APRIL FOOLS' DAY

was two weeks ago but apparently no one told

Blockbuster

for even more beleaguered

Circuit City Stores

Netflix

Taking the strategic view, there's a method to Blockbuster's seeming madness. Attempting to stave off irrelevance in the digital media future is a wise, even laudable goal. On a conference call with analysts, Chief Executive James Keyes invoked the gleaming example of Apple's Apple Stores as the rationale for the tie-up. "Our view of the change that's occurring in consumer electronics and the movie-rental business is one of convergence," he said.

Yes, he's right about where the industry is headed, and trying to create a one-stop shopping powerhouse for digital media, tools and gadgets certainly makes sense. But realizing that future by merging these two retailers seems far-fetched at best. For one thing, they have enough enemies, already. Blockbuster's under siege from Netflix, while Circuit City's big-box dominance was lost long ago to Best Buy and Wal-Mart Stores.

Staking a claim in the converged future of digital media sounds just swell, but the territory's hardly there for the taking not if Apple, Amazon.com or any number of emergent online media players have anything to say about it. And let's not forget Nokia, if it can make good on its plan to take U.S. market share.

It's also hard to see how combining these cacophonous, confusing and uninviting retailers would provide consumers with a shopping experience anything like the Apple Store. It's a beautiful fantasy, but it makes us wonder if Blockbuster management has ever set foot inside one of Steve Jobs's cathedrals of conspicuous digital consumption.

From an investing standpoint, even if Blockbuster could somehow tie these two bricks together and make them float, there's little hope that its shares will fare well anytime soon. Blockbuster's almost incomprehensible overreaching led BMO Capital Markets analyst Jeffrey Logsdon to downgrade the stock to Market Perform (Hold, essentially) from Outperform (Buy) Monday.

"While investors might be willing to look beyond Blockbuster's own turnaround, we think it could take nine to 12 months to close the deal, then an additional year to potentially realize any strategic or financial synergies," Logsdon wrote. "We find it difficult to imagine that fighting what amounts to a two-front war will ultimately enhance value for Blockbuster shareholders."

As for investors in Circuit City, this is the best news they've had in a long time. True, the company ended a four-quarter losing steak by posting a profit last week, but there was little in the news to suggest the company's troubles are behind it. Circuit City managed to control expenses during the period, but critical measures of health like same-store sales and gross margin plunged. As Stacey Widlitz, an analyst with Pali Research summed it up last week: "At this point there is no reason to believe a turnaround is taking hold. We would not get excited about owning Circuit City."

Even after Monday's 27% rally to $4.97, shares in Circuit City have still lost more than 70% in the last year. There's nothing lovely in the fundamentals or the company's prospects. And interestingly, although Blockbuster is offering between $6 and $8 a share (more than double last week's closing price), the stock has failed to trade higher than the bid. The Street appears pretty doubtful of the outcome.

Circuit City faithful would do well to take this opportunity to exit their masochistic positions. Let the professionals and arbitrageurs play out the string. Blockbuster shareholders, meanwhile, had already seen their stakes lose more than half their value in the last year. The stock's down another 10% Monday. Retail investors should just let this one go, too.

If there's an apparent winner in this, it stands to be Netflix, which was already gaining at Blockbuster's expense before the latter decided to tie an albatross around its neck. Thomas Weisel Partners analyst Lloyd Walmsley reiterated his Outperform rating Monday, writing, "We believe a Blockbuster/Circuit City combination could help accelerate Netflix's recent improved performance."

True, Blockbuster and Circuit City have big brands and lots of real estate, but that in itself is far from sufficient for success. Just look at Sears Holdings, the struggling retailer born of Kmart's acquisition of Sears. It's understandable that a drowning man does desperate things, but grabbing onto another drowning man won't keep him afloat.