Friday, February 17, 2006

Is RadioShack Losing Ground?

Do you honestly expect a company like RadioShack (RSH) to survive under the intense heat Best Buy (BBY) and Circuit City (CC) throw off?

Radio Shack's contract with Verizon (VZ) is about to finish, so kiss that revenue stream goodbye.

Even with Cingular stepping up to the plate (to supplant VZ), the bottom line is that the majority of RadioShack's businesses are watching their revenue crumble.

RadioShack reports later today -- management better blow the roof off with positivity surrounding its wireless handset sales, currently their #1 revenue driver:
We still believe that RadioShack's accessory and power business, which we view as unique, has the makings of a narrow economic moat. However, with that business representing a shrinking portion of overall revenue (about 27% of 2004 revenue compared with 29% in 2002), and with revenue for this segment essentially flat over the past two years, we classify RadioShack as a no-moat company. We don't believe the firm has a sustainable competitive advantage in the home electronics or wireless phone businesses. (Morningstar)
RadioShack is increasingly depending on one revenue path. In the home electronics segment, that's a recipe for disaster, and the stock price has certainly reflected it.

Current CEO Dave Edmondson hasn't helped one bit.

Since he took over last year, RSH's earnings have tumbled, profit margins have dipped, and shares have taken a 17% haircut -- very impressive, Dave.

For the love of God, someone please put this has-been out of its misery.

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