Shopping ShopNBC Around

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ValueVision Media said last week that it has received interest from several different parties who want to buy all or part of its ShopNBC unit, and should decide what to do with the home-shopping network within the next several months.

The announcement comes on the heels of a federal filing by shareholder GE Capital that it is looking for ways to participate in the auction for the shopping network.

<p> </p><p> <strong id="d9e25-5-strong">3Q 2008</strong> </p><p> <strong id="d9e29-7-strong">3Q 2007</strong> </p><p> <strong id="d9e33-9-strong">% Change</strong> </p>

Net Sales

$124.8 million

$184.8 million

-32%

Net Income (Loss)

($20.8 million)

($5.7 million)

-265%

Shipped Units

782,000

1.07 million

-27%

Average Price Point

$212

$240

-12%

On a conference call with analysts Nov. 19 to discuss its third-quarter results, George Vandeman, chairman of ValueVision’s special committee of independent directors, said that the company has received bids from a number of companies and is aware of the GE filing. He added that the committee has instructed its advisers to invite several of the proposed buyers to take part in the next phase of the process — which would involve management presentations and more detailed due-diligence information. Final bids would be due after that phase is completed.

Vandeman said the committee also is evaluating other alternatives to boost value, including share buybacks, paying a dividend and monetizing its balance sheet.

“The special committee and its financial advisors continue to review the full range of strategic alternatives available to the company. We anticipate that the special committee will conclude its review by the end of the fiscal year,” Vandeman said. ValueVision’s fiscal year ends Feb. 2.

In its filing with the Securities and Exchange Commission on Nov. 17, GE Capital, said that it and another General Electric Co. unit — NBC Universal — are evaluating how they can participate in the process. Combined GE Capital and NBC Universal own about 11.8 million ValueVision shares, or about 30% of the total shares outstanding.

NBC first invested in ValueVision in 1999, and this past March nixed a plan to sell its 6 million-share stake on the open market. While the company gave no reason for the change of heart, ValueVision stock was trading at about $6.01 last March, about half its price a year earlier when NBC first announced its intentions.

In hindsight, that may have been a mistake. ValueVision shares closed at 57 cents each on Nov. 19, up 3 cents per share. The stock is down about 91% ($5.53 per share) this year.

The precipitous fall in the stock price prompted shareholders to try to take matters into their own hands. During ValueVision’s second-quarter conference call in August, shareholders lambasted management and called for the sale of the company. In September, the company said it had formed a special committee of independent directors to evaluate its options and that it had hired Minneapolis-based Piper Jaffray & Co. as financial adviser.

The Nov. 19 conference call was brief, clocking in at under 30 minutes. CEO John Buck said that because the review process is ongoing, there would be no question and answer portion to the call, but vowed to have one in a later call before the end of the fiscal year.

“I know you have a lot of questions and are anxious for more details,” Buck said. “I promise you that we will hold another investor call as soon as we are able to communicate the outcome of the strategic review process and the future of this business.

Just who would buy ShopNBC remains to be seen. Its much larger rivals — QVC Inc. and HSN — are having their own problems as the recession deepens. In the third quarter, QVC sales were down 3% and cash flow plunged 21% as customers purchased less. HSN fared a little better in the period — its sales were down 1% in the third quarter — but that may be due to more favorable comparisons (its sales were off considerably last year).

The third quarter was another rough one for ShopNBC, which has been hit hard by the declining economy. Revenue plunged 32% in the third quarter to $124.8 million and net losses more than tripled to $20.8 million on a big decline in volume and the average price of items sold. This is after a 26% decline in revenue in the second quarter.

On the conference call last Wednesday, ShopNBC chief financial officer Frank Elsenbast said that shipped units declined 27% in the period and the average selling price of items dipped 12% in the period.

“As you can see from the results, ShopNBC experienced a very difficult third quarter,” Buck said on the conference call. “With our third-quarter results and our stock price below $1, I can only imagine how frustrated and concerned you are, as we are. This is unacceptable.”

Buck went on to explain that the company has identified three initiatives to turn things around — cutting expenses, improving fundamentals and reining in distribution costs — and has made some headway. In the third quarter, expenses were down 12% compared to the same period last year and gross margins rose slightly to 34.5% in the quarter, compared to 33.7% in the second quarter.

Buck said that given the positive signs, he was optimistic about the future.

“We are determined to find out what the best outcome is for the company and do what is best in the interim,” Buck said on the call. “We are being very careful with our cash, we are improving ongoing business operations and we are exploring a full range of strategic alternatives.”

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