Crave

After exploring other options, Circuit City said Friday it will begin liquidating all remaining stores.

Circuit City calls it quits.

(Credit: Circuit City)

About 30,000 employees face layoffs as the rest of its 567 stores are closed. The fates of outstanding warranties, its Firedog repair service, and Canadian stores are still to be determined, according to the company.

The nation's second-largest consumer electronics retailer filed for bankruptcy in November and initially closed 155 retail outlets in an attempt to get its roughly $2 billion debt under control. Just a week ago, Circuity City announced it was in talks for a sale with two "highly interested" parties. After the talks broke down, the company said, it had no choice but to liquidate all remaining merchandise and shut its doors.

"We are extremely disappointed by this outcome. The company had been in continuous negotiations regarding a going concern transaction. Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction in the limited timeframe available, and so this is the only possible path for our company," James Marcum, acting president and chief executive officer for Circuit City, said in a statement.

The disappointing, recession-weakened holiday season likely sealed the retailer's fate, although the real problems began before the economic downturn. The retailer had posted several huge losses late 2007 and early 2008, but the rash of bank failures in September and October proved disastrous for it.

The resulting global credit crunch hit Circuit City hard. The retailer buys TVs, stereos, laptops, and other gadgets on credit, usually at a good rate from vendors with the promise to pay them back once the company sells the goods in its stores. But as the company racked up huge losses, and credit became suddenly more expensive, vendors stopped giving Circuit City reasonable financing rates.

The Consumer Electronics Show has become a mammoth event every January in Las Vegas, but the down economy is paring it back as Cisco Systems, Yahoo, and other companies scale back their presence.

CES remains a useful way for technology companies to meet with retailers, press, and the media. But for some in the current economic climate, it's not useful enough to pay $35 per square foot for a sprawling booth on the Las Vegas Convention Center's cavernous interior.

"This was to have been Cisco's first time as a formal exhibitor," said spokesman Jim Brady. "Given (Cisco's) focus on reducing costs, the company has decided to scale down its participation in CES in Las Vegas in January 2009." Instead, the networking giant is sticking with a more modest space rented at the Venetian Hotel supplemented with videoconferencing technology.

Cisco isn't the only one to scale back. Also on the list are Yahoo, Seagate, Logitech, and Belkin, company representatives confirmed. Philips won't have a space on the CES show floor, either, though Funai, which has taken over manufacturing and selling TVs under the Philips brand in the United States, will pick up some of the slack.

The Consumer Electronics Association, which runs the show, said the show will be the third largest in terms of floor space, shrinking from its size the peak years of 2007 and 2008.

"The economy is causing some companies that may have had booths to say, 'Maybe we want to be in a meeting room instead,'" said association spokeswoman Tara Dunion. Despite it, the total number of exhibitors is level from 2008's show at about 2,700. "We're also seeing companies on the show floor for first time," including Verizon Wireless, T-Mobile, Iomega, and Mattel, she said.

And there's a silver lining, too. "Vegas hotel rates are coming down because tourism travel to Vegas is slower than it's been in years. That provides an opportunity for business professionals," she said.

Incentives to show
But the organizers are working hard to keep the show as lively as possible. One promotion is aimed at technology buyers--the middlemen who buy all those TVs, gadgets, cameras, and other devices before selling them to ordinary folks.

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One of the hottest products in consumer electronics is finally cooling off.

A report released Tuesday confirms that flat-panel television shipments to retailers are beginning to tail off. Specifically, LCD and plasma TV shipment grew just 21 percent, and 20 percent, respectively year over year during the third quarter of 2008, according to DisplaySearch's Quarterly Global TV Shipment and Forecast Report.

(Credit: CNET)

That's by far the most meager growth for this category in the past two years. The previous six quarters' growth have all exceeded 41 percent compared to the previous year.

We're on the brink of a worldwide recession, so it's none too surprising that pricey televisions would be cut out of consumers' budgets. But what's potentially scarier for the TV industry is that most of the data for the third quarter was collected before the financial industry's late-September meltdown. In other words, the numbers for the fourth quarter, even with the late-year holiday sales push, could be even worse.

That said, some of the top TV manufacturers actually fared pretty well during the third quarter. Samsung, already the top producer of TVs, maintained its dominance, and actually increased its year-over-year growth in shipments by 99 percent. No. 2 Sony grew its shipments 73 percent.

