http://www.forbes.com/technology/feeds/afx/2006/02/20/afx2539792.html
Their CEO just resigned because he falsified his education. The sales are in the tank.
Do you think they are good takeover company ?
Forbes.com article:
CHICAGO (AFX) - RadioShack Corp., reeling from a plunge in fourth-quarter earnings and a management credibility scandal, said Monday that CEO David J. Edmonson has resigned.
In a conference call Friday, Edmondson apologized to investors and analysts both for the company's poor performance and for lying about his educational background.
On Friday, the company posted a 62% drop in fourth-quarter net income and announced a sweeping restructuring plan that could include closing up to 10% of stores in an effort to counteract its inability to tune in quickly enough to some of the technological advances in personal electronics.
Executive Chairman Leonard Roberts said in a statement Monday that Edmondson's resignation 'resulted from a series of mutual discussions about what is best for RadioShack and all of its constituencies.'
'This situation is especially painful,' Roberts said, 'because Dave is a talented and dedicated individual who has made many contributions to the company. Dave recognized that major distractions for the company could negatively impact its efforts to implement the company's turnaround strategy. Undoubtedly, this was a tough decision.'
The board name Claire Babrowski, who most recently served as executive vice president and chief operating officer, to president and acting CEO. She will retain the title of COO.
Edmondson said in a separate statement Monday that new leadership was needed so the company's turnaround plan would have the best possible chance to succeed.
The revamp announced Friday prompted mixed responses from analysts, who indicated the plan might be successful but, at that time, they doubted Edmondon's ability to pull it off after it became clear he had lied about his education.
Credit Suisse analyst Gary Balter said the 62% plunge in fourth-quarter earnings and a slowdown in cash flow 'point to a company in a virtual state of collapse,' according to a research report.
With the share price dropping into the teens, others wonder if private-equity investors might swoop in before any of the foundation for the new strategy is put in place.
'RadioShack's eroding stock will likely reignite buyout speculation,' Jefferies & Co. analyst Donald Trott told his clients. Should that happen, many investors might be able to recover some of the losses from the 42% decline in the stock's value in the past year.
Rough patches
To long-time investors and observers, it came as no surprise that the electronics retailer slogged through the crucial holiday-selling period with too many products that shoppers didn't want and not enough that they did.
Since 2000 RadioShack has seen too many customers who simply couldn't find what they wanted leave, never to come back. Its efforts to focus mainly on selling high-margin products failed at a time when costs on hot-sellers like MP3s and digital cameras were falling. And its small-store approach, intended at differentiating itself from the big-box boys like Best Buy and Circuit City stores, gave it precious little room for popular inventory and, in some cases, customers.
RadioShack stores couldn't feature, for example, plasma TVs -- the hottest electronics item for more than two years now. And its inventory on digital music merchandise was so limited that company executives said most of it sold before it even reached the shelves.
The result: Since 2000, sales have risen, on average, 1% a year, while earnings have dropped 28%; margins have eroded terribly -- 8.2 percentage points in the fourth quarter alone; productivity is at a standstill and the value of the stock has shrunk by 66%. A look at the six-year history of annual ratios is depressing, too.
Friday's blow to investors had been flagged with at least two warnings ahead of the results. But such a steep earnings dive was far from expected.
RadioShack didn't provide an outlook, saying there's too much uncertainty given its turnaround strategy. The plan, which could reduce its store count by as much as 10%, could take as long as three years.
The results came amid a controversy over Edmondson's veracity. He apologized to investors Friday not only for the performance of the company but for having lied about his educational background. Last week, the company said the board would hire a law firm to investigate the matter.
'2005 was a very, very troubled year,' Edmondson told analysts Friday. 'We must move in a more bold, aggressive manner and with a greater degree of urgency.'
Too many wires
What went wrong over the holiday season? RadioShack had neatly pegged to its store walls rows of stereo wire, batteries and cell-phone headsets -- all high-margin products, but slow selling ones. Missing were enough iPods and satellite radios to feed the customers' appetite.
As a result, the company was forced to swallow a $62 million inventory writedown in the quarter.
Another painful blow in the quarter came in wireless sales of cell phones and calling plans -- which make up a full one-third of RadioShack's sales. The company blamed a huge loss in sales at its core stores to its decision to end a 10-year pact with Verizon Wireless, opting for a new one with Cingular. It expanded one long-term deal with Sprint.
It was a transition that Edmondson called a 'major business risk.'
Core to the restructuring plan is a strategic shift in inventory, reflecting the realization that customers who want low-margin products might possibly buy more than just those. At the least: there is customer traffic.
Also included in the plan is an emphasis -- finally, some analysts have said -- on such non-core sales routes as the Web site and international growth in Mexico and Canada.
