RadioShack was founded in 1921 and for years, was the mainstay for electronics and accessories but the company has not turned a profit since 2011. As a result, the electronics chain filed for Chapter 11 bankruptcy in federal court. While some people were surprised, most expected this would happen.
In fact, with small electronics companies being overshadowed by larger corporations, RadioShack survived longer than predicted by top analysts. However, in yesterday’s court hearing, the company agreed to sell as many as 2,400 RadioShack stores to Sprint, as well as a hedge fund to its largest shareholder.
As stated by Michael Pachter, Wedbush Securities’ analyst, the biggest surprise is that RadioShack lasted as long as they did. Most analysts thought the company would fold by the end of 2013 at the latest.
However, even with the looming bankruptcy, RadioShack will go on although in a much smaller capacity. As part of the deal, Standard General, the hedge fund, coupled with Sprint, will purchase between 1,500 and 2,400 stores out of the 4,000 in existence in the US. For Sprint, a special store within a store is anticipated in as many as 1,750 stores.
However, both Standard General and Sprint will still have to battle for the deal to be finalized against possible rivals in an auction supervised by the courts. Until that time, RadioShack will continue operating as usual. According to chief executive with RadioShack, Joe Magnacca, steps are being taken to get the best value for company stakeholders.
During the early part of the 1970s, RadioShack was a leader in the world of technology, selling an all-electronic calculator. Then five years later, it was one of the first companies to produce mass market computers that ran on a Bill Gates’ designed operating system. Over the years, the company has also pioneered early laptop and mobile phone designs.
Unfortunately, increased ecommerce coupled with the digital revolution have caused the company’s footprint to be diminished dramatically. With larger mobile phone makers, RadioShack’s sales for this device have dropped. With this, finding its position in the market has been tough.
Although Magnacca vowed to make change with people believing he was the man to get the job done, RadioShacks’ financial decline continued. The biggest challenge has been the company’s irrelevance, with the newer generation viewing the company as old-time.