Evaluation of Blockbuster Inc. (Symb: Bloaq)

Evaluation of Blockbuster Inc. (SYMB:BLOAQ)

Evaluation of Blockbuster Inc. (SYMB:BLOAQ)

1.0 Introduction

Blockbuster Inc., a darling of the late 1980’s and early 1990’s and a favorite pick among analysts across the spectrum of investment companies is facing a crisis. The company was listed in the NYSE under the symbol BBI until 2009 when the share price no longer met the requirements of NYSE listing and was relegated to pink sheet and now trades under the symbol BLOAQ and currently trading around $0.05 per share compared to nearly $30.00 in early 2002. Blockbuster is currently operating under Chapter 11 Bankruptcy protection.

1.1 About The Company

Blockbuster began operations in 1985 with one store out of Texas, in the single idea that that people didn’t want to watch a movie over a over, but just a handful of times. At around $70 per movie to purchase, the idea of rental caught on quickly. That single idea grew Blockbuster to a chain of over 9,000 stores in 25 countries in less than 2 decades. Today, operating under bankruptcy protection it maintains around 4,000 stores in 17 countries and competes in the traditional brick and mortar, online, over the mail and kiosk movie rental business. Future restructuring plan includes reduction of another 500-1,000 stores world-wide.

Blockbuster was a traditional brick-and-mortar stores designed to serve a particular demographic. With information fed back from their integrated point-of-sale system into a centralize hub of information in their headquarters, the company was able to efficiently stock inventory in each of their locations.

Company was acquired by Viacom in 1994 and by 2004 the battered company was spun out as an independent company and began its gradual degradation. At its height in 2004, the company had a 40% market share in video rentals with rental revenue of $8 billion and double that amount in video sales. Today, the company operates and on-line video rental...