The Internet site, for example, now offers only 20,000 units and contributes a measly 1% to sales.
But will this latest plan to bolster sales and profit work? Known as a company that has long over-promised and under-delivered, analysts are skeptical.
'RadioShack has failed to deliver on several of its objective in recent years and we are not anticipating any benefits until 2007,' Jeffries' analyst Trott said.
Benefits in 2007 might even be a tad optimistic. RadioShack said the new plan could take 18 months, but it might be 36 months, to close as many as 700 stores and two distribution centers and to clear out at least half of the inventory stocked on shelves and counters to make room for products people want.
RadioShack executives said they are shaking out the 'problem' stores and are taking a save-the-marketshare tactic that should have been a no-brainer two, three and four years ago. They will warn customers of a store closing about 45 days in advance with the location of another RadioShack store near by.
But if executives are effective at choosing the right brands and items, then the choppiness that has characterized the past six years of sales and earnings will get balance and even maintain it, they believe.
'One of the key components of sustainability is having enough of the right products to sell,' Babrowski told analysts during Friday's conference. 'That starts with making room in our stores for products and customers.'
'In 2006, we're going to buy with conviction and devote the store space to those products in a contemporary way,' she said, adding that an overhaul of the mall-based units is in store.
Though repair services have proven to be a big boon to Best Buy and its Geek Squad, they are but a blip to RadioShack, which seems to have missed that boat. Without offering details, Babrowski said the company did achieve its 2005 sales goals for repair services, 'but we're not at all bullish on it in the near term.
'We ramped up for growth, which didn't happen,' she added.
What has worked and is going to get more attention are the wireless kiosks. So much so that RadioShack said it will add another 200 this year for a total of 1,000. In fact, Edmondson specifically referred to the importance of kiosks, a boatload of which are at Sam's Club stores, as key to RadioShack's future.
RBC Capital Markets analyst Scott Ciccarelli urged his clients to wait it out the upheaval.
'In addition to likely potential changes at the executive level -- recent issues related to CEO credibility -- we suspect this confluence of factors will continue to weigh on RadioShack shares and there will be continued hesitation with the stock until there is more clarity on some of these issues,' he said last week.
He's going to 'remain on the sidelines given the massive changes the company has on its plate at this time.'
From Trott's perspective -- and he's urging clients to hold their shares of the stock -- the only catalyst he thinks will drive the stock in the near-term is a run at it by private-equity investors. That has been bandied about for at least two years.
Their CEO just resigned because he falsified his education. The sales are in the tank.
Do you think they are good takeover company ?
Forbes.com article:
CHICAGO (AFX) - RadioShack Corp., reeling from a plunge in fourth-quarter earnings and a management credibility scandal, said Monday that CEO David J. Edmonson has resigned.
In a conference call Friday, Edmondson apologized to investors and analysts both for the company's poor performance and for lying about his educational background.
On Friday, the company posted a 62% drop in fourth-quarter net income and announced a sweeping restructuring plan that could include closing up to 10% of stores in an effort to counteract its inability to tune in quickly enough to some of the technological advances in personal electronics.
Executive Chairman Leonard Roberts said in a statement Monday that Edmondson's resignation 'resulted from a series of mutual discussions about what is best for RadioShack and all of its constituencies.'
'This situation is especially painful,' Roberts said, 'because Dave is a talented and dedicated individual who has made many contributions to the company. Dave recognized that major distractions for the company could negatively impact its efforts to implement the company's turnaround strategy. Undoubtedly, this was a tough decision.'
The board name Claire Babrowski, who most recently served as executive vice president and chief operating officer, to president and acting CEO. She will retain the title of COO.
Edmondson said in a separate statement Monday that new leadership was needed so the company's turnaround plan would have the best possible chance to succeed.
The revamp announced Friday prompted mixed responses from analysts, who indicated the plan might be successful but, at that time, they doubted Edmondon's ability to pull it off after it became clear he had lied about his education.
Credit Suisse analyst Gary Balter said the 62% plunge in fourth-quarter earnings and a slowdown in cash flow 'point to a company in a virtual state of collapse,' according to a research report.
With the share price dropping into the teens, others wonder if private-equity investors might swoop in before any of the foundation for the new strategy is put in place.
'RadioShack's eroding stock will likely reignite buyout speculation,' Jefferies & Co. analyst Donald Trott told his clients. Should that happen, many investors might be able to recover some of the losses from the 42% decline in the stock's value in the past year.
Rough patches
To long-time investors and observers, it came as no surprise that the electronics retailer slogged through the crucial holiday-selling period with too many products that shoppers didn't want and not enough that they did.
