Amazon.com (AMZN +1.43%) isn't going to buy RadioShack (RSH +0.00%) anytime soon, but SunTrust analyst Bob Peck still turned heads on Monday by suggesting the leading online retailer should consider snapping up the fading chain of small-box consumer electronics stores.
Peck argued that having a local presence would serve Amazon well as an outlet to showcase its Kindle products, an outpost for pickups and drop-offs across many of its offerings, and a way to expand its AmazonFresh grocery delivery service.
Peck also suggested that buying RadioShack makes a lot more sense now than it may have years ago because Amazon is already charging and collecting sales tax in a growing number of states. If sales tax as a buyout hurdle sounds familiar to longtime dot-com darling watchers, it's because many used the same logic to show why Amazon wouldn't buy Netflix (NASDAQ: NFLX). If that's no longer a barrier, wouldn't Amazon be more likely to acquire the video streaming company than rolling the dice on the remnants of RadioShack?
A decade of missed connections
Amazon and Netflix have been flirting with one another for a long time. Next month, it will be 10 years since Netflix slashed prices of its DVD rentals-by-mail plans merely on whispers CEO Reed Hastings was hearing about Amazon launching a rival offering.
We may never know if that was going to happen, but Netflix's cutthroat ways did the trick. Amazon entered the DVD-by-mail market in Europe, instead. At the time it would have made perfect sense for Amazon to buy Netflix instead of settling for the more uncertain and underdeveloped foreign market. It didn't, obviously.
The gossip returned in 2007, with Amazon reportedly ready to take out Netflix at $34 a share. That seems ludicrous now, but it would have been a 59% premium to where Netflix's depressed stock was at the time.
Netflix has seemingly done everything possible in the seven years since to make itself more palatable to Amazon. Instead of the 6.8 million DVD-receiving subscribers that Netflix served in 2007, it's now delivering content to more than 50 million streaming customers worldwide. Netflix has become digital, global, and seemingly unbeatable. Yes, the stock is also a 20-bagger since the 2007 gossip, but Amazon's stock has also appreciated sharply in that time.
It's the only needle-moving acquisition that would make sense for Amazon at this juncture.
Smack attack on RadioShack
But Amazon isn't likely to consider buying Netflix. That ship has likely sailed. The two belong together, and I've played my part in a ridiculous Cupid outfit -- slinging arrow after arrow after arrow -- to no avail.
However, the only thing dumber than Amazon failing to snap up Netflix when it had the chance would be buying RadioShack, a profitless and debt-saddled dinosaur that isn't going to be salvaged.
Could Amazon use 4,400 small stores tucked away in suburban strip malls? SunTrust's Peck seems to think so, but I'm guessing it would send the wrong message. Setting up small outposts across the country with limited inventory isn't the answer. Trying to offer a wide array of services between a Subway sandwich shop and a check-cashing store is going to do more harm than good. After all, isn't this exactly the thinking that got RadioShack where it is today?
Why is everyone trying to inject an old-school model that doesn't work into Amazon's new media bloodstream? Netflix gets this. It used the Internet to grow its DVD rental business, and when the market was ripe for digital delivery it flipped the script to make sure it would be the disruptor instead of the disrupted.
Let's let RadioShack go in peace. It's the only real way that RadioShack could benefit Amazon as more ex-customers turn to the cheaper prices and wider sales floor that only the e-commerce king can offer. Netflix was the one that got away, and it was the only one that mattered.
