Amazon.com, Inc. (NASDAQ:AMZN) and Sprint Corp (NYSE:S) are swooping in to buy the salvageable remains of RadioShack Corporation (NYSE:RSH) — the beleaguered electronics retailer that has been in a death spiral for the last year — according to Bloomberg.
We’re now officially looking at the end for RSH stock.
RSH stock in its current form is an utterly emaciated version of its former self, down 90% in the last year alone. After liquidity concerns gradually became more and more serious, RadioShack has nowhere left to go.
The New York Stock Exchange even suspended trading of RSH stock yesterday for failing to minimum listing requirements. RadioShack also defaulted on a major debt payment yesterday.
So with the highly-anticipated and arguably inevitable demise of RadioShack now upon us, what can investors do to profit from the misery? Enter AMZN and Sprint.
Release the Vultures: AMZN and Sprint Corp Circle the Carcass
AMZN CEO Jeff Bezos has never been known for his empathy. Bezos is a ruthless businessman, more than willing to sacrifice the profit margins of his own business in an effort to undercut and ultimately destroy others.
In some ways, Bezos is reminiscent of John D. Rockefeller, the founder of Standard Oil, always anxious to buy out his competition. Should someone deny his offer, he would lower oil prices, drive his small competitor out of business, and pick up the scraps on the cheap.
Bezos isn’t one to ignore opportunity, and the 4,000 U.S. retail locations RadioShack currently enjoys are attractive assets for AMZN, which hopes to boost its brick-and-mortar presence as it expands and improves its logistics and shipping network. According to Bloomberg,
“Amazon has considered using the RadioShack stores as showcases for the Seattle-based company’s hardware, as well as potential pickup and drop-off centers for online customers, said one of the people, who asked not to be named because the deliberations are private.”
AMZN isn’t the only one hoping to capitalize from the crash-and-burn RSH routine. Sprint is interested in buying between 1,300 and 2,000 of the stores RadioShack will soon be forced to shutter. Sprint is looking to differentiate itself in a ruthless wireless market dominated by the likes of Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T).
Sprint is already differentiating itself by consciously choosing not to make big moves to improve its network. A recent AWS-3 auction — where telecom players bid on the rights to broadcast over certain bands of spectrum in certain markets — saw AT&T, Verizon, DISH Network Corp (NASDAQ:DISH), T-Mobile US Inc (NYSE:TMUS) and others spend $41.3 billion for spectrum rights. Sprint didn’t spend a dime, saving up and biding its time until another auction, the 600MHz incentive auction, where Sprint feels its money is best spent.
AMZN and Sprint will be feeding on RSH, have no doubt about it. AMZN in particular can use the former RadioShack locations opportunistically, establishing a physical store where it can hawk its wares.
Now, RSH, I beg you again: Go gentle into that good night.
As of this writing John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid.
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