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One the way to buying Circuit City (CC), Blockbuster (BBI) found out it may not have the money to close a deal. Its big shareholder Carl Icahn might help and there is some money on the Circuit City balance sheet. According to The Wall Street Journal "Concerns about Blockbuster’s methods for financing a bid contributed to a sharp fall in the company’s shares."

The issues at hand are actually more profoundly ugly than that. Part of the reason that Circuit City can be bought at all is that its poor performance has dropped its share price by 40% over the last six months. A looks at the Blockbuster stock chart shows it is down by just as much. The blind may end up leading the blind. Blockbuster’s market cap, at $605 million, is now below Circuit City’s at $740 million.

Blockbuster has failed at it missions as much or more than Circuit City has. In its last fiscal year, BBI had a net loss of $74 million on over $5.5 billion in revenue. In its last fiscal, CC lost just over $8 million on $12.4 billion in revenue.

Which company is the worse run? It is close to a tie, but should go to Blockbuster by a nose.

Blockbuster, a bricks-and-mortar company in a digital world, is more broken than Circuit City.

The wrong company is the buyer. It is time for Circuit City to use the Pac-Man defense and buy Blockbuster. It the movie rental company is worth anything.

Douglas A. McIntyre