RadioShack: Not Your Typical Retailer

It sounds like an oxymoron: high-flying RadioShack. It seems that whenever
I need some batteries or cabling, my first thought is to go to
RadioShack .
And there is usually a RadioShack nearby (apparently, 94 percent of all
Americans live or work within five minutes of a RadioShack).

The company had humble beginnings, founded as a one-store company in
downtown Boston in 1921. The company had products for ham operators. The
name of the company came from the maritime industry, in which wireless
equipment was stored above the bridge of a ship in a place called the “radio
shack.”

Now, the company operates 7,100 company owned stores and franchises. One
million customers each day come through the doors of RadioShack.

The stock prices of electronics retailers has not been great. So, it would
seem natural that RadioShack’s stock should also be sinking. Well, this is
definitely not the case. The stock has been surging.

Why is this the case? The big reason is that RadioShack has been
effectively leveraging its store locations. Instead of being a mere
retailer of goods, the company is aggressively offering services, such as
direct-to-home satellite, wireless, paging, long-distance and of course,
Internet connectivity. Thus, RadioShack is shifting more of its revenues to
subscriptions.

A key deal was with Microsoft. In the five-year deal, Microsoft will sell
its Internet services throughout the whole RadioShack retail chain.
RadioShack not only brings distribution, but also trained sales people and
home-installation services. Interestingly enough, Microsoft made a $100
million investment in the RadioShack.com site.

RadioShack has also signed major deals with Verizon Wireless and Sprint. It
would not be surprising to see similar deals in the near future.

The financials of RadioShack have been strong. In the past quarter, sales
were $1 billion, up from $886.7 million in the same period a year ago. The
company also had profits of $75.4 million, which was up from $61.6 million.

In fact, the company’s recent deals will not launch until later this year (for example,
the Microsoft Interent centers will be in stores in the fall). As these deals gain
strength, expect the company to continue to surprise Wall Street analysts.