Nortel Networks Screwed, Again

When people talk about the biggest corporate disasters of all time, the same names come up: WorldComm, Enron, and Nortel Networks.

Unlike the former companies, Nortel has been hanging in for years, like some sort of slow-motion train wreck, bouncing from major crisis to minor, and never regaining it's lost status as the darling of Canadian hi-tech companies.

Yahoo!: Telecom giant Nortel files for bankruptcy protection, victim of credit crunch

Telecom equipment giant Nortel Networks Corp. (TSX:NT) and several of its units have filed for bankruptcy protection from creditors, a victim of the global credit crunch that has devastated the Canadian company's markets.
Once the kingpin of Canadian technology and one of this country's most widely held stocks, Nortel and several of its units filed for Chapter 11 bankruptcy protection in the United States and were set to do the same thing in Canada under the federal bankruptcy protection law.
The high-tech company has faced a variety of troubles since the telecom bubble burst eight years ago, including accounting problems that devastated its stock and led to criminal charges against former executives and most recently the sharp slump in the economy.

This seems like a good time to dredge up an old joke that's been trotted out via email every time Nortel has been on the ropes (figures are unaudited):

If you had bought $1000.00 worth of Nortel stock one year ago, it would now be worth $49.00.
With Enron, you would have $16.50 of the original $1,000.00.
With WorldCom, you would have less than $5.00 left.
If you had bought $1,000.00 worth of Budweiser (the beer, not the stock) one year ago, drank all the beer, then turned in the cans for the 10 cent deposit, you would have $214.00.
Based on the above, our current investment advice is to drink heavily and recycle.

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a&b sound Files For Bankruptcy Protection Again

It's been a tough year for CE retail. After months of mysterious, inexplicable behavior by the storied Western Canadian retail chain, and plenty of rumors, it's finally official:

Marketnews: a&b sound Files for Bankruptcy

Struggling Western Canadian retailer a&b sound has officially announced its filing for bankruptcy protection.
A note written by MacKay & Company Ltd., trustee in bankruptcy that appears on the company Website (www.absound.ca) indicates that while the organization attempted to turn the company’s business around, it was
unable to do so.

One of my correspondents just asked me in an email, if I think that they’re finished for good this time. Who knows, but this time there’s not a whole lot left for someone to buy out of receivership. When Steiner originally put a&b sound into CCAA in 2005, they had 22 stores. This time, new owner Seanix and Paul Girard have nada. Indeed, even the value of the name brand "a&b sound" is pretty much gone.

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Circuit City Failure Wounds Landlords

Call it the domino effect. As Retailer Daily reports, it's going to be a Blue Christmas for retail landlords.

Retailer Daily: Circuit City Bankruptcy Sends Landlords Reeling

The market reacted harshly to the news: Shares of Developers Diversified Realty, which has 50 Circuit City stores and derives 1.7% of its annual revenue from them, fell 24.6% on Monday. Real estate investment trusts (REIT) Kimco Realty and General Growth Properties also declined 9.6% and 34% respectively. (General Growth dropped another 68% in Tuesday trading.)Among the other REITs that lost value are Simon Property Group and Vornado Realty Corp.

Don't forget that REIT and other property stocks have already been clobbered this past year, so it's not as if there was oodles of market cap that could be erased and shrugged off with impunity.

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Samsung's Circuit City Losses Covered? Hard To Believe

According to The Korea Times, CE giant Samsung claims that the entire $116 million that failing retailer Circuit City owes them is insured against default.

The Korea Times: Samsung May Pull Out of Circuit City

Samsung said all of its unpaid bills from Circuit City are insured and therefore Samsung won't suffer any losses.

If it's true that all of Samsung's $116 million in outstanding receivables with CC is covered by default insurance, then they've either been paying super-stiff premiums, or they've got an underwriter who was totally oblivious to the rash of bad news CC's had this past year.

*Hat tip to the excellent news site Retailer Daily for first linking to the Korea Times story.

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Circuit City Creditor List Published

This just handed to me by one of my contacts: the filing that lists all of beleagured failing CE retailer Circuit City's creditors.

Circuit City Creditors

Get your own at Scribd or explore others:

The stuff you really want to know starts on page 16. But for those of you who are impatient, here's the list of Circuit City's Top Five Creditors:

1. 
   
   Hewlett Packard $118,797,964


2. 
   
   Samsung $115,925,716


3. 
   
   Sony $60,009,803


4. 
   
   Zenith $41,162,162


5. 
   
   Toshiba $17,919,395

Keen CE retail hawks will notice that Toshiba is out less than a third of what CC owes Sony, and a tenth of what HP's holding the bag for. That likely speaks well to Toshiba's risk management, since by all accounts they turned off the tap for Circuit City six months ago, after Blockbuster withdrew their takeover bid.

For that matter, look how comparatively little many CE brands were exposed. Sharp is only owed $7 million, Onkyo $4.2 million, and Klipsch $3.5 million. Peanuts, really. It's a Well Known Fact that suppliers had been tightening the screws for some time, which ultimately contributed to hastening CC's demise.

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Circuit City Files Chapter 11

And that, as they say, is that.

TWICE: Circuit City Files Chapter 11

Richmond, Va. — Circuit City has filed for Chapter 11 bankruptcy protection and plans to continue operating the business with the help of a $1.1 billion debtor-in-possession revolving credit facility from its current lenders.
The company’s Canadian operations will also seek bankruptcy protection under the Creditors Arrangement Act in Canada (CCAA).

Early in 2007, when there was still enormous amounts of stupid private equity money sloshing around the globe, CC's board rebuffed a takeover offer of $20 a share. It would be unkind to say that was foolish in hindsight. Let's be honest, everything Circuit City's done for the past five years has been foolish in hindsight.

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The Sharper Image's New Owners Make Hay While The Sun Sets

TWICE: New Sharper Image Owners Shut Stores

The investment consortium that acquired The Sharper Image last week for $49 million in a bankruptcy auction said it will close the chain’s remaining 86 stores and will leverage the brand under a new licensing strategy.
The partners, which include liquidator Gordon Brothers, private equity firms Hilco Consumer Capital and Windsong Brands, and investment group Bluestar Alliance, said they have developed a global licensing strategy for wholesale, direct-to-retail, e-commerce and catalog businesses that will “exploit The Sharper Image’s heritage of quality, excitement, innovation and fun.”

It would ill-behoove the proud new owners of The Sharper Image to delay too long in seeking to capitalize on the value of their acquisition's brand.

To be blunt, beyond whatever value their inclusion in the SkyMall catalogue carries, The Sharper Image's brand value can be likened to the sand running out of an hourglass. I am keen to see what they do to revive a brand that I only associate with ludicrous kitsch that runs on AA batteries, and outdated 80's chic.

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