The offering comes with a multi-year agreement with Sonic Solutions, which involves Sonic’s RoxioNow platform to extend its reach. RoxioNow powers digital services for retailers, cable operators, manufacturers, etc. Sonic Solutions and Sears are working together to embed the RoxioNow services into various devices, such as Blu-ray players, mobile phones, and TVs. 

"Collaborating with Sonic provides a great opportunity for Sears and Kmart to launch digital services for customers seeking even faster access to the latest in home entertainment experiences," said Karen Austin, President of Consumer Electronics for Sears and Kmart. "We’ll continue to increase the reach and flexibility of the Alphaline Entertainment service by providing consumers on-demand access to the latest entertainment from a range of home and mobile electronics."

"The Sears launch represents an important milestone for Sonic, with another RoxioNow-powered storefront now open for business," said Mark Ely, President of Strategy, Sonic Solutions. "We look forward to continuing to collaborate with Sears and bringing Alphaline Entertainment to consumers through a broad range of connected devices."

Clearly, the service will compete with services from Amazon and iTunes, but may also have some impact services like Netflix (which may be getting ready for some big expansion). It could even compete with Google TV, because consumers may be forced to decide whether they want a Blu-ray player that supports this or one that comes with Google TV. 

Either way, it’s clear that connected devices and services that utilize them are going to be big business in 2011, and it’s gong to be an increasingly interesting space to watch.

Under the multi-year agreement, Sears has licensed Sonic Solutions’ RoxioNow platform, which will power digital entertainment delivery services for both Sears and Kmart. The new services will launch later this year and will be promoted at retail stores nationwide.

"Teaming up with Sonic is a great opportunity for Sears and Kmart to quickly establish a position in digital video entertainment, and offer another great service to our customers," said Karen Austin, President of Home Electronics for Sears Holdings.

"With direct access to so many movies and TV shows from a broad range of devices, our customers will have the ability to obtain the latest high-quality entertainment virtually anywhere, anytime."

The new entertainment service will offer a range of updated movies and TV shows for rent or purchase, including new releases often on the same day DVDs become available at retail stores. Sonic and Sears will embed the service on a network of devices including portable media players, Blu-ray players, mobile phones, and high-definition televisions.
 

Toshiba spokeswoman Jody Sally said that Kmart has decided to carry HD DVD instead of Blu-ray because of its lower price according to Home Media Magazine. The Toshiba HD DVD player sells for $299 but is available for $198 at a number of retailers including Wal-Mart and Circuit City.

Kmart will continue to sell the Playstation 3, which has a Blu-ray player inside, but its marketing will be concentrated on HD DVD. The least expensive Blu-ray player retails for $499 and Sony says it will launch a $399 Playstation 3 next month.

Craig Kornblau, president of Universal Studios Home Entertainment, which supports HD DVD said the $200 price will help to reach a mass audience. Sally agreed that the lower price would help sales.

"There was no official move on our MSRP, but I’m happy to see the strong sales momentum on our players," Sally said. "We experienced a great lift in player sales when Transformers (Paramount) was released, and the strong momentum continues."

More than 170 million of Sears’ outstanding shares were voted, with approximately 149 million shares or approximately 88% of the votes cast and 69% of total shares outstanding voted in favor of the merger proposal. More than 61 million of Kmart’s outstanding shares were voted, with 99.9% of the votes cast and 69% of the shares outstanding voting in favor.

Widespread store closings are not in the cards for the new retailer.

An Associated Press article says, “Minutes after a rancorous shareholders’ meeting where Sears, Roebuck and Co. retirees denounced the 119-year-old retailer’s sale to Kmart Holding Corp., Lampert stated his intent to reinvigorate the two faded retail icons and ‘transform them into a great company’.”

“I think either company on its own could have been OK,” said Lampert, who was Kmart’s chairman and the largest individual shareholder in each retailer. “But I don’t think either company could have been a great company.”

