Circuit City
(NYSE:CC) shares jumped $0.16, or 1.03%, to $15.69 today after an
Associated Press story suggested that the company may need a buyout or
major management shakeup to recover from recent profit warnings and
increasingly intense competition.
Circuit City rejected a $17
per share buyout offer in 2005, instead opting for a turnaround effort
that was quenched by a price war on flat screen televisions last year.
The price war caused the company to replace 3,400 workers with cheaper
labor that ended up hurting sales. Overall, the situation for Circuit
City isn't looking all to good with one of its competitors even
considering bankruptcy.
So, what are the chances of a buyout?
Well, the fact that the company has received a bid in the past for an
amount greater than the current market price suggests that it is could
be a possibility. Moreover, while some other companies may be cheaper,
nobody can match Circuit City's status as the second largest
electronics retailer in the United States. Combined with the financial
troubles that the company is in, it would not be too hard to fathom a
buyout scenario. This makes CC a stock
worth watching!
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