Analyst applauds Dish buy of Blockbuster


The $320 million acquisition of bankrupt Blockbuster by Dish Network is being hailed as “a positive” by Wells Fargo Securities analyst Marci Ryvicker. She had also given the idea a thumbs-up last week when it was learned that Dish was in the bidding.

First off, Ryvicker notes that Dish has cash on hand to cover the purchase. After adjustments for available cash and inventory, Dish expects to hand over about $228 million in cash when the deal closes. “At the end of Q4 DISH had $641M in cash and was levered at 2.1x and we do not view the acquisition as being significant to DISH’s finances,” the analyst told clients.

More importantly, here’s what Ryvicker has to say about what Dish will do with Blockbuster.  

“Though DISH did not explicitly elaborate on its plans for Blockbuster’s individual assets the company did mention that it expects cross-marketing and ‘service extension opportunities.’ We believe that the most valuable ‘extension opportunity’ for DISH lies within Blockbuster’s digital business, which rents movies to customers on an a la carte basis through the internet similar to Netflix and content rights, which DISH could use to start a robust on-demand library,” said the Wells Fargo Securities analyst.

“DISH could keep some stores open. Again, though no specific plans were stated we note that DISH was not partnering with liquidators indicating that it could keep some physical Blockbuster stores open for business. Further, the WSJ reported that Charlie Ergen has expressed interest in using existing stores to sell subscriptions to DISH video services,” she wrote.

Here, then, is the bottom line from Ryvicker: “We view the acquisition as a positive that provides DISH with an internet content platform and delivery method, a content library and greater optionality at a manageable cost. Further, we believe this is one more ‘hint’ that Charlie Ergen is setting DISH up to provide (some) content via server/internet versus satellite.”