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Should Best Buy Acquire RadioShack Before it Disappears?

Should Best Buy Acquire RadioShack Before it Disappears?

RadioShack (RSH) did something Tuesday that it hasn't done in three years. For the first time since 2010, the Fort Worth-based electronics retailer posted an increase in same-store sales, briefly giving its beleaguered stock a lift before succumbing to gravity once again and selling off.

After all, despite this one achievement, the company also disclosed a larger than expected quarterly loss, shrinking sales, a slump in customer traffic and a CFO who bolted for another job.

"It's just a broken business model and there are better competitors, better options for consumers," says analyst Michael Pachter of Wedbush Securities, in the attached video. He rates the stock a sell with a $1 price target.

"They can't overcome that decline in traffic and they're not cutting costs fast enough and they're running out of cash," Pachter says. "I'd say they're out of business, literally, in about a year-and-a-half."

If he's right, then some market watchers say RadioShack becomes an asset play, consisting of 5,800 stores worldwide and 1,500 wireless phone centers in the U.S.

While he says Best Buy (BBY) would thrive in RadioShack's smaller stores, there's one big obstacle standing in the way of such a deal.

"I think a shift from large format stores to small format stores is the only way Best Buy can thrive," Pachter says, pointing out that the Minnesota-based chain probably couldn't afford to take on RadioShack's operating expenses.

"Best Buy should have figured it out ten years ago and not entered into long term leases," he says. "If they downsize, that will address most of their problems, but it's about a ten-year fix, not a quick fix (done by) buying something."

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