SPG Guitars E-Mail Newsletter June 1, 2007

Guitar Center Inc., the listed California musical instruments retailer, has hired Goldman Sachs to run an auction, an investment banking source said. The source, whose comments underlined speculation which had emerged yesterday, said that it was his understanding that the sale process was already fairly advanced.

The company’s management has been disappointed in its stock performance, which has been hurt by poor performance of its direct response business, a hedge fund manager claiming knowledge of management’s thinking said. Guitar Center is the dominant retailer of musical instruments, the hedge fund source added.

A Guitar Center official and an outside public relations firm representing the company didn’t return calls. A Goldman Sachs official declined comment.

Unlike a couple of other music instrument chains that have gone into bankruptcy recently, Guitar Center’s retail stores are profitable, and most of its customers are professional musicians and serious amateurs, an audience that is less likely to be lured away by discount retailers like Wal-Mart, the hedge fund source said. That makes Guitar Center an attractive target for LBO firms, the hedge fund source added.

Last year Woodwind & Brasswind, an Indiana and Brook Mays Inc. both filed for Ch. 11. Guitar Center bought Woodwind & Brasswind out of bankruptcy.