On April 1, 1963, Charles Tandy booked one of the junior ballrooms at the Ritz-Carlton in Boston and put out a call to Radio Shack employees to meet there that evening. There were rumors of changes afloat, but no one knew anything specific. That night, about 40 employees assembled in the ballroom where Tandy and C.O. Buckalew, one of his accountants, were waiting for them. “I’m Charles Tandy from Fort Worth, Texas,” he said to the group. “I now own Radio Shack.”
Why Charles Tandy wanted Radio Shack
Charles Tandy made his name in the leather craft business, operating a catalog business and a chain of retail stores that sold leathercraft supplies, kits, and related merchandise. But while his father, David, and younger brother Bill were content selling leather crafts, Charles had ambitions that were bigger than the business model could fulfill. So after taking Tandy public in a nonconventional manner, by merging with a struggling east coast leather company that was publicly traded and then taking it over, he started looking for other opportunities.
In 1962, Tandy and one of his managers started what would become Pier 1 Imports, a furniture store that lasted 58 years, until 2020. But Tandy’s methods didn’t work as well for selling furniture. But meanwhile, First National Bank of Boston had a $5 million loan out to a chain of 9 stores called Radio Shack. Radio Shack couldn’t pay it, but its head, Milton Deutschmann, was in denial.
First National Bank put one of its vice presidents, Bill Brown, in charge of the Radio Shack account. Brown knew they would lose 75 cents on the dollar if they simply liquidated the company, so he tried to find a buyer. He knew Charles Tandy from being involved in Tandy’s going public, and introduced Tandy to Deutschmann. Tandy and Deutschmann didn’t get along, so their talks quickly went nowhere. But as the company continued to struggle, Brown got Tandy back to the table again. He called Tandy’s office, only to find he was vacationing in Mexico. Brown convinced the office to have Tandy call him.
How Radio Shack got into trouble
Radio Shack was founded in 1921 by Theodore Deutschmann, a British immigrant, selling electronics components by retail and mail order. It took its name from the wooden structure on ships that housed their radio equipment. In 1947, it started selling audio equipment, and in 1954 it launched its private label brand, Realistic.
By 1960, Deutschmann’s brother, Milton, was running the company. It was profitable, making $445,804 on $12.5 million in sales. But in 1961, things took a turn for the worse, losing $836,358. By 1962, Radio Shack was losing $200,000 per month.
Decades later, Deutschmann acknowledged Radio Shack’s major problem was extending credit to its customers. Quoted in the 1992 book Tandy’s Money Machine by Irvin Farman, he said the company knew merchandising, but didn’t know anything about credit, especially how to go about collecting the money.
But Lewis Kornfeld, Radio Shack’s vice president of advertising and merchandising, said some problems went back further, to 1958. That year, Chicago-based consulting firm Cresap, McCormick and Padgett advised Radio Shack to double and quadruple all purchase orders. They weren’t going to double or quadruple their sales on broadcast microphones, Kornfeld said. Kornfeld also said Radio Shack management didn’t calculate gross margins correctly, overestimating its margins by 8-12 percent.
Tandy’s offer
On March 27, 1963, Deutschmann met Tandy along with representatives from the bank. Deutschmann told them what he had told Tandy before, that they just needed to spend more money on advertising, spend a bit more money up front, and they could turn the company around.
At 11:30, Tandy rose from his chair and started walking out the door. Brown asked where he was going. “I’m going back to Mexico,” he said.
Brown and Radio Shack director Francis Hooks Burr followed him out the door. Brown took Tandy to lunch, where he convinced him to write down his offer on paper, while Burr talked to Deutschmann.
Tandy’s conditions were that he took over management immediately, that one of the Big Eight accounting firms would conduct an audit, and he would pay full book value for the company as of June 30, 1963, the end of Radio Shack’s fiscal year.
Brown said the company’s book value was likely zero and he couldn’t have the company for nothing, so he insisted on Tandy putting down a $1 million deposit. Tandy talked him down to $300,000.
Deutschmann was receptive to the offer, because he was in denial about how much trouble Radio Shack was in. He signed the deal. He walked right into Tandy’s trap.
Price Waterhouse conducted an audit, finding the company had negative net worth, giving it a book value of zero. That meant Tandy took control of Radio Shack for $300,000.
How Tandy turned around Radio Shack
Tandy’s plan to turn around the company was to close the large stores, open a large number of smaller stores in locations he rented so he could close underperforming stores at little risk, and eliminate credit, going cash only. He also eliminated the mail-order business, although he continued publishing a catalog. The Radio Shack catalog became iconic under Tandy’s ownership. The typical Radio Shack store ended up being 2,500 square feet.
Tandy reduced the number of stockkeeping units, or SKUs, Radio Shack carried from 30,000 to 2,400. And he took as much of the business as possible to private label brands, which had better margins.
By the time Charles Tandy died at the age of 60 in 1978, Radio Shack had around 7,000 stores, including franchises and international stores. As a kid growing up in the 1970s and 80s, it was hard to escape Realistic sound equipment, TRS-80 and Tandy computers, the Armatron robotic toy, and my favorite, the siren-equipped fire chief’s helmet.
This and other of Charles Tandy’s escapades are documented in the 1992 book Tandy’s Money Machine by Irvin Farman. With Radio Shack having fallen on hard times in subsequent decades and going bankrupt in 2015, this book seems largely forgotten today. But it reads well, and it’s well-researched. If you’re a Radio Shack fan or a fan of vintage computing, it’s worth tracking down a used copy for your collection.
David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.
I loved going to radio shack when I was a kid in the 80s but I was endlessly frustrated that they never seemed to have all the parts needed to build anything, even projects in their own books. By the mid 90s hobby electronics was on life support with iconic kit suppliers and surplus dealers dropping like flies. Then Radio Shack was far too slow to pivot to support the growing maker community when cheap easy to use microcontrollers like the AVR, PIC and the Arduino ecosystem showed up followed by the Raspberry Pi. They did eventually carry some Arduino stuff near the end but it was far too little and too late.