Blockbuster Burning the Cash

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By LuvNflix
May 5, 2005

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Taking a quick look at the Blockbuster announcement this morning... the headlines fail to report the most critical part of their financial announcement.

The free cash flow was a loss of $148.1 Million, and their cash reserves are now down to $145.3 Million down from around $330M the prior quarter.

At this rate loss, Blockbuster will be out of cash by the end of the next quarter, and will be digging into their credit facility. Considering they have exhausted a large portion of it already, and are over $1B in debt, where is the upside?

I would expect to see a bond rating change based on today's financial statement. They were recently put on a negative rating watch, and now would be the time to pull the trigger.

Something is going to have to change in this market. The word is PRICE! As Reed Hastings said on the Conference Call, Blockbuster has to lead, and now they have a huge incentive to not implode.

Additional note... this huge decrease in cash flow must make Mr. Icahn pretty happy. How will they pay the HUGE dividend now? Take out a bigger loan? No wonder they didn't comment on it publicly prior to the earnings announcement.

Shhhh... don't tell anybody... Blockbuster is BROKE!

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