What's Next For Best Buy?


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Best Buy (NYSE: BBY ) has been shedding executives like leaves in fall, but it still must have come as something of a shock to the top brass when founder Richard Schulze resigned from his position on the board on Thursday, stating on his way out that he may sell his recently disclosed 20.1% stake in the retailer.

CEOs come and go, but when one of the company's founders, the people who put their heart and soul into building the business, decides to jump ship (albeit at the age of 71), then that really should be a wake up call.

"I continue to believe in Best Buy and its future--and care deeply about its customers, employees and shareholders," Schulze said as he left. "There is an urgent need for Best Buy to reinvigorate growth by reconnecting with today's customers and building pathways to the next generation of consumers."

So the big question is, what happens next? There are rumors swiftly gathering pace that Schulze is contemplating a takeover, which is at least plausible if he is unhappy at the way the company has been managed overall, feeling that he didn't have enough authority. Some analysts believe that Schulze was angry having lost control of the board, in the wake of allegations that he failed to notify the board about the alleged inappropriate behavior of former CEO Brian Dunn.

In the shorter term though, how does a company replace a founder? There will certainly be a battle for power now. A company spokesman, Bruce Hight, said, "We don't know what (Schulze's announcement) means, but I guess we'll find out. We certainly appreciate his past contributions, which were immense. But the company's going to proceed forward with plans that it has already announced."

Those plans will include developing a new strategy to turn the business around and, immediately, installing a new CEO. Schulze had already been replaced as chairman by Hatim Tyabji.

If Schulze does want to take over completely, he will face a tough task convincing investors, as he will have to pay significantly more than the $6 billion valuation. One representative said that they would sell for between $9 billion and $12 billion, but there are major doubts that Schulze could raise that amount.

The biggest problem Schulze faces is that investors will be wary of his involvement after the debacle of the last year.

On Friday, BBY was down 0.19 cents, or 0.96%, at $19.70.

Follow me @BCallwood .

(c) 2012 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: BBY

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