Since 2000 RadioShack has seen too many customers who simply couldn't find what they wanted leave, never to come back. Its efforts to focus mainly on selling high-margin products failed at a time when costs on hot-sellers like MP3s and digital cameras were falling. And its small-store approach, intended at differentiating itself from the big-box boys like Best Buy and Circuit City stores, gave it precious little room for popular inventory and, in some cases, customers.
RadioShack stores couldn't feature, for example, plasma TVs -- the hottest electronics item for more than two years now. And its inventory on digital music merchandise was so limited that company executives said most of it sold before it even reached the shelves.
The result: Since 2000, sales have risen, on average, 1% a year, while earnings have dropped 28%; margins have eroded terribly -- 8.2 percentage points in the fourth quarter alone; productivity is at a standstill and the value of the stock has shrunk by 66%. A look at the six-year history of annual ratios is depressing, too.
Friday's blow to investors had been flagged with at least two warnings ahead of the results. But such a steep earnings dive was far from expected.
RadioShack didn't provide an outlook, saying there's too much uncertainty given its turnaround strategy. The plan, which could reduce its store count by as much as 10%, could take as long as three years.
The results came amid a controversy over Edmondson's veracity. He apologized to investors Friday not only for the performance of the company but for having lied about his educational background. Last week, the company said the board would hire a law firm to investigate the matter.
'2005 was a very, very troubled year,' Edmondson told analysts Friday. 'We must move in a more bold, aggressive manner and with a greater degree of urgency.'
Too many wires
What went wrong over the holiday season? RadioShack had neatly pegged to its store walls rows of stereo wire, batteries and cell-phone headsets -- all high-margin products, but slow selling ones. Missing were enough iPods and satellite radios to feed the customers' appetite.
As a result, the company was forced to swallow a $62 million inventory writedown in the quarter.
Another painful blow in the quarter came in wireless sales of cell phones and calling plans -- which make up a full one-third of RadioShack's sales. The company blamed a huge loss in sales at its core stores to its decision to end a 10-year pact with Verizon Wireless, opting for a new one with Cingular. It expanded one long-term deal with Sprint.
It was a transition that Edmondson called a 'major business risk.'
Core to the restructuring plan is a strategic shift in inventory, reflecting the realization that customers who want low-margin products might possibly buy more than just those. At the least: there is customer traffic.
Also included in the plan is an emphasis -- finally, some analysts have said -- on such non-core sales routes as the Web site and international growth in Mexico and Canada.
The Internet site, for example, now offers only 20,000 units and contributes a measly 1% to sales.
But will this latest plan to bolster sales and profit work? Known as a company that has long over-promised and under-delivered, analysts are skeptical.
'RadioShack has failed to deliver on several of its objective in recent years and we are not anticipating any benefits until 2007,' Jeffries' analyst Trott said.
Benefits in 2007 might even be a tad optimistic. RadioShack said the new plan could take 18 months, but it might be 36 months, to close as many as 700 stores and two distribution centers and to clear out at least half of the inventory stocked on shelves and counters to make room for products people want.
RadioShack executives said they are shaking out the 'problem' stores and are taking a save-the-marketshare tactic that should have been a no-brainer two, three and four years ago. They will warn customers of a store closing about 45 days in advance with the location of another RadioShack store near by.
But if executives are effective at choosing the right brands and items, then the choppiness that has characterized the past six years of sales and earnings will get balance and even maintain it, they believe.
'One of the key components of sustainability is having enough of the right products to sell,' Babrowski told analysts during Friday's conference. 'That starts with making room in our stores for products and customers.'
'In 2006, we're going to buy with conviction and devote the store space to those products in a contemporary way,' she said, adding that an overhaul of the mall-based units is in store.
Though repair services have proven to be a big boon to Best Buy and its Geek Squad, they are but a blip to RadioShack, which seems to have missed that boat. Without offering details, Babrowski said the company did achieve its 2005 sales goals for repair services, 'but we're not at all bullish on it in the near term.
'We ramped up for growth, which didn't happen,' she added.
What has worked and is going to get more attention are the wireless kiosks. So much so that RadioShack said it will add another 200 this year for a total of 1,000. In fact, Edmondson specifically referred to the importance of kiosks, a boatload of which are at Sam's Club stores, as key to RadioShack's future.
RBC Capital Markets analyst Scott Ciccarelli urged his clients to wait it out the upheaval.
'In addition to likely potential changes at the executive level -- recent issues related to CEO credibility -- we suspect this confluence of factors will continue to weigh on RadioShack shares and there will be continued hesitation with the stock until there is more clarity on some of these issues,' he said last week.
He's going to 'remain on the sidelines given the massive changes the company has on its plate at this time.'
From Trott's perspective -- and he's urging clients to hold their shares of the stock -- the only catalyst he thinks will drive the stock in the near-term is a run at it by private-equity investors. That has been bandied about for at least two years.
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