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Best Buy Earnings: You Break It, You Best Buy It Part II

NEW YORK ( TheStreet) -- This just in. Best Buy (BBY - Get Report) reported worse than expected earnings and investors are still skeptical of a premium-priced buyout proposal from ousted chairman and company founder Richard Schulze.

Basically, nothing's changed.

As TheStreet noted in August after Best Buy cut its earnings outlook, it's time for Schulze to put up or shut up on a multi-billion dollar takeover proposal that's been discounted by investors since first being floated to the public this summer.

Third quarter earnings, which showed a disappointing net loss of $13 million, or 4 cents a share, and a 4.3% drop in same store sales, only give investors more reason to be skeptical of Schulze's motives in slow-playing a takeover deal.

From the first indication of Schulze take-private interest, the prospects of a deal have seemed sketchy at best. That is especially true given the price tag of Best Buy and Schulze's reluctance to put out a formal offer. In fact, Schulze's machinations resemble those used by activist investor Carl Icahn when opening tender offer campaigns that can stretch months without resulting in a deal.

With Best Buy having agreed to open its books to Schulze and media reports that private equity giants are lining up for a bid on the electronics retailer, time is of the essence. Cash and cash equivalents at the retailer have fallen to $309 million, from over $2 billion a year ago. Meanwhile, the headline on Best Buy's earnings release is equally dire. "Best Buy Confirms Significant Decline in Fiscal Third Quarter 2013 Earnings," writes the company.

Shares in Best Buy tumbled over 13% to 10-year lows of $11.96 a share in Tuesday trading.

As investors eat further losses that put Best Buy's year-to-date stock drop at nearly 50%, the only person who's likely to be celebrating is Schulze.

After all, the recently ousted chairman recently dropped an initial takeover 'proposal' as high as $26 a share to $20 a share earlier in November. Now, with Best Buy's market cap falling below $5 billion, the prospect that Schulze can arrange the financing for a takeover seems more plausible. That is, if Schulze is truly interested in retaking the reins of Best Buy.

Were his proposals nothing more than an effort to generate M&A interest or a stock pop, the company's continued share plunge would hit Schulze, who owns over 20% of Best Buy shares, hardest.

Meanwhile, waving a premium priced non-bid to public investors and watching an accelerating deterioration in Best Buy's earnings and cash position is no way to go about business.

If Schulze wants Best Buy and thinks he can turn the company around -- as he indicated in multiple letters to company management -- he needs to stick with his takeover proposals and submit a formal offer.
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