Best Buy Reportedly Exploring RadioShack Merger
By Tom Ryan
According to a report in the New York Post, Best Buy is
reviewing a potential merger with RadioShack, which is said to be looking for
a buyer. Both Best Buy and RadioShack said they don’t respond to market
A purchase of RadioShack would boost Best Buy’s efforts to capitalize
on fast-growing demand for smartphones and other wireless gadgets. Best Buy
Mobile departments have been added inside its stores but the retailer has also
been slowly testing and rolling out stand-alone Best Buy Mobile stores over the
last three years.
“This is all about handheld devices,” one banking source told the Post of
the acquisition talks. “A whole new wave of these products are coming out
and they’re going to break the monopoly of the carriers,” whose market power
has hurt RadioShack’s profits in the past.
Best Buy ended 2009 with 74 Best Buy Mobile stores, which range from 1,000
to 1,200 square feet, and it currently has 77. Last week, it announced plans
to open 75 to 100 small stores, primarily Best Buy Mobile stores, in the U.S.
RadioShack has more than 6,000 stores. Last month, it said higher sales
of cell phones and coverage plans drove fourth-quarter profit ahead 26 percent.
In the quarter, it added T-Mobile to its list of carriers, and also said sales
were higher for Sprint Nextel cell plans and for prepaid phones and airtime.
Last October, it launched a pilot mobility kiosk program in about 100 Target
stores. And just last week, RadioShack said it will begin selling Apple iPhones
nationwide under a special pricing campaign, which will make it the second-largest
iPhone retailer after Wal-Mart.
Other options RadioShack may explore, investment bankers told the Post,
are a sale to a private-equity buyer, a massive share buyback or a strategic
acquisition of its own.
Discussion Questions: What do you think of a potential Best Buy acquisition
of RadioShack? How would you rate the mobile phone and wireless coverage opportunity
for retailers overall?
- Is the Shack throwing in the towel? – New York Post
- Buyout rumors boost RadioShack stock – Dallas Morning News
Radio Shack set to become nation’s second-largest iPhone retailer – Apple