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Best Buy Best Suited to Best Takeover $BBY $GOOG $MSFT $AAPL

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Best Buy (NYSE:BBY) continues to lurch forward and attempt to revitalize itself. New C level officers are in place. They have decided to ramp up on-line activities. (Hey that sounds fresh) They have dwindling cash resources which is disturbing.

Do we smell a take-over. Because we do smell something.

Best Buy leading retail problem is consumers doing physical browsing and then placing on-line orders somewhere else. OK so they have a tremendous strength that they cannot leverage. In the mean time Google, Apple, Samsung and Microsoft (think games and maybe phones) all have a vested interest in selling hardware and devices. Best Buy still generates huge foot traffic and satisfies any tactile pre-purchase needs.

As a mass market retailer Best Buy has its faults which are well documented in the market place. But to someone wishing to dominate distribution channels Best Buy offers some near monopolistic advantages.

So like someone should buy them, feature their own products and kick competitors in the groin area.

Market cap of around $5 Billion and dropping. An expensive dividend yield of 4.45% and an approximately short interest position of around 10% of public float, the under 5 trailing PE ratio has got to make an acquisition look good.

Maybe go the private equity route and disguise any anti-trust issues through the chop-house process but the bits and pieces will give strategic advantage to key players. Given the huge cash balances of some tech players this is entirely doable.

Remember its a double play gambit. Enhance your own product line and torpedo some or all your competitors.

Count down?

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

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Best Buy Travel Bias Influences New Hire for President $BBY $GOOG $EBAY $MOT $EXPE

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Best Buy (NYSE:BBY) finished up some outstanding business and hired a new President of the e-commerce and on-line divisions. Scott Durchslag former president of online travel company Expedia (Nasdaq:EXPE). He is also a former partner at McKinsey & Co. and has previously served as Skype’s chief operating officer prior to its sale by EBay (Nasdaq:EBAY) as well as a vice president at Motorola Inc. which partly has been swallowed by Google (Nasdaq:GOOG). Resume looks good.

But here is the bias to be concerned over. Hubert Joly the current President, CEO and Director is also from the online travel business. CW Travel Holdings long based in Minneapolis is also a major player in the travel business.  While corporations need to make sure the fit in the executive suite works you need to be concerned about too much background commonality.

The next question becomes: What do you do with the big boxes? The online guys will need big money to spend and the bricks and mortar environment is clearly not cutting it.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

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Best Buy Sticks with a Homey for CEO. Not exactly the Big Bold Bet. $BBY $AMZN $DJTRET $RTH

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Best Buy (NYSE:BBY) announced a new CEO with a supposedly mid range pay package. Mid range that is for a company of Best Buy’s size. Brand new CEO Hubert Joly scored a pay package valued around $32 million over three years to entice him to the problematic consumer-electronics chain.

OK so Best buy is not hot and the opportunity to run it may not be the best piece of sugar out there. However, it does put to rest the lack of CEO quandary. More telling is Hubert Joly has a history of working with problematic companies. He has more recently been running Carlson a global hospitality company and or Carlson Travel. This puts him squarely into the Minneapolis Business milieu, which quite frankly is not that big.

So here is the inferred strategy from the board of directors by the numbers:

  1. The corporation has a problem
  2. We blow off the chief problem maker
  3. We hire a new guy with no retail experience
  4. But the new no retail guy is good at stabilizing companies
  5. Why do this?
  6. Unstable companies do not attract super-star candidates
  7. Unstable companies do not attract premium paying take over offers
  8. Board is still uncertain about what course to take in the future
  9. Board is still uncertain how the market cookie will crumble
  10. But in the meantime stability guy fixes what can be fixed.
  11. Also hire lots of consultants and investment bankers to get advice and unlock value.
  12. This is not the time to hire the retail equivalent of Marisa Meyer
  13. The retail equivalent of Marissa Meyer is probably Jeff Bezos.
  14. This means a take-over by Amazon (Nasdaq:AMZN) so we need to clean up the joint.
  15. In the mean time we need to sell some big-ass TV’s.