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More than 170 million of Sears’ outstanding shares were voted, with approximately 149 million shares or approximately 88 percent of the votes cast and 69 percent of total shares outstanding voted in favor of the merger proposal. More than 61 million of Kmart’s outstanding shares were voted, with 99.9 percent of the votes cast and 69 percent of the shares outstanding voting in favor.

An Washington Post article says:

“Sears and Kmart stores have suffered from declining sales for most of the past decade. Kmart recently emerged from bankruptcy proceedings, during which it excised 700 underperforming stores, and many of its remaining properties are in older shopping centers.

The new company faces a formidable task integrating two sprawling retail empires. And it must find ways to squeeze out the $500 million in cost savings and improved sales that it has promised shareholders.”

Sears and Kmart will form a major new retail company named Sears Holdings Corporation. Sears Holdings stock is expected to start trading on the Nasdaq National Market under the stock symbol “SHLD” on March 28, 2005.

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More than 170 million of Sears’ outstanding shares were voted, with approximately 149 million shares or approximately 88 percent of the votes cast and 69 percent of total shares outstanding voted in favor of the merger proposal. More than 61 million of Kmart’s outstanding shares were voted, with 99.9 percent of the votes cast and 69 percent of the shares outstanding voting in favor. The closing of the merger is expected to occur later today.

An Associated Press article says:

“The votes capped off the stunning proposal unveiled four months earlier by Kmart Holding Corp. chairman Edward Lampert, the billionaire hedge fund manager who was the largest individual shareholder in each company.

Lampert, who helped Troy, Mich.-based Kmart turn a $1.1 billion profit last year with the aid of real estate transactions, denied he has a big sell-off in mind for Sears assets and said the new company ‘goes beyond being an investment.’”

”It’s an opportunity to transform two companies that once were great — to transform them into a great company relative to the 21st century,” said Lampert. ”I think there’s a presumption that you’re going to see a lot of store closings. That’s a wrong presumption,” he said. ”Our program is to keep as many stores open as we can.”

Together, Sears and Kmart will form a major new retail company named Sears Holdings Corporation. Sears Holdings stock is expected to start trading on the Nasdaq National Market under the stock symbol “SHLD” on March 28, 2005.

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More than 170 million of Sears’ outstanding shares were voted, with approximately 149 million shares or approximately 88 percent of the votes cast and 69 percent of total shares outstanding voted in favor of the merger proposal. More than 61 million of Kmart’s outstanding shares were voted, with 99.9 percent of the votes cast and 69 percent of the shares outstanding voting in favor. The closing of the merger is expected to occur later today.

Kmart Chairman Edward S. Lampert said, “The combination of Kmart and Sears will create a leading retailer and we expect will provide heightened value for our customers, associates and shareholders. Sears Holdings will have an enviable stable of proprietary brands, strong points of distribution and enhanced growth opportunities.”

Alan J. Lacy, chairman and chief executive officer of Sears, commented, “I am very pleased that our shareholders recognize and support the strategic and economic benefits of the merger. Sears Holdings will better meet the needs of more families with outstanding products and services available in nearly 3,500 convenient locations.”

Together, Sears and Kmart will form a major new retail company named Sears Holdings Corporation. Sears Holdings stock is expected to start trading on the Nasdaq National Market under the stock symbol “SHLD” on March 28, 2005.

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For the 13 weeks ended January 26, 2005, the Company reported net income of $309 million, or $3.09 per diluted share compared to $270 million or $2.78 per diluted share for the same period in Fiscal 2003. Adjusted net income and adjusted diluted earnings per share, excluding gains on sales of assets and bankruptcy-related recoveries, were $259 million or $2.59 per diluted share, an increase of 20% and 16% over the prior year, respectively.

Same-store sales declined by 4.5% during the fourth quarter of Fiscal 2004, which represents a significant improvement compared to the two previous quarters in which the decline was 12.8% and 14.9% and compared to the prior year fourth quarter in which the decline was 13.5%.

