Mobile Device Sales May Be Best Buy's Best Bet

Best Buy (NYSE: BBY) said Monday it would buy out Carphone Warehouse's (CPW) interest in its North American Best Buy Mobile business for US$1.3 billion. By purchasing the CPW stake, Best Buy is trying to shift more of its focus to mobile devices. Best Buy has asked CPW to stay on in a consultancy capacity for up to five years.

With sales of TVs and other electronics lagging, Best Buy is going to try for some revenue oomph by leveraging its position in the mobile device market. Killing its European expansion and juicing up its services portfolio may also help.

This year Best Buy will also close all 11 of the big-box stores it currently operates in the UK. The stores were launched in April 2010 as an experiment, but over the past year, they have become a drain on the company's financials.

Best Buy also announced Monday an agreement to acquire the IT and cloud services company mindSHIFT for $167 million. The mindSHIFT purchase will snug neatly with Best Buy's Geek Squad services to small- and medium-size businesses.

The new acquisitions live in two markets -- mobile devices and services -- that are not as vulnerable to discounting as many of Best Buy's electronics products. The company has been steadily losing sales to Internet giants such as Amazon (Nasdaq: AMZN).

Best Buy did not respond to the E-Commerce Times' request for comments by press time.

Going for the No-Discount Market

One of the clear side stories to its Carphone acquisition is Best Buy's withdrawal from the UK.

"This is the end of a high-profile deal with Carphone to expand Best Buy into the European market," said Tier1Research analyst Carl Brooks.

"This deal is really about a business failure and a redirection of efforts to grow sales," he told the E-Commerce Times.

That doesn't mean Carphone is going out of business.

"It is only the joint venture between Best Buy and Carphone -- called 'Best Buy Europe' -- that is collapsing," Brooks explained. "Carphone is not in serious trouble."

Best Buy's acquisition of Carphone's stake in its mobile business indicates the retailer sees a bright future in mobile devices.

"Best Buy's high-margin sales of cables and doodads and media are suffering," said Brooks. "You can often find an item Best Buy retails for $20 for $5 online."

Mobile devices and their plans are not subject to direct-from-the-source discounts, Brooks observed.

"An iPhone has a fixed price, so that's predictable revenue for Best Buy," he said.
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