Changes on the Board of Directors Might Be Beneficial to Blockbuster Inc.

By Relmor Demitrius -

After a controversial and disappointing run on the Blockbuster (NYSE:BBI) board of directors, Carl Icahn has removed himself from the board and sold off all this shares.  Also, a large block stockholder so worried about the state of his company has filed a proxy to join the board of directors, which will be voted on at the stockholder meeting in May.

I realize that some investors and media types could look at Icahn selling out of Blockbuster as bad news, I however see it as good news.  I have rarely witnessed Icahn increase shareholder value in 3 years.  As anyone can witness lately Icahn’s involvement with a company does not guarantee its success.  Lately, it appears to guarantee the price drops.  I believe Icahn adds no value to a company, in fact, his removing himself from a company actually adds value back into it.  His dealings and disasters in Blockbuster, Yahoo, and Biogen make him no Warren Buffet.  I personally would probably run from a stock if I heard the out of touch, none magic man Icahn wanted in.  I think whatever influence or magic touch or good ideas he had has long dried up.  I think there is a nice beach somewhere waiting for Mr. Icahn somewhere, and he should go enjoy it.  What Blockbuster needs possibly now that a skeleton has been removed from Blockbusters closet (pun fully intended) is some new blood.

Enter one Mr. Gregory Meyer, disgruntled stockholder extraordinaire.  His ownership of 620,000 shares of Class A common and 60,000 shares of Class B common shares would make him one of the larger holders on the board.  He definitely has personal interest involved.  His buys were well over $1 as the stock is now trading at a measly 29 cents a share.  With a going concern and wording in the latest SEC filing warning of possible bankruptcy being necessary, the board definitely did not deserve 1 dollar of bonus money, yet received cheap options contracts in 2009 and millions in bonus money the company does not have.  When times are better you can take a bonus, right now seems insulting to common stockholders.  What were they rewarding themselves for would be my question?  I can’t see one reason to award anyone anything at this point in time.

Meyer claims new blood and an outsider influence might be just what the doctor ordered.  I tend to agree.  I don’t see any harm in allowing a concerned outsider a board seat.  CEO Jim Keyes of course endorses the incumbent and is spending money to fight this proxy attempt by Meyer’s.  Jim Crystal is the incumbent and an intelligent case can be made for keeping him.  Arguments like don’t hinder a boards plan and “stay on course philosophy” as well as Crystal’s experience could be helpful going forward.  Whatever stockholders decide to do, I doubt it will change or affect much going forward, but it would be a nice signal to investors that the board is actively and creatively attempting to right the ship and moving forward into the digital age and this process is helped by adding new blood of someone who was involved with the kiosk business.  Blockbuster has over 5000 kiosks in play now, with plans to add 5000 more by the end of year.  Their video kiosk service, involved with NCR, is one avenue BBI is using to change their business model and access a market they were barely involved in prior to 2009.

Whatever the future holds for Blockbuster, hopefully the current board or whatever new board emerges from the May meeting can continue to progress in their plans to expand the mortar and brick business model.  Keyes sites that a change in the board right now could be disruptive to their plans.  I say spending millions to insiders on bonus money is disruptive to their plans by a much larger degree than giving away one board seat to a savvy business man smart enough to see the money in kiosk video rentals before Blockbuster did.  Are they really confident in their boards ability to manage the company going forward when they deny a man the right to be on the board after being proved more of a visionary than any current board member?

Long BBI