Is Best Buy Heading Into Business Services?

Best Buy (NYSE:BBY) has hired former NCR executive Christopher Askew to act as the tech retailer's president of services. The position was created just for this hire, in large part to revamp the Geeks Squad—and it raises interesting questions about Best Buy's business strategy moving forward.

In an internal announcement, chief executive Hubert Joly said that the appointment "shows the importance of the Geek Squad to our overall Renew Blue transformation," adding that "Our more than 20,000 Geek Squad agents represent a unique competitive advantage for Best Buy." Askew will report directly to Joly.

Best Buy is still the largest U.S. electronics retailer by revenue, but with the rise of tough online competition the chain has been in the red for three straight quarters, including an $81 million loss in the quarter that ended May 4.

In the past, Best Buy's recognizable tech crew was one of the highlights of its strategy, helping distinguish the chain from otherwise similar competitors. But as sales of TVs and computers have decreased, so have the warranties they attach to those items, leaving the Geeks with more time to twiddle their thumbs. The company cut 600 Geek Squad jobs last summer.

Askew's first task will be to get the most out of that IT section, but it's his past experience that has people talking. NCR has made a push into software and services, seeing a 20 percent revenue jump during Askew's time there. Before that, at Lenovo, Askew launched that vendor's business services unit in 2006. A Best Buy business services unit that leverages the Geek Squad brand could prove lucrative.

Burt Flickinger, managing director at consulting firm Strategic Resources, told the Minneapolis Star Tribune that many American companies would be eager to switch their IT to them. "Best Buy will go to both the personal and professional services market," he said. "Customers want service people that are familiar with the products and the language and are based stateside."

That said, it wouldn't be an easy transition. For large companies, IT services vendors including IBM, HP, Perot and Dell are well-entrenched and highly competitive. But cracking the smaller-business market is something those companies have also tried without much luck, while office supply chains Staples (NASDAQ:SPLS), Office Depot (NYSE:ODP) and OfficeMax (NYSE:OMX) have all already staked their claim to small and medium-size business services.

For more:

- See this Star Tribune story
- See this Wall Street Journal story

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