Shrinking TV Margins Drive Circuit City to Close Stores
February 15, 2007 - Circuit City announced plans for the closure of underperforming stores in North America and the restructuring of its executive management team. The goal is to improve its financial situation, which is under intensified price pressure in the digital TV market.
Current Analysis Perspective
 ► Despite brisk holiday sales of flat-panel TVs, disappointing gross margins in the flat panel-category in the third quarter of FY 2006 have led Circuit City to cut the fat. The giant consumer electronics retailer has been very aggressive with its prices for flat-panel TVs to the extent that its low prices were hurting the company’s margins. Circuit City’s current price per inch for flat panels of 37-inch and up is significantly lower than at its major rival, Best Buy. Circuit City’s price compression has been moving the retailer’s prices away from Best Buy and much closer to the discounter giant Costco. In January 2007, Circuit City’s average sales price per inch for LCD and plasma units sized 37-inch and up was at $51, whereas Best Buy’s average sales price per inch stayed at $62 and Costco’s was at $46.
► While Circuit City is closing some of its stores to recover from slimming margins in the flat-panel TV segment, the club store Costco appears to be happy with its pricing positions in the digital TV market. Continuing its steady growth, Costco recently announced plans to open new stores this year.
► Circuit City’s aggressive pricing strategy may help boost its sales for digital TVs. However, unlike the warehouse stores, Circuit City has higher overhead costs and will not be able to survive the razor-thin margins in the long run. Reshaping its storefront makeup and corporate structure is exactly what the company needs to do in order to maintain profitability. Current Analysis takes a positive stance on the company’s solution to stay competitive in today’s consumer electronics industry.
AMD Introduces New Flagship Processor, Drops Select CPU Pricing
March 1, 2007 - In an effort to bolster its performance position, AMD recently introduced a new flagship dual-core desktop processor – the Athlon 64 X2 6000+. AMD’s new processor rounds out the top end of the chipmaker’s X2 desktop dual-core lineup with a 3 GHz clock speed, which supersedes any of the contemporary processors in terms of frequency. According to industry pundits, the 6000+ product was originally slated for release in late 2007.
Current Analysis Perspective
 ► Current Analysis applauds the new product introduction and assertive price reduction efforts put forth by AMD, which has lost some of the gains it was able to seize during its top performance reign in 2005 and 2006. In the past year, Intel has regained the performance crown with its current Core 2 Duo and Core 2 Quad as the leaders with regard to desktop processor performance. While AMD’s 6000+ processor tops the existing frequency level of any existing mainstream processor, it is still no match for Intel’s Core 2 Quad.
► Looking beyond the fact that AMD’s 6000+ introduction leaves Intel still holding the top performance crown, AMD’s 6000+ processor pricing strategy deserves at least a tiara rating in its own right. At a $464 per 1,000 tray price, AMD’s new flagship 6000+ holds a solid price/performance advantage over its closest Intel competitor, the Core 2 Duo E6700. At $530 per 1,000 tray, Intel’s Core 2 Duo E6700 sells for $41, or 8%, more. With a price/performance win such as this, AMD stands to regain some of its footing – at least in the dual-core processor market, which has taken the U.S. retail desktop market by storm, capturing 71% unit share (compared to 29% for single-core processor options).
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March 1, 2007 - Not willing to cede the all-in-one PC market to HP’s innovative TouchSmart or longtime rival Apple, Sony has launched a trio of new models to add to its impressive LS series. Prices range from $1,799 to $1,999, and all models run on some version of Microsoft’s new Windows Vista operating system (OS). 