Circuit City CEO Philip Schoonover Short Circuits
Phillip Schoonover announces he has quit the pressure from major investor Mark Wattles and other shareholders showed to be too much for the Circuit City CEO to handle. It was announced Monday September 22nd 2008 that Schoonover had stepped down and would be replaced by James Marcum. Mark Wattles, who controls 6.5% stake in the company, had previously nominated Marcum to be elected on to Circuit City’s board of directors in June. The major investors and other shareholders are depending on Marcum to focus on turn around time. Marcum was quoted as saying “We believe that by fine-tuning our focus and strategies we will be able to leverage this history and build a stronger future for the company”.
Wattles who is sure to be feeling a victory at Schoonovers resignation, still has expressed his desire for the company to be sold. Circuit City has hired Goldman Sachs to explore some strategic business alternatives. Blockbuster had proposed to purchase Circuit City for $1 Billion recently and as Circuit City seemed to deny the bid, they did eventually relent and were ready to sell. The offer fell apart in July as the economy weakened. Circuit City shares are down 80% from the previous year, causing major shareholders such as Wattles and HBN Capital Management who owns 9% of the company’s shares to express the desire to sell off the company and count their losses.
The demise of Circuit City has been brought on by not only competitors pricing, such as Costo centers and department stores such as Wal-Mart, but the moves of the now resigned CEO Schoonover helped to create a mess, that the company could not recover from. Schoonover made a cost cutting decision to fire 3,400 top Circuit City employees, stating they were earning too much and could be replaced by lower wage workers. The morale that was created by this move brought on a downfall to the company. Service suffered as employee morale was weakened and Circuit City lost a net $164 million, triple the loss of the previous year, before making the cuts. Marcum will have his hands full trying to turn this company around, is still unsaid if he plans to sell, although since Blockbuster, no potential buyers have been mentioned.
