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Blockbuster Tanks on Job Cuts

NEW YORK ( TheStreet) -- Blockbuster (BBI) cut jobs this week following its weak holiday sales, and the news sent shares tumbling 7.2% to 38 cents in after-hours trading.

Blockbuster did not reveal how many jobs it will cut, but spokesperson Michelle Metzger said the movie rental retailer eliminated a small percentage of its workforce including some senior-level positions. Metzger said "some hard decision had to be made" in an effort to "realign resources."

Competition for Blockbuster from Netflix (NFLX - Get Report) and Coinstar's (CSTR) Redbox has intensified, stealing market share away from Blockbuster and forcing it to rethink its entire operational strategy.

Last month, the company revealed that fourth-quarter earnings came in lower than expected, due to weak holiday sales. As a result, it now expects a loss of $183 million to $193 million for fiscal 2009.

CEO James Keyes told TheStreet last week that while the company has been struggling, there are several new initiatives -- like kiosks and Blockbuster digital -- that might help the company right itself.

Still, Keyes said he couldn't guarantee that Blockbuster won't need to shutter more stores in the process, and didn't deny the possibility of the wholesale elimination of its physical stores all together.

Blockbuster previously said it plans to shutter 20% of their stores by 2011, leaving about 3,200 stores from 4,356 locations in the fall.

-- Reported by Jeanine Poggi in New York.

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