Ticker Shock: Circuit City, Yahoo, GM Fight for Survival
Monday's top stories and stocks with potential to move.
I can't lie: I had a bad feeling when I flicked on my screen at about 5:30 or 6 this morning.
But my worries were apparently for naught: Asia was in the green, Europe was in the green, and the futures were up. Whew.
We also started off on a positive note: The Dow was up triple digits soon after the open.
General Motors (GM)
Word has it that GM and Cerberus are talking turkey with regard to Chrysler. The 2 parties (GM and Chrysler) might want to hook up in short order, possibly even before the election.
My take: Again, I'm not sure that combining forces will do enough, and quickly enough, to cut costs. It could also, I think, end up being a major headache, as GM seems to have more than enough troubles as a standalone. So even at $6 and change, I'm not a bottom fisher here. I need a little more convincing that a combination would be a good move.
Circuit City (CC)
The well-known electronics retailer has been struggling lately, to say the least. Its sub-$1 share price pretty much says it all. (The stock has taken a beating since Blockbuster (BBI) withdrew its bid to acquire the firm for at least $6 a share).
The news this morning is that the company may be forced to close 150 of its locations and lay off thousands of its workers, though no exact numbers were mentioned. Just a few weeks ago, the company hired Skadden, Arps, Slate, Meagher & Flom, the law firm that handled the Chapter 11 reorganization of Kmart, as its bankruptcy counsel.
To be clear, I think that keeping a close eye on costs is something that Circuit City needs to do. But from my experience, this kind of action often has its own upfront costs (closure costs, severance costs, etc.), so I'm not jumping for joy just yet.
Incidentally, and not surprisingly, I view this as potentially good news for Best Buy (BBY), Circuit City's arch-rival. Long story short, I wouldn't even think of bottom-fishing Circuit City at this point. But I do like Best Buy for the long haul.
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