Radioshack sees phones as growth driver

LAS VEGAS (Reuters) - RadioShack Corp. (NYSE:RSH - news) is still working through inventory issues caused by a change in phone carrier partners, but these are factored into its lowered earnings outlook and mobile phones remain a catalyst for long-term growth, the retailer said on Thursday.

ADVERTISEMENT

David Edmondson, president and chief executive of RadioShack, the No. 3 U.S. consumer electronics chain, said he believes the company has prepared well to start the new year as a partner with Cingular, even thought it instituted a rate plan late last year that may have contributed to Radioshack's woes.

RadioShack has been trying to revive its lagging wireless sales, a key profit driver. In August, it agreed to sell Cingular Wireless phones, cutting ties with longtime ally Verizon Wireless. It also signed a new 11-year deal with Sprint. Cingular is a venture of AT&T Inc. (NYSE:T - news) and BellSouth Corp. (NYSE:BLS - news).

On December 16 it said it was unlikely to achieve its 2005 earnings per share forecast of $2.14-$2.24 a share.

"We were selling out and getting out of Verizon (phones), and our contingency plan was to sell a lot more Sprint (phones) to make up for Verizon, and that didn't happen," he told Reuters in an interview at the Consumer electronics show in Las Vegas.

"But I am very pleased over the Cingular launch."

He said lingering Verizon-related inventory issues remain, although most phones have either been returned to Verizon, sold to distributors, or written off its books.

Despite the recent troubles, Fort Worth-based RadioShack is still expecting mobile phones to be a strong contributor to its profit. Over the next five years it plans to open an additional 2,500 mobile phone locations in the U.S. -- including stores and kiosks selling Sprint Corp. phones, Edmondson said.

He noted that while RadioShack is known more for selling phones, cables and batteries than cutting-edge technology, many products displayed at the huge Consumer Electronics Show fit into his vision for RadioShack's future, including small and pocket-sized personal devices that deliver music, gaming, video, or information provided by some of its partners.

"I'm looking for a device that hooks up to a transport network -- either a cable network, a wireless network, a satellite network, or a cable network -- things that hook up to one of those to provide content," he said.