Blockbuster Acquires Alpha Bay Software

Blockbuster L.L.C., a subsidiary of DISH Network Corp. (DISH - Analyst Report), has acquired the assets of Alpha Bay that provide business software to the retail industry. The acquisition will help the company improve the overall customer experience within its 900 retail locations.

Alpha Bay’s AIRS suite of applications provide mobile checkout, inventory management, customer loyalty and business intelligence service to retail operators and is supported through a unique hybrid ISsm platform. Alpha Bay’s cloud-based service will help Blockbuster employees serve customers from anywhere within a store, allow them to move out of the checkout counters as well as deliver enhanced promotional programs. However, the financial terms of the deal were not disclosed.

In April 2011, DISH Network won the auction for the bankrupt movie and video game retailer Blockbuster for approximately $228 million. The acquisition provided DISH with the rights to stream movies over the internet. The company also combined Blockbuster’s movie streaming services through its wireless broadband network to offer a highly innovative bundled service.

Thus, DISH may become a viable competitor to online video streaming companies such as Netflix Inc. (NFLX - Analyst Report), Hulu and YouTube. Additionally, Blockbuster also offers game downloads for all the major gaming consoles like Nintendo, Sony Corporation’s (SNE - Snapshot Report) PSP and Microsoft Corporation’s (MSFT - Analyst Report) Xbox.

We believe that besides improving the in-house retail experience of a Blockbuster customer, the acquisition of Alpha Bay will reduce DISH’s IT cost by almost 50% in 12 months, and will add to its revenue front as it will continue to market its enterprise systems to other retail companies.

The current Zacks Consensus Estimate for DISH Network Corp. is pegged at 68 cents for the second quarter, with a growth rate estimate of (8.98%). For 2012 and 2013, the Zacks Consensus Estimates stand at $2.73 and $2.79 with a growth rate of (5.49%) and 2.20%, respectively

Recommendation

Currently, DISH Network has a Zacks #3 Rank, implying a short-term Hold rating on the stock. We are also maintaining our long-term Neutral recommendation on the company’s shares.