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By | Bill Ray 8th May 2008 15:10

Best Buy eyes up Europe, buys into Carphone Warehouse

Paint it yellow

Best Buy and Carphone Warehouse have entered into a joint project to launch the US brand in Europe. But getting Best Buy into the UK isn't just about sticking a big yellow tag on everything.

For £1.1bn Best Buy gets a 50 per cent share of CPW's high-street stores, along with its MVNO operations everywhere except France. CPW hangs onto its fixed-line operations, including broadband, and gets enough money to pay off its debts with £250 million in change.

The deal will see a new entity running the retail operations of CPW, ownership being split evenly between the two companies with each providing three board members. That new entity will run small CPW-branded stores selling phones and laptops, and large trading estate stores bearing Best Buy livery and selling all kinds of electronics.

Culturally the two companies claim to be closely related, with both focused on customer care and explaining electronics to the customer rather than just supplying. Best Buy sets great store by its Geek Squad, who will come to your home and install your electronics (or just browse your porn), and is planning to push the service hard in Europe (the explaining, not the porn browsing).

Best Buy claims to be the world's largest electronics retailer, and walking into one of its US stores it's easy to believe. CPW, meanwhile, wants to get into laptop computers. Twenty years ago there was one phone per house, while these days there is generally one per person, and CPW expects to see laptops taking the same upward spiral within the next few years. The buying clout and experience of Best Buy will be a considerable advantage in keeping prices low, and CPW expects to have laptops arriving in their stores come June.

This way Best Buy gets an instant foothold in Europe, putting the big yellow tag on the larger CPW sites, and with aspirations to open many more. The company reckons Europe's trading estates are a bargain at the moment, and will be buying up sites for new stores (though when we asked it wouldn't be drawn on how many).

Quite what CPW will do with its £250 million isn't clear - there has been talk of it buying Tiscali, though. At a press conference the company admitted it would "like to be considered as a potential buyer, at the right price", but made clear that buying Tiscali was not on the agenda for the moment.

It doesn't seem in any hurry to spend the cash, insisting that it's not burning a hole in the corporate pocket, and that it would use it to invest in "fixed line and infrastructure" at some point.

Electronic retailers have suffered with the shift to internet sales, but both CPW and Best Buy have survived that by offering impartial advice that can't be replicated on a computer screen - and occasionally misleading customers about the prices they'll pay online.

It might not be a great time to be expanding retail operations, and if prices get squeezed by an economic downturn then the new entity could end up owning rather a lot of empty space. But the biggest concern has to be about jointly running a company with no senior partner. This would be a challange for any two companies, but coming from opposite sides of the Atlantic makes for significant differences in culture, no matter how neatly aligned your objectives.

It will certainly be interesting to see if the egos involved can really compromise and share control, or if they find themselves separated by a common language. ®

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