Stocks opened lower, but rose through the afternoon hours to end the shortened trading week on a positive note. Heading into the three-day weekend -- indexes are closed tomorrow for Good Friday -- the Dow Jones Industrial Average (DJINDICES:^DJI) added 13 point, or 0.1%, and the S&P 500 (SNPINDEX:^GSPC) lost less than one point, to hold steady at 2,036.
Stocks fell slightly for the week, ending a five-week winning streaking that brought the Dow back into positive territory on the year after being down 10% in mid-February. Meanwhile, office-supply specialist Office Depot (NASDAQ:ODP) and Redbox DVD kiosk owner Outerwall (NASDAQ:OUTR) both made large stock-price swings today.
Office Depot's merger defense
Office Depot's shares jumped 9% as the hearing to decide the fate of its proposed merger with rival Staples (NASDAQ:SPLS) continued to make headlines. According to Bloomberg, during testimony yesterday, U.S. District Judge Emmet Sullivan was critical of federal regulators' arguments -- and even some of its legal tactics -- which suggests that the Federal Trade Commission may not have an easy path to blocking the merger. The two sides are presenting arguments next week, and Sullivan should hand down his ruling by May.
Office Depot and Staples believe the merger will help their businesses beat back the challenge from online rivals like Amazon.com through cost savings and increased scale. "The combined company will be positioned to better serve the changing needs of business customers and compete more effectively against a large and diverse set of competitors," the companies said in a joint statement this week. If the FTC succeeds in blocking it, though, then the office-supply specialists return to the drawing board in seeking ways to return to growth (Office Depot managed zero comparable-store sales growth last year, while Staples' comps fell by 3%).
Outerwall's online do-over
Redbox owner Outerwall rose 4% today on news that it's prepping an online video-streaming service called Redbox Digital. The stock has been cut in half during the last year as customers have moved away from DVD rentals in favor of online entertainment options (rentals last quarter were down a brutal 24%, year over year). Still, shares are up sharply in the past month, in part because management recently announced that it's exploring its strategic options that might include a possible sale of the business.
Outerwall's latest stab at the online market is completely different from its failed Redbox Instant service. Rather than taking on market leader Netflix with an all-you-can-stream subscription platform, Redbox Digital appears to be an on-demand rental service with more limited scope.
Yet it might not even see the light of day. "For tens of millions of consumers, Redbox is their source for new release rentals without a subscription," the company said in a statement to Variety. "As such, we regularly conduct tests of potential new offerings, that may or may not be brought to market."
A digital-rental service won't solve Redbox's rental problems. It might, however, make a good complement to its 40,000 physical kiosks, and could be a smart way for the company to take advantage of its base of millions of credit card accounts from customers who have executed nearly 5 billion DVD rentals to date.