Not To Praise Circuit City, But To Bury It

Clusterstock's Henry Blodget takes a two-part swipe at both Circuit City's inept management, and his favorite whipping boy, Treasury Secretary Paulson:

What was the disastrous business mistake that will now cost Circuit City stockholders and bondholders everything and 35,000 employees their jobs?
Not buying enough crap assets to make Hank Paulson come running with his arms full of money.

As droll as that was, if I can be semi-serious for a minute, there were two key factors that contributed to CC's demise.

First, their senior management were absolutely useless. Even if you don't know the first thing about business, you'd really have to exert yourself to have less strategic retail savvy than they.

More importantly, the global credit crunch meant that the supply of eager beaver Private Equity companies with access to shitloads of easy money dried up. Less than two years ago, CC's board rebuffed a $20/share takeover offer (further proof of my first point, above), a high water mark that they would never again come close to.

Without crazed PE money sloshing around the globe, the number of white knights who were capable of turning the company around was, well, zero.

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