Aylwin Lewis, President and Chief Executive Officer of Kmart, said, “After a strong first two months of the fourth quarter, we continued to deliver solid financial results through the close of 2004. While we are pleased with our performance, our return to solid, profitable operations is only the first stage in our effort to revitalize this organization. We look forward to what still needs to be accomplished and plan to continue our momentum by further improving our operations and the customer shopping experience in 2005.”

Operating income for the 13-weeks ended January 26, 2005 was $472 million compared to $497 million in the prior year. Adjusted operating income, excluding gains on sales of assets, was $437 million in the fourth quarter of Fiscal 2004 compared to $411 million in the fourth quarter of Fiscal 2003.

Net income for the fourth quarter of Fiscal 2004 includes a charge of approximately $7 million after-tax or $0.07 per diluted share for the early amortization of debt issuance costs associated with the Company’s decision to terminate its credit facility in January, 2005. Net income for the fourth quarter of Fiscal 2003 includes a charge of approximately $8 million after-tax or $0.08 per diluted share for the early amortization of the debt issuance costs associated with the Company’s decision to reduce the size of the credit facility.

Adjusted operating income, adjusted net income and adjusted diluted earnings per share are non-GAAP measures. The Company has provided these adjusted figures to provide a more meaningful comparison of ongoing results and analysis of the Company’s operating performance, as they reflect core operations excluding significant gains realized on sales of assets. Non-GAAP measures should be evaluated in conjunction with, and are not a substitute for, GAAP financial measures.

Net income and diluted earnings per share for Fiscal 2004 were $1,106 million and $11.00 per share, respectively. Gains on sales of assets and bankruptcy-related recoveries contributed $579 million and $37 million, respectively, after-tax to net income in Fiscal 2004. Included in Net income is a charge of $14 million after-tax or $0.14 per diluted share for the early amortization of debt issuance costs associated with the Company’s decision to reduce the size, amend, restate and then terminate the credit facility.

Operating activities provided net cash of approximately $1.1 billion in Fiscal 2004. Net income after gains on sales of assets of $579 after-tax and bankruptcy related items of $37 million after-tax provided $490 million of operating cash flow in the current year. Cash flows were positively impacted by improvements in working capital, including incremental accounts payable due to improved terms with our vendors and timing of receipts.

Investing activities generated $332 million in Fiscal 2004 due largely from proceeds of $444 million from the sale of owned and assignment of leased properties to Sears and Home Depot. An additional $118 million was received for the sale of non-core assets. Proceeds from the sale of assets during the current year were offset by capital expenditures of $230 million.

Kmart’s cash balance on January 26, 2005 was approximately $3.4 billion, exceeding prior expectations of $3.2 billion and an increase of approximately $1.3 billion over the prior year. The $3.4 billion excludes approximately $400 million related to the sale of stores to Sears, recorded in accounts receivable, pursuant to the previously announced store sale transaction. Inventory levels were $3.3 billion at the end of Fiscal 2004, consistent with prior year-end inventory of $3.2 billion.

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Kmart and Sears, Roebuck shareholders of record at the close of business on January 26, 2005 will be entitled to vote on the proposal. The special meeting of Kmart shareholders will be held at Sears, Roebuck’s headquarters, which will serve as the headquarters of the combined company following the merger, in Hoffman Estates, IL in the Merchandise Review Center, General Session Room at 8:30 a.m. CST / 9:30 a.m. EST. The special meeting of Sears, Roebuck’s shareholders will be held at its headquarters in Hoffman Estates, IL in the Merchandise Review Center, General Session Room at 11:00 a.m. CST / 12:00 p.m. EST.

Under the merger agreement, Sears Holdings Corporation will have a ten- member Board of Directors, which will include a total of seven members from the current Kmart Board and three members from the current Sears, Roebuck Board. Sears Holdings will be the holding company for the Sears, Roebuck and Kmart businesses, which will continue to operate separately under their respective brand names.

The merger is subject to approval by both Kmart’s and Sears, Roebuck’s shareholders and customary closing conditions.

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