.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

Dear W.T.:

In 2003 my attorney daughter, Hilary, defended a trio of bozos who one evening tried to reduce the electronics inventory of a Circuit City store. Neither effort was successful, but her subsequent visits to that store resulted in the purchase of a large-screen TV and 200 shares of Circuit City Stores Inc. (CC-$9.02) stock at $4.50 per share. Hilary has a nose for things I wish I had — two years later CC was trading at $20 and in April 2006 she sold her 200 shares at $30.50. When I asked Hilary why she sold CC, she said: “Their customer service sucks, and it’s more fun to shop at Wal-Mart, Costco or Best Buy.” She also believes management, with whom she has crossed swords, is “a few atoms shy of a molecule.”

I couldn’t agree more. These are the same people who in May 2006 canned 10 percent of their top salespeople because they were earning too much money. Can you imagine General Motors, Merrill Lynch, MetLife or Century 21 eliminating their top producers because they earn too much money?

Well, since that “cut ’em loose” edict of “Prince” Philip Schoonover (chief executive officer, president and chairman) over a year ago, CC’s revenues have been as flat as a debit card. Morale imploded, and 2007 net profit margins crashed to their lowest level since Ollie North was running the government from the basement of the White House. So last year, after sending the company’s star salespeople out to pasture, Schoonover told the Street that he expects sales growth of about 6 percent and earnings to improve by 1.8 percent. Well, so far sales have flopped by 5 percent, and net income is expected to plop by 60 percent. And yes, Hilary was right as rain: Circuit City’s customer service is as much an oxymoron as military intelligence.

I’m aware that some of CC’s problems stem from the general weakness in the home electronics market. And I’m mindful that most electronics customers are price-sensitive buyers. I’m also aware that margins on the popular stuff such as video game hardware, laptops, cameras, TVs, etc. are thin as onion skin.

But why does competitor Best Buy Co. Inc., which sells the same stuff at the same prices, have twice the per-store sales with profit margins that make CC’s look like a subprime mortgage? The answer is simple as sunlight: Best Buy has superb management. It’s run by executives with foresight, not guys like Schoonover and his sycophants, who like puppy dogs follow the successful trends of competitors like Best Buy.

If there ever were a company that needed new management, Circuit City certainly fits the bill. Over the past dozen years, CC’s earnings have been up and down like a chimney sweep. Its return on capital and equity are niggardly and net profit margins (a company’s heartbeat) are so weak that an accountant might declare CC a dead company.

Were I Schoonover, I’d be embarrassed to show my face to shareholders, company employees or anyplace in CC’s Richmond, Va., hometown. Circuit City is a living disaster.

There is one caveat, though. According to the latest filing, CC’s book value is an astonishing $11 per share, or $2 higher than the current market price, and the company has more than $1 billion in working capital.

So there are three solutions that could turn this $12.5 billion revenue company around:

1. A leveraged buyout.

2. A new management team.

3. The judicious and frequent application of industrial-sized management enemas.

Should any of these appear to become a reality, the perception would be sufficient to add between four and six points to the market value of CC.

Don’t sell your shares; I’m hearing that a white or gray knight may come to the rescue.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service