Blockbuster A Year Later

A curious item came to light on Tuesday, St. Patrick’s Day of all days, to illustrate once again how times have changed.

Investor Mark Wattles, owner of Ultimate Electronics, bought 5.7 percent of Blockbuster, the video-rental chain. In a filing, Wattles said he is confident that Blockbuster will be able to avoid a rumored bankruptcy.

Then on Thursday Blockbuster reported a net loss of $374.1 million for its fiscal year ended January 4, 2009, triple the adjusted net loss of $124.3 million for the previous fiscal year. And for its fiscal fourth quarter Blockbuster posted a $359.8 million net loss, compared with adjusted net income of $57.8 million for the prior year’s fourth quarter.

James W. Keyes, Blockbuster’s CEO, said it has reached agreements with lenders to extend its credit lines through September 30, 2010, and the chain will also look at cost reductions, including compensation and lease costs.

This is a far cry from a year ago when Blockbuster offered a $1 billion cash offer for Circuit City, backing then Circuit insurgent stockholder Wattles who wanted a new management team for the now-departed CE chain.

And, oh, by the way, remember that billionaire superstar investor and majority shareholder in Blockbuster, Carl Icahn, backed the deal.

Blockbuster’s Keyes said yesterday that it is looking to diversify “especially through digital alliances that leverage our brand equity.” That’s what they wanted to achieve via the Circuit City deal, or so they said, last year.

One has to wonder what would have happened to Blockbuster, its stockholders and CE retailing in general over the past six months if the video-rental chain did take over Circuit City just as the recession hit with full force last fall.

Sometimes the best deals are the ones you don’t make.