Blockbuster Threatens Hostile Takeover of Circuit City, Puzzles Industry (Updated)

April 14 – Blockbuster offered an aggressive $1.1-1.3 billion to buy the nation’s second largest electronic retailer, Circuit City. Blockbuster made the offer directly to shareholders, citing numerous attempts to contact Circuit City’s board of directors to negotiate a deal with no response over the last two months. The price works out to $6.00-$8.00 a share, a 54% premium over Circuit City shares that closed at $3.90 on Friday. Circuit City stock closed at on $4.97/share on Monday, April 14.

Blockbuster publicly announced plans to develop, what it hopes to be, a nearly $18 billion retail enterprise that will capture the growing market that converges entertainment and electronics technology. This announcement came among rumors that Blockbuster is developing a television set-top box similar to Apple TV that will allow for direct downloads of video programming for high definition televisions. Originally, comments suggested this was a “train wreck in slow motion” because Blockbuster did not have the infrastructure to develop such a product. The acquisition of Circuit City might help provide the instant market presence to make that product viable.

This move signals a drastic shift in Blockbusters attempt to regain its reputation in the media entertainment industry after companies such as Netflix chopped away Blockbuster’s in-store rental business model. This move, however, seems to be a drastic swing of the pendulum. Perhaps Blockbuster plans on adopting the Apple model of self-branded retail stores, which helped revitalize Apple’s presence in the technology market starting eight years ago.

Blockbuster Chief Executive Jeffrey Keyes stated that this move would result in “a game-changing retail concept with a sustainable competitive advantage.” It is unclear what advantage Blockbuster would bring to the table. When Apple opened retail stores several years ago, they had products with which to fill their stores. Should Microsoft, remored to have plans of opening stores to promote its portfolio of hardware and software do the same, it has a variety of software and hardware products immediately available to enhance the brand. How much could a movie rental company and an electronics store overhaul an industry?

Blockbuster must have a comprehensive plan to integrate its product and add value to Circuit City’s business model to confirm Keyes’ statements. This should include more than a television set-top box. If this is the single piece of equipment on which Blockbuster relies, why not establish an exclusive contract with either Circuit City or Best Buy to sell their set-top box? This plan would be much cheaper than a full on acquisition? For Blockbuster’s sake, there must be more in the works. Absent a full plan of integration, the end result may simply be Circuit City with a few Blockbuster products littered throughout the store. This hardly would be a “game-changing concept.” Add this to the hostile nature of the takeover, rather than a cooperative negotiation of both companies’ strengths, and the Keyes’ vision of a “sustainable competitive advantage” seems baseless at best.

Circuit City confirmed the offer here.

Update: Blockbuster shares fell just over 10 percent ($0.32/share) on Monday after the announcement. Industry analysts felt uncomfortable with the offer and felt like it was more of a financial diversion than a legitimate effort to revive the company’s performance and reputation.

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Sprint to Launch iPhone Competitor (That Can Actually Compete)

April 1 (Not an April Fool’s joke for Sprint, fortunately) - Sprint Communications recently announced at CTIA Wireless 2008 the newest release of a touch screen smart phone, rivaling Apple’s iPhone released in June of 2007. The Samsung SPH-M800, dubbed the “Samsung Instinct,” will be available in June 2008. The company noted their focus during the CTIA trade show: create a smart phone with a great user interface.

Similarities – i.e., where Sprint’s creativity team conceded: The Instinct has a large touch screen with nine “home” buttons that launch applications, similar to the iPhone. The Instinct also has a full web browser that zooms in and out with the touch of the finger. The overall build and dimensions seem to mirror the iPhone as closely as possible without triggering patent infringements. Sprint promises to provide its own media and music store on the phone for users to download music. Both devices have a built-in 2-megapixel camera.

Where it picks up votes: The Instinct will use the power of Sprint’s 3G EVDO network, one of the fastest next-generation wireless networks available. The iPhone launched last year on AT&T’s slower, 2.5G wireless network, EDGE. (Click here for discussions of a 3G iPhone due in June 2008). The Instinct also will have access to Sprint’s live TV broadcast reception capabilities. Until now, few people wanted to watch television on such small screens. This seems to be a viable solution. Additionally, the Instinct boasts Microsoft Exchange email program, which has been cited as the iPhone’s weakness. (Apple announced plans to rectify this problem). It will have the capabilities of other traditional Sprint phones, including the “Push to Talk,” complete with chirping (an asset or a liability, depending on who is asking).