George Gutowski writes from a caveat emptor perspective.

Best Buy Reverse Governance Issues. Can Minnesota Law Maximize Shareholder Wealth $BBY

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Best Buy Co (NYSE:BBY) has a takeover problem. Roger Schulze who holds 20% of the shares has made a take-over offer. Sort of. He can’t prove that he has the financial backing to pull the deal off. Credit Suisse will only give him a highly confident letter which probably cost plenty but obligates nothing. Credit Suisse also has to explain to potential financiers why its a good idea to back Roger Schulze now after his own board made him walk the plank. Oh by the way retail is not exactly the best place to be. tough story to sell.

Best Buy’s board has some unique Minnesota law that allows them to consider many other factors in addition to the official take-over offer. Minnesota has a populist dare I say Social Democratic world view. Unlike Delaware law Minnesota law allows for the interests of employees and other stakeholders to be considered.

So the corporate governance obligations are different. Most shareholders have bought and selling Best Buy for years and had no practical working knowledge of this quirk. I dare say there will not be a stampede to Minnesota to incorporate new business. A few may even leave as boards of directors may not like the hoops Minnesota makes you jump through.

The bottom line will still be financial. What is in the best interests of Best Buy shareholders. The company is in difficulty. The now ousted founder who still owes 20% is trying to make an offer but cannot put it together, at least for now. The board needs to prove its usefulness and show how it taking care of the shareholders. As Best Buy is in distress they will need to demonstrate how they will take care of other stakeholders.

At the present time they have nothing they can go public with. Hopefully the back room machinations are in high gear and a recovery plan is under assembly. But right now the responsibility sits with the board of directors.

George Gutowski writes from a caveat emptor perspective.

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Touchpad sleeps with the fish $HPQ self assassinates #touchpad #ipad #corpgov

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Hewlett-Packard (NYSE:HPQ) threw in the towel and self assassinated the touch pad. iPad and Steve Jobs rule, rock and regulate the tablet post PC world. and it didn’t take that long! Best Buy (NYSE:BBY) had the terrible stats weeks ago the product was just not moving. HP does not have the touch pardon the pun with consumer electronics. Wondering if Best Buy could start selling their data stream and make some extra money.

Leo Apotheker can argue that he took over in a crisis after the Mike Hurd expense account thing. He is from (NYSE:SAP) SAP and has enterprise computing in his DNA. So he lost public faith quickly in something that he had no investment in. The corporate governance issue becomes “How could the board and C-level officers make such a huge blunder and fall flat on their faces so quickly.”

Shareholder class action lawsuits will soon start. Not sure if corporate stupidity is a legal cause of action. But if lawyers can stretch the argument to reckless than the judge will start to listen.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours. In my hunt for a tablet, HP was not even a factor. Up to now I have been loyally buying HP products right from the old 12C calculator which I still have to many printers to desk tops and laptops. Adieu old friend.

 

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Best Buy Avoids OnLine Downloads

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Best Buy (BBY) announces its connectivity strategy along side a near doubling of EPS. Sounds good. Very good in fact. Conspicuous by its absence is any discussion of on-line downloads a la Netflix (NFLX) or iTunes (AAPL). You have the consumer at the initial moment of trust when he/she lays out large wads of cash to buy some expensive gear. If the consumer is going to use connectivity it makes sense the same consumer will consume media on-line. Why lose the relationship?

Brian Dunn, CEO of Best Buy says they are still in the early stages of the strategy. Lots of ways the comment may be interpreted.

Let’s see Netflix (NFLX) has a market cap of some $7.7 Billion. Best Buy (BBY) market cap is roughly twice that at $14.4 billion. M&A seems unlikely. Strategic Alliances seem more likely. But executives do not even discuss the possibility.

Disclosure: No position in stocks mentioned in this post.