Best Buy buyout: Good idea?

The struggling electronics chain gives founder Richard Schulze a shot at acquiring the company, but it's not clear he's the right man for the job.

By TheWeek.com Aug 29, 2012 11:24AM

Richard Schulze, the founder of Best Buy (BBY), won't take no for an answer. He recently floated the idea of acquiring the electronics retailer he once led, but talks reached an impasse. However, negotiations have been revived in the wake of Best Buy's dismal quarterly earnings and investor skepticism that its newly appointed CEO, Hubert Joly, can turn the company around. 


This week, Best Buy said it will give Schulze access to its financial information in what amounts to a green light for him to make an offer. Yet the company still faces a threat from Amazon and other online retailers that sell the same goods for less money, and it's an open question whether Best Buy's founder can even save the company. 


Is a Schulze buyout a good idea?


No, Best Buy needs new blood. Schulze "knows the company well and has been a motivator" of Best Buy as it grew and "became a leader in selling technology," says Walter Loeb at Forbes. But "the retail environment for technology has changed" and "competition is fierce through e-retailers like Amazon and eBay." Best Buy needs to "develop a stronger internet presence, close stores, and revitalize existing units," and it's not clear whether Schulze understands that.


But investors have more confidence in Schulze. When Best Buy announced the appointment of Joly, who has no experience in retail, investors "pushed the stock down by 10%," says Dhanya Skariachan at Reuters. Meanwhile, Best Buy stock soared nearly 8% on the breakthrough in negotiations between Schulze and the company's board. At the very least, it indicates shareholders believe Schulze can offer something more than the turnaround plan Best Buy is offering.


Schulze must devise a better plan. With Best Buy opening its books, the pressure is on Schulze "to show he has a real deal up his sleeve," says Ryan Dezember at The Wall Street Journal. In addition to offering a feasible turnaround plan, he must find financial backers who believe in the project and are willing to bankroll it. The company "has pushed forward with its own plans for a turnaround" with Joly, and the onus is on Schulze to show that he can do better. 


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5Comments
Aug 29, 2012 5:00PM
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The problem is OVEREXPANSION, Items not in stock, Poor Slection, Poor Advertising

For example-- I lie in Corona Claifornia and within 15 Minutes of my home and I can to any one of 5 differenent locations.  In which case noe of  the 5 will have the item in stock or a very poor selections to choose from..    I would much rather go to a single locations that is bigger, more selection, better stock of products. This alone will allow the closure of 4 stores-- have 1 superstore and make the shopping to Best Buy a experience not a waste of time..  Best Buy Executive needs to look at some of the Frys Electronics Superstore and see how they are packed day in and day out.

 

 

Aug 29, 2012 6:51PM
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No one can save Best Buy. Their customer service after the sale has to be the worst in the country. Why buy from a company that acts like they don't need your business?
Aug 29, 2012 5:40PM
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Problem actually is that people should be charged a fee to connect and purchase from online stores,charged a tax. Same is true for the retailers selling on line!
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