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Will Radio Shack Survive the Holiday Season?

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By Mark Wilson, Esq. on December 03, 2014 9:54 AM

Remember the good old days, back in the 1980s, when you needed a 500 microfarad capacitor, and Radio Shack was your friend? They had drawers full of electronics parts of all shapes, sizes, and amperage.

Radio Shack, however, has fallen on hard times. Few people need electronic components, and even if they do, they can get them online. All the other electrical gadgets Radio Shack sells can be purchased elsewhere. Is this the end of the once-venerable tinkerer's institution?

Life Support

Possibly. In October, The New York Times reported that Radio Shack was restructuring its debt, allowing it access to precious liquid resources ahead of the holiday shopping season. However, Michael Pachter, managing director of the private investment firm Wedbush Securities, told the Times that this holiday season is a Hail Mary for Radio Shack, which would have gone bankrupt by now if not for the debt restructuring. "It buys them time to get through the holiday. If they don't turn a profit at holiday, they will file," he said.

So what's wrong with Radio Shack?

Well, if you have time to read this former employee's lengthy eulogy, a lot. After three and a half years working there, Jon Bois concluded, "RadioShack is a rotten place to work, generally not a very good place to shop, and an untenable business to run. Everyone involved loses."

But, like claims about Africanized killer bees, reports of Radio Shack's demise have been around for years, but never quite materialized. In the 2000s, it was that place you went to get a cell phone that wasn't Best Buy. Even today, though, brick-and-mortar stores are less and less relevant for buying cell phones, so what's left?

Maybe not much. Radio Shack is like an aging celebrity you're surprised to learn is still alive. Perhaps Radio Shack's time is over, another anachronism of pre-Internet times. Circuit City couldn't cut it; that chain died in 2009.

And One More Thing

Remember that October debt restructuring? Yesterday, it became more controversial as lender Salus Capital Partners accused Radio Shack of self-dealing. But Radio Shack claims that it's the one injured by that agreement; even though the company walked away with enough liquidity to get it by for the next few months, the terms of the agreement wouldn't let it do profit-maximizing things, like close 1,100 stores. Apparently winning just isn't an option.

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