Is a Best Buy Buyout Inevitable?

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It’s been a hard year for consumer electronics retailer Best Buy (NYSE:BBY). The company’s stock price has come down nearly 50 percent this year to date and hit a new 52-week low on November 21 of $11.46 per share. Fiscal 2013 third-quarter results showed a loss of $0.04 per share, a 4.3 percent drop in comparable-store sales, and a 4.7 percent year over year decline in revenue.

To sum it up, “In line with trends experienced over the last three years, Best Buy’s third quarter financial performance was clearly unsatisfactory,” said president and CEO Hubert Joly in the earnings report.

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The reasons for the company’s unsatisfactory decline are fairly well documented. Steep competition from online marketplaces like Amazon.com (NASDAQ:AMZN) and destination mega-shopping centers like Wal-Mart (NYSE:WMT) are appealing to consumers with lower prices and more convenience. Competition compounded by a tough economy has the company backed into a corner.

Current management has initiated a “Renew Blue” strategy to “begin re-invigorating the company’s performance and rejuvenating Best Buy” but many investors are dubious about success. With limited options on the table and unwilling to see his company collapse, founder and 20-percent stakeholder Richard Schulze announced in August his desire to work with private-equity funds and take the struggling company private.

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