Sprint Corp (NYSE:S) made a deal with nearly extinct RadioShack Corporation (OTCMKTS:RSHCQ) to take over some of its failing stores. That should be old news to investors.
The deal has always been a bit mind-boggling, since Sprint has plenty of troubles right now and getting a bigger retail presence hardly seems to top the list. I mean, as Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (T) continue to invest heavily in the next generation of wireless networks, how can the smaller and cash-strapped Sprint keep up for long?
But let’s look beyond that for now. Because adding to the intrigue of this Sprint scheme is a recent revelation that Sprint has zero interest in retaining the RadioShack brand — and will happily watch the name fade into oblivion six months from now.
Sure, Sprint has a co-branded presence in more than 1,400 RadioShack locations, according to the terms of a recent joint venture. But as the other locations not included in this deal are closed and liquidated, it’s important to remember that the deal with hedge fund Standard General to (ahem) “save” the business after the Shack’s February bankruptcy filing doesn’t include the the RadioShack brand name.
According to reports, Standard General doesn’t own that brand name — at least, not unless it wants to bid for the branding when it goes up for auction in May.
You might think this is a crazy oversight by Standard General or by Sprint. However, a recent WSJ report shows execs don’t think they need a RadioShack logo to pull off their plans.
Maybe they’ll just call the new locations Sprint Stores. Maybe they’ll come up with a hybrid name like “SprintShack.” Maybe they’ll go for Plan C and just invent some nifty new logo to distance themselves from the RSH bankruptcy mess.
But no matter what, RadioShack branding isn’t part of the game.
One Bloomberg report indicates that, before auction, the name and brand are worth some $20 million. And apparently, Sprint and Standard General think there’s a better use of that cash. They’ll simply use the branding as long as they can under the current terms of the joint venture, and figure something else out when the time comes.
There are other parts of the RSH business that haven’t been sold off yet and aren’t owned by the hedge fund or other parties, including a RadioShack dealer network. But what Sprint investors should take away from the deal is that at least the company isn’t burning $20 million on a dead brand — and is convinced it can reap the benefits without the Shack’s logo.
I remain skeptical of whether there are any benefits to be had, but at least I agree with the notion that $20 million is about $19 million too much for this dead electronics brand.
Sprint is right to shun it.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
