This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Blockbuster's Future Looks Dicey

Blockbuster (BBI) won its freedom Tuesday, but the only people cheering were the Viacom (VIA.B) investors bidding the troubled movie-rental chain adieu.

Viacom ended weeks of speculation by saying it would spin Blockbuster off to shareholders. The New York media conglomerate, which owns 81% of the Dallas movie company, made the move after it wasn't able to sell the chain to private investors.

Now the spotlight turns to Blockbuster, which faces rising pressure to remake itself in a shifting movie-industry landscape. The company, under competitive fire from DVD sellers and rival rental services alike, rolled out a plan to spend $70 million to $90 million preparing to offer new services.

Blockbuster said it would spend the money to develop an online DVD subscription business, a movie-and-game-trading service, and game stations in its stores.

"We believe Blockbuster will compete very effectively as an independent company and that separation from Viacom will enable us to better pursue our unique strategic vision and significant avenues for expansion," CEO John Antioco said. "With our brand, our cash flow, and our growth opportunities, we are convinced that the prospects for our business are exceptionally strong."

Not everyone was equally convinced, however. For one thing, Blockbuster said the new plans would reduce 2004 earnings by 10% to $1.48 a share. Analysts had been expecting $1.61 a share, according to consensus estimates from Thomson First Call. And that's not even the biggest worry.

"We believe Blockbuster's core, profitable rental business may be vulnerable over the next 12 months, as mass market consumers with recently purchased DVD players are encouraged to build DVD libraries by heavy discounting," said Jill Krutick, an analyst at Smith Barney, in a research note Tuesday.

Viacom shares, which slipped last week on news the spinoff plan was moving ahead, rose 1% Tuesday. Blockbuster fell 23 cents to $16.40.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
NFLX $658.31 0.00%
VIAB $64.20 0.00%
AAPL $126.44 0.00%
FB $87.28 0.00%
GOOG $523.40 0.00%

Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs