Best Buy (BBY) Q2 2014 Earnings: New Geek Squad Leader, Strong Results

Best Buy (BBY), which owns the Geek Squad and mindSHIFT IT services businesses, delivered stonger-than-expected Q2 2014 financial results today. But new Geek Squad leadership could trigger a shakeup in that Best Buy organization. Plus, some Geek Squad expenses related to mobile warranties provide a healthy reminder that MSPs will need to navigate the smartphone and tablet support markets very carefully. 

For its most recent quarter, Best Buy revenue was $9.3 billion, down slightly from Q2 2013. Net income surged to $266 million from $12 million for the corresponding quarter last year. Same store sales, a key performance indicator in the retail market, fell a small 0.6 percent. Best Buy’s stock jumped roughly 13 percent on the results. Translation: Some investors are starting to believe that Best Buy’s store makeovers and in-store partnerships with Samsung and Microsoft are starting to pay off.

What About IT Services?

For MSPs, the areas to watch remain Geek Squad (for consumer IT services and perhaps small business services) and mindSHIFT (for managed and cloud services). Best Buy, once again, did not mention mindSHIFT on an earnings call today. That’s unfortunate, considering mindSHIFT is an MSPmentor 501 company as well as a Talkin’ Cloud 100 (Top 100 Cloud Services Provider) member. It’s difficult to pinpoint how mindSHIFT has been performing under Best Buy’s ownership, though all of our sources indicate that mindSHIFT continues to grow.

Meanwhile, changes may be coming to the Geek Squad business. During today’s earnings call, President and CEO Hubert Joly put Chris Askew, president of services, in the spotlight. Joly said:

“I’d like to welcome Chris Askew, our new president of services, to our One Best Buy team, as we focus on strengthening one of our greatest competitive advantages, our network of 20,000 Geek Squad agents and the service they provide to our customers. Chris joins us with a strong track record in managing large, complex services organizations, including at NCR, Dell, and Lenovo. We’re thrilled to have him on board, and excited about reinvigorating this growth engine within the company.”

Read between the lines and it’s clear Askew will put his stamp on the Geek Squad business.

Mobile Warranty Expenses

Among the areas that may need help: Geek Squad’s support of mobile devices. Multiple times during the call, Best Buy warned of a “temporary increase” in the company’s mobile warranty costs. Those higher costs are expected to continue through the first quarter of fiscal 2015. “This increase is considered temporary because it relates to higher claims frequency on our legacy Geek Squad protection programs that will expire or be operationally restructured out over the next several quarters,” said CFO Sharon McCollam during the earnings call.

New Synergies?

It sounds like the mobile warranty issues are being addressed. Where will Askew focus next? I can’t help but wonder whether Geek Squad and mindSHIFT will begin to promote some synergies into the SMB IT support market.