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Is Circuit City dead?

Don Reisinger thinks Circuit City is dead in the water, but its board disagrees. What do you think?

After visiting both Best Buy and Circuit City this weekend, I was floored by the incredible differences between both stores: Best Buy was packed, Circuit City was begging people to come in; Best Buy was making sales every few seconds, Circuit City had one register open and no one in line. Thinking this must have been an anomaly, I did some research on both of the companies' financials and came to a staggering conclusion: Circuit City is dead in the water.

Sure, some may say that my assertion that Circuit City is dead may be a bit premature considering the fact the company has enjoyed growing revenue with last year's figure amounting to almost $12.5 billion, but for the first time in three years, Circuit City incurred a loss of $8 million -- a sharp contrast from its 2006 profit of $139 million.

But Circuit City's problems go far beyond its financials. Much like CompUSA, it's a company that is plagued with poor leadership and a host of issues that its management simply can't fix. And to make matters worse, the same two forces that killed CompUSA -- the online world and Best Buy -- have Circuit City in their sights now and things don't look good.

Trust me -- it's all over for Circuit City.

If you still don't believe me, let's simply compare numbers. As it stands, Best Buy's stock price is hovering at about $40-$42, while Circuit City's is just $4 per share. As I mentioned, Circuit City lost about $8 million in 2007 and Best Buy incurred a profit of $1.377 billion. Best Buy increased its cash coffers by about $457 million, allowing it to invest in even more profitable enterprises, while Circuit City's was reduced by $174 million.

As if that wasn't enough, Circuit City's market cap is just $680 million. Compare that to Best Buy's $17.26 billion and you quickly learn everything you need to know about two of the largest big-box electronics retailers in the world.

But it gets worse. In its latest quarter alone, Circuit City incurred a loss of $207 million with revenue of just $3 billion. On the other hand, Best Buy enjoyed revenue of about $10 billion with a net income of $228 million.

Taking all of those figures together, it's not difficult to see that the end is near for Circuit City. But how close is it? According to the company's board, it will continue to do all it can to keep it afloat, but I simply don't see how that's possible. To make matters worse, it's not even a target for acquisition because Best Buy stores can usually be found anywhere a Circuit City store is and very few companies are willing to get in on the big-box electronics retail game anymore.

In essence, Circuit City is on its own.

And although some may say that it'll be a sad day when Circuit City finally follows CompUSA down the path of obscurity, I don't agree. To be quite honest, Circuit City is nothing more than a major retailer with only some of the products you're looking for at prices that aren't nearly as competitive as those online or even at Best Buy. In other words, I don't see any value in shopping at Circuit City.

And unfortunately for Circuit City, the majority of the population finds no value in shopping there either.

But alas, Circuit City may be around for longer than you think. As it stands, it still has a relatively stable financial structure and has been successful in keeping debt at a manageable level. That said, it's losing cash at an astounding rate and its stock price has no chance of rising to any level that would help it turn things around. And if it's losing money at a such a fast rate and it can't raise cash through stock ventures, it has but one option to turn things around -- borrow.

Circuit City is nothing more than a floundering enterprise that is trying to do all it can to stay relevant. And while I believe the chances of that happening are slim, the company still hangs on to a faulty belief that it has a chance at becoming a major player in the electronics retail industry.

I can't blame the executives for trying, but trust me, it's over.