Radioshack? Are they still in business? I mean, I see stores once in a while but what exactly are they doing there? It's hard not to think of Radioshack as a relic of long gone era, like Blockbuster Video or Borders or, the still alive-and-kicking, Barnes & Noble (BKS) bookstores. But despite the inevitable, Radioshack was hell-bent on a comeback this year, a comeback that hasn't come to fruition the way management had hoped.
And the stock, despite some fluctuation, which could have yielded significant returns for savvy investors, is, like the company, on the fast-track to extinction. But Radioshack and its investors refuse to go quietly into that good night, which was dramatically illustrated by Tuesday's whopping 20% increase in share price on over four times the average trading volume. The stock closed at 86 cents a share, and has been trading in a 52-week range of 55 cents and $4.36 per share.
But investors shouldn't get too excited. They didn't invent a time machine to return to the 1990s when Radioshack was a king, brick-and-mortar stores ruled the day, and cyberspace consisted mainly of teenagers looking to hook-up on AOL chat rooms. No, the reason the stock skyrocketed Tuesday was due to a desperate attempt by Standard General LP, one of RadioShack's largest shareholders, to negotiate a possible rescue package with investors to stave off bankruptcy filingm according to a Bloomberg report. The hedge fund seeks to boost RadioShack's cash through the issuance of debt equity to avoid a chapter 11 filing.
Looking at every possible financial metric, Radioshack will soon join other former retail giants in the graveyard of the new economy. Cash flow, net income, debt-to-equity ratio, return on equity--pick your favorite financial indicator of a company's health and you'll see a very sick company indeed. A company once known as Radioshack. Then again, did you really expect an electronics store to thrive in the 21st Century when it has the word "radio" in the name? I could see a "Padshack" or a "tabletshack" maybe weathering the storm continually growing stronger in cyberspace, but the death of "radio" shack should be less than surprising.
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