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Best Buy Bets $1.3 Billion on Connected World
Best Buy Bets $1.3 Billion on Connected World

By Jennifer LeClaire
November 7, 2011 12:22PM

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"We are seeing growth on the mobile side of the business significantly increase and a lot of that is being driven by smartphones and smartphone revenue," said Michael Gartenberg, an analyst at Gartner. "It's not really a surprise that Best Buy would want to invest even further in this type of activity" by fully acquiring Carphone Warehouse Group.

In a move to capitalize on what it calls the growth of the "Connected World," Best Buy is making sweeping changes to its operations. Center to those efforts is the acquisition of Carphone Warehouse Group.

Best Buy on Monday announced it will purchase Carphone Warehouse Group's shares in the U.S. and Canadian Best Buy Mobile unit for $1.3 billion. That gives Best Buy full ownership of the business. The acquisition signals Best Buy's bet that the mobile industry will continue its rapid growth.

Best Buy is funding the deal with cash. The motive: tapping into what the company sees as a significant opportunity as connections migrate from phones to other connectable devices such as tablets, laptops, TVs and e-readers.

Connected World Focus

The connected world concept is one into which many tech industry titans are moving. Hewlett-Packard on Monday announced additions to its portfolio of solutions and services for telecom companies that aim to help them drive business growth with better service-management quality for customers.

Last week, Cisco released its 2011 Connected World Technology Report that revealed the next generation of workers expects to use social media, mobile devices and the Internet more freely in the workplace. And the Connected World Forum last week showcased next-generation mobile apps and services.

"We are seeing growth on the mobile side of the business significantly increase and a lot of that is being driven by smartphones and smartphone revenue," said Michael Gartenberg, an analyst at Gartner. "It's not really a surprise that Best Buy would want to invest even further in this type of activity."

Shifting Europe Strategy

Best Buy Europe, meanwhile, is closing the 11 big-box pilot stores it launched in the United Kingdom. Instead, the company will focus on its installed base of about 2,500 smaller stories. Best Buy Europe launched a big-box format test in the U.K. in April 2010. However, challenging economic conditions are leading Best Buy to close them at the end of 2012.

Finally, Best Buy launched a new venture called Global Connect to expand beyond North America and Europe. Best Buy plans to build on and recreate the success of its mobile businesses by providing expertise in select markets globally. Best Buy will take a partnership approach, contracting with third parties to work with its connected products and services business on a global scale.

In a separate announcement on Monday, Best Buy said it is acquiring mindSHIFT Technologies, a managed service provider that targets small- to mid-sized businesses, for $167 million.

MindSHIFT provides cloud services, data center services and professional services to more than 5,400 clients and 25,000 managed desktops in key markets throughout the United States. The acquisition is part of the retailer's plan to accelerate growth in the SMB IT services category. The acquisition aims to complement the Geek Squad and Best Buy For Business operations.

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