Management Moves Further Spark Circuit CityManagement Moves Further Spark Circuit City

The management shakeup at Circuit City Stores continued Tuesday, as three of the firm's executives were promoted while its chief operating officer prepared to leave the retailer. Highfields Capital Management LP, a major stockholder in Circuit City, has been pressuring the retailer to improve its business operations.

Highfields, which owns about 8 percent of the Circuit City's stock, has made an unsolicited $3.25 billion bid to take over Circuit City, offering a premium on the stock price. Highfields has indicated it wants to take Circuit City private.

The resignation of COO John W. Froman, a long-time Circuit City executive, was announced on Monday. No reason was given for his resignation, and calls to Circuit City seeking comment on whether Highfields played a role in the management changes were not returned.

Highfields--which has a reputation for confrontational negotiations with the firms in which it invests--has been outspoken in its criticism of the electronics retailer. In a letter to Circuit City's chairman and chief executive officer, Alan McCollough, last month, Highfields said: ". . . the status quo is not acceptable. . .we are nevertheless disappointed that management has been unable to move more aggressively."

Highfields observed that the difficulties of dealing with the demands of public-company scrutiny weighed heavily on Circuit City, making private-company status more attractive. When Highfields announced its intention to take over Circuit City, its offer represented a 20 percent premium over the retailer's stock price and a 33 percent premium over the market value of its operating business, Highfields said.

The Highfields letter went on to state: "Our full team is available to answer questions, begin detailed discussions and move forward immediately." Highfields noted that Circuit City was "going head-to-head with a tough and entrenched rival"--an allusion to Best Buy, whose profits and market share have been on the rise.

In the latest management changes, George D. Clark Jr., a 20-year veteran of the chain, was named president, Circuit City-Retail Stores. Douglas T. Moore--who joined the firm in 1990 and, most recently, has been the retailer's Western Division president and senior vice president--was named senior vice president, merchandising. Ronald G. Cuthbertson was named senior vice president, supply chain and inventory management. Cuthbertson held executive positions at Best Buy from 1999 through 2004.

In another development, Circuit City said it is cutting its ties with online retailer Amazon.com Inc. to focus on its own Web site. Circuit City said its Web site business has grown rapidly in recent years.

A successor to Froman was not named in Tuesday's announcements, although media reports noted that Circuit City said it would name a replacement soon. Froman joined the retailer in 1986 and was named COO in 2001.

Last month, Circuit City said it would shutter 19 stores and lay off 430 full-time employees. The company also recently received a blow unrelated to its business operations, when one of its planes crashed, killing eight persons.