Meanwhile, upstart Vizio, which has faded to No. 4 overall in TVs, is still the No. 3 manufacturer of plasma TVs and is the fifth-largest manufacturer of LCD TVs. For the year, its LCD shipments were down 8 percent, but due to its new entry into the plasma market, its plasma shipments were up a whopping 251 percent.

Another interesting tidbit from DisplaySearch's numbers: TVs with screens smaller than 40 inches have now increased shipments for two consecutive quarters, after declining for the previous year. It's a sign that consumers are looking to save money when buying a new TV, and also notable because the industry's prescribed antidote to rapidly falling prices has been getting customers to upgrade to bigger TVs. DisplaySearch reports that TVs larger than 40 inches "slowed to (their) lowest growth rate in over two years."

Circuit City Stores announced Monday it plans to close 155 stores and lay off 17 percent of its workforce in the U.S., as it aims to restructure its business amid a tightening credit market and downturn in business.

Over the past few weeks, the retailer's financial health has become more dire and, according to a report in The Wall Street Journal, was considering restructuring moves as a means to avoid a Chapter 11 reorganization bankruptcy filing.

(Credit: Circuit City Stores / Richard Cadan Photography)

The struggling electronics retailer noted in its announcement that not only have its sales dropped amid an economic slowdown and loss in consumer confidence, but also its suppliers have begun cutting back on the level of credit they are extending to the retailer.

"The current mix of terms and credit availability is becoming unmanageable for the company," Circuit City noted in its announcement.

That cutback by suppliers comes at a critical time for Circuit City, as it heads into the holiday buying season when it wants to replenish its stock with the popular items.

The company plans to begin a liquidation sale at its 155 stores targeted for closing (PDF) on Wednesday and is expected to continue the sale through the rest of the year.

Circuit City also plans to scale back plans to open new stores to two from 12 in the current fiscal year and suspend all store openings for 2010. The company will continue to operate in 153 U.S. markets and overseas, but will be exiting 12 U.S. markets as a result of the restructuring.

Other woes for Circuit City include a potential delisting of its stock from the New York Stock Exchange. Last week, the NYSE warned the company its stock price had fallen below $1 for 30 consecutive trading days, a trigger point for a potential delisting.

The NYSE warned the company on Oct. 24 and Circuit City has 10 days to resolve the issue. One common means that companies use in this situation is a reverse stock split, in which investors who hold a certain number of shares can swap them for a single share in the issuer's stock. For example, 10 shares of stock trading at 50 cents each would become 1 share that trades at $5 a share.

The layoffs across the tech sector are hitting companies large and small.

The maker of the popular Jawbone Bluetooth headset has let several employees go, citing the economy as one of the main reasons.

(Credit: Aliph)

"Given the current economic climate and opportunities we have to more efficiently bring products to market, we are realigning our resources to increase focus on our core technology and products. As part of this effort, we have eliminated a number of positions in the organization," an Aliph spokesperson confirmed to CNET News Friday.

The spokesperson declined to say how many or from which departments those positions came, but a source tells us the company let go approximately 25 people, or 30 percent to 33 percent of the staff.

Bluetooth headsets saw a spike in sales over the summer, at least in California, following the state's new law barring talking on a cell phone while driving. The law allows for the use of earpieces and Bluetooth devices instead.

However, Aliph is funded by Sequoia Capital, the Silicon Valley VC firm that recently told all of its portfolio companies earlier this month to buckle down and tighten their finances if they wanted to survive the current economic downturn.

Aliph is based in San Francisco, and is also funded by Khosla Ventures.

Online retail growth will slow for the first time this holiday season as a result of the weak economy, according to a new report from Forrester Research.

The market research firm estimates that $44 billion will be spent online by consumers during the holiday season; that's up 12 percent from last year, but it's the slowest rate of growth for online retail to date.

It's important to note that the Forrester report refers specifically to e-commerce, not to the hordes of people who show up at Best Buy at 5 a.m. for Black Friday deals. But the slowed growth probably is more reflective of the economy in general, not of an aversion to shopping on the Web--that's because Forrester also found that a weak economy gives incentives to shop online.

For example, 48 percent of those surveyed said they believe that they could find better deals on the Web versus in stores, up from 41 percent last year. And 36 percent said high gas prices would induce them to shop online, up from 22 percent in 2007.