The Instinct will also cost “less than the iPhone,” according to Sprint’s announcement. This likely will make the product more competitive with the now-stable $399 lowest iPhone price. Sprint failed to mention whether this phone would be able to access the $99/month “Simply Everything” Plan with unlimited voice, data, and texting. Should this be the case, it would also provide a competitive edge over AT&T, where a comparable unlimited plan starts at $120 or more.

Sprint agreed that the most important thing for this product was the user interface. It is unclear what took so long for people to realize that Apple pretty much had the market cornered on best user interface and to give their methods a real try. What is surprising is how they hired Icon Mobile, a design firm, to come up with the best and most creative user interface. They either robbed Sprint of the money it paid for a creative design or just agreed at the table they would transcribe the iPhone and try and make it better.

Most important about this release is that this phone has better features that the iPhone, and where the Instinct leaves off, it certainly supplements the smart phone experience with other applications. Verizon made a failed attempt with the Voyager to introduce a touchscreen smart phone, which hardly made a blip on the market radar. It turned out to be nothing more than the “EnV,” a phone that opened with a full keyboard and mediocre applications. Though it had web browsing capabilities, it offered little more than traditional Verizon phones. The Instinct has the potential to surpass what the iPhone started. How great the potential is, and who takes advantage of it, will be up to the consumer.

Dimensions:

2.17-inch-by-4.57-inch-by-0.49-inch

4.4-oz Instinct using its 3.1-inch

240-by-432 touch screen.

PC Magazine Reports here.

MSNBC reports here.

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“iPhone University” Pulls Classrooms Into Future

Feb. 28 - Nine months ago, two weeks prior to Apple’s release of the iPhone, high-ranking officials from various universities met with Apple executives to discuss a concept called “iPhone University.” This concept represents Apple’s second attempt to integrate its products in the education market. Apple tried this once in the mid-1990’s with getting the Apple II into elementary and high school classrooms. This time around, Apple arguably has a much stronger product base to establish itself as an effective tool in enhancing the education experience.

Apple executives envision iPhone University as an iPhone or iPod touch for every student enrolled in a college or university. When students arrive in the Fall, their iPhone or iPod is included in tuition and is ready to connect to the University’s wireless network. There, students can download class notes and presentations, check meal plan or account balances, participate in discussion groups, and even get directions to their professor’s offices. It would be easy to imagine that campus-wide emergency broadcast systems would be included in the program. Abeline Christian Univeristy (ACU), one of the five colleges adopting “iPhone University,” already uses many of these features. Other schools participating in the pilot program include Stanford, Yale, Harvard, and MIT.

“iPhone University” comes at the perfect time to integrate wi-fi and smartphone technology with the higher educaiton experience. Students more connected to the University arguably creates a sense of loyalty and personal investment into the education, including campus-wide public safety. Additionally, a versatile mobile device such as the iPhone will allow students to perform many more functions at much faster rates than before. It is impressive that one device has the potential to affect so many students on such an immediate level.

With that being said, why didn’t technology companies think of this sooner? Why did technology companies not capitalize on Apple’s failed idea from the 1990’s? Campus-wide wireless networks have been in place for the last several years. Many smart phones created before the iPhone have the capability to display graphics, e-mails, and the Internet (despite being limited). With iPhone and iPod’s popularity firmly supplanted, it will be difficult for new market entrants to stop this expansion. It had to happen sooner. “iPhone University” demonstrates foresight, as well as insight, giving Apple a second uninhibited attempt at integrating its product line in the education market.

Apple Insider reports it here. For a demonstration video, click here.

Apple releases larger-memory iphone, ipod touch

Tuesday, Feb. 5 – Apple (AAPL) announced release of a 16 gb iphone (retail $499) along with a more substantial 32 gb ipod touch (retail $499). Both products feature the same wireless and user-interface capability as previous versions.

Additionally, reports have circulated that the iphone market share for smart phones has increased to 28 percent in less than nine months since release in June 2006. Apple Insider reports here, citing British market research firm Canalys’ report dictating recent market trends in smart phone purchases.