But Best Buy stands poised to see its "Renew Blue" turnaround strategy gain traction after Microsoft (MSFT) doubled down on its push into the smartphone market with deal to acquire Nokia's (NOK) handset business for $7.1 billion.
Best Buy is uniquely positioned to benefit from what could be a growing rivalry between Microsoft and Google (GOOG), as those firms seek to cut into the mobile industry profits that Apple has achieved by integrating its operating system with its mobile hardware. Google and Microsoft will now own large handset manufacturers that put them in direct running with Apple, and both companies are likely to rely on Best Buy as a crucial selling channel.
In the past year, Google and Microsoft have both opened their own stores within Best Buy stores nationally, in a move that is helping the big box electronics retailer improve its appeal to customers and its profit margins. While Best Buy's store-in-store concept with Google and Microsoft is just starting to be reflected in quarterly earnings reports, Microsoft's further commitment to hardware indicates Best Buy's strategy could take hold.Put simply, Microsoft and Google are giving no signs of slowing their spending in the smartphone market. In the medium-term, Best Buy seems to be the biggest beneficiary. At this time last year, Best Buy was fighting a seemingly hostile takeover bid by its founder Richard Schulze that put its credit ratings in junk bond territory. However, Microsoft's dedication to the consumer hardware and software business may change the narrative surrounding the company, heading into an all-important holiday season and hardware upgrade cycle. The company has returned to profitability and its operations are beginning to generate cash again. The "Renew Blue" strategy under new CEO Hubert Joly and three quarters of better-than-forecast earnings that culminated in a return to profitability in the second quarter beg the question of whether the business has stabilized.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV