Business Tech

Cages at Best Buy are stocked with new models preloaded with Windows 7: behind bars until October 22.

(Credit: Brooke Crothers)

Best Buy is locked and loaded for the Windows 7 launch.

And I don't use the phrase "locked and loaded" figuratively. "Locked" in that all the new Windows 7 machines are locked down behind cages. And "loaded" in that all the cages are full. (See photos.)

I visited a Best Buy Friday night in Southern California where the cages were loaded exclusively with new models preloaded with Windows 7. And I learned a few odd tidbits from a stoked salesperson who had definitely been drinking the Windows-7-is-totally-awesome Kool-Aid. Let me add that the information was conveyed to me at one store in Southern California and may not necessarily apply to all stores nationwide.

Updated on August 23 at 6:45 a.m. PDT: adding updated $299 price of Toshiba laptop.

Netbooks based on Intel's Atom processor faced a fresh assault this week: the $279 AMD-based Acer laptop.

Here's the $299--or this case, the $279---question: do you want a Netbook or a Notebook?

The choice: a Netbook with a 10-inch screen, an Intel Atom processor, no optical drive, and Windows XP that weighs about two pounds? Or, a notebook with a 15.6-inch screen, a higher-performance AMD or Intel processor, an optical drive, and Windows Vista that weights about six pounds?

Best Buy was selling a 15-inch Acer laptop for $279.99 on Wednesday.

(Credit: Brooke Crothers)

On Wednesday, Best Buy was offering an Acer laptop (AS5516-5474) that had been previously listed at $299.

A Best Buy salesperson in a Southern California store said these deals typically last a week.

Acer $279.99 laptop

(Credit: Best Buy )

The specifications: an AMD Athlon TF-20 64 processor, 15.6-inch WXGA display, 2GB DDR2 memory, DVD-RW drive, 160GB hard disk drive, ATI Radeon Xpress 1200 graphics, 802.11b/g wireless, 10/100 Ethernet LAN, and Microsoft Windows Vista Home Basic Edition.

Pretty close to basic mainstream-laptop hardware with the exception of the low-end AMD-ATI silicon and the older "g" wireless.

It weighs in at 6 pounds and measures 1.5-inches thick.

Earlier this month, Best Buy was offering a $299 Toshiba laptop sporting a 15-inch screen but then bumped the price up to $329.

Update: As of August 23, the price of the Toshiba Satellite with an Intel Celeron Processor (Onyx Blue, model: L305-S5955) had been cut to $299. The laptop showed wide availability, as of August 23.

But whether it's a $279, $299, or $329, it's a laptop design that has legs. And a real competitor to the 10-inch Netbook, which costs about the same.

And here's another question: As more of these $279-$329 deals are seen at Wal-Mart and Best Buy and as more ultra-thin laptops appear that approach $600 in price, what will happen to the popularity of the Netbook?

Best Buy has listed a 15-inch Acer laptop with relatively robust specifications for $299. But try getting your hands on one.

Though listed among the "new arrivals" on Best Buy's Web site, it is currently not available at stores or online. But there is anecdotal evidence of its existence. Very-recent user comments indicate that people have purchased the laptop and other stores, such as Wal-Mart Stores and Amazon (which shows it in stock), list it at a higher price.

Acer laptop comes with most of the fixins' for $299

(Credit: Best Buy)

And the specifications? An AMD Athlon 64 processor, 15.6-inch WXGA display, 2GB DDR2 memory, DVD-RW drive, 160GB hard disk drive, ATI Radeon Xpress 1200 graphics, 802.11b/g wireless, 10/100 Ethernet LAN, and Microsoft Windows Vista Home Basic Edition. Pretty close to mainstream-laptop hardware with the exception of the low-end AMD-ATI silicon and the older "g" wireless.

When contacted by phone, a Best Buy sales representative said the reseller has fielded a number of calls already about the laptop and confirmed that it was currently unavailable.

By comparison, what do you get for $299 when buying a diminutive Netbook? An Asus Eee PC at this price comes with an Atom N270 processor, 1GB memory, 10.1-inch screen, 160GB hard disk drive, Intel 950 graphics, a Webcam, no optical drive, and Windows XP.

And there are good deals on other, more-mainstream laptops at Best Buy. A Toshiba Satellite is listed at $349 with an Intel Celeron processor, 15.4-inch display, 2GB DDR2 memory, DVD-RW drive, 160GB hard disk drive, Intel 4500MHD graphics, 802.11b/g wireless, 10/100 Ethernet LAN, and Microsoft Windows Vista Home Basic Edition.

Dell has been back in the retail game for two years now, but there are still a few kinks being ironed out.

Some Dell customers are reporting serious confusion over the process of registering a new PC and signing up for the free Windows 7 upgrade. Dell's earlier announced policy is that PCs purchased after June 29, 2009 will be granted a free update when Microsoft's newest operating system arrives in October.

But since that date, some reported that when they go to register their new PC (purchased after June 29) from third-party retailers like Best Buy and MicroCenter, the date of purchase appears much earlier than the day the customer made the purchase. Instead, the date that appears in many cases is the day that Dell sold the computer to the retailer, sometimes weeks--or months--earlier.

One customer from Florida, Richard Lurton, who ordered a Dell Inspiron 15 notebook, went back and forth with Dell customer service, only to be told that the date the retailer purchases the computer is the date that matters.

Similar complaints were received by Best Buy, which acknowledged the problem and established a special message board for the topic. The support forums on Dell's own Web site show customers who bought Dell computers at Best Buy and retailer MicroCenter also having difficulty registering for the Windows 7 upgrade.

Dell acknowledged the company knows about the problem and is currently taking steps to resolve it. There is a page set up for retail customers where they can change the purchase date from the retailer's purchase date to the customer's purchase date.

Regarding customer service employees who were erroneously telling customers that the retailer's purchase date determined upgrade eligibility, Dell spokesman Bob Kaufman said that over the last two weeks, "customer care has received updated information and it is now handling calls appropriately."

Those still experiencing this problem can call Dell customer service.

Electronics megaretailer Best Buy reported on Tuesday quarterly earnings of $153 million, or 36 cents per diluted share. Results were 15 percent lower than the $179 million, or 43 cents per diluted share, earned in the year-ago quarter ended in May.

Sales for the quarter--the company's first of fiscal 2010--were higher, though, jumping 12 percent year over year, to $10.1 billion from $8.9 billion.

Best Buy attributed the bulk of the earnings decline to restructuring charges, which reduced first-quarter income by $25 million, or 6 cents per diluted share. The company was hit by costs from changes to its U.S. store model and a shake-up of its European division.

Minus the restructuring charges, earnings were $178 million, or 42 cents per diluted share. This contrasts with its previous quarter, which saw earnings of $570 million, or $1.35 a share.

Analysts had expected income excluding charges of only 34 cents per share.

"Our first-quarter results reflect strong execution of our strategy in a difficult consumer environment," said Jim Muehlbauer, Best Buy's executive vice president of finance and chief financial officer. "Once again, our teams grew market share and improved the gross profit rate while maintaining a disciplined approach to expense management."

Best Buy's sales were certainly helped by the closure of Circuit City's retail stores. But they also were boosted by stronger growth in Best Buy Europe and gains from 185 new stores over the past year.

The company is upbeat about the year ahead, projecting more robust earnings for 2010 overall.

"We are pleased to report that the year is off to a good start, and we remain focused on delivering our annual earnings guidance of $2.50 to $2.90 per diluted share, excluding restructuring charges," said Muehlbauer. "Given the limited visibility to consumer spending in the back half of the year, along with the fact that a majority of the company's earnings are derived from the holiday selling season, it's prudent to maintain our original guidance at this point."

Best Buy does face some uncertainty. Brian Dunn will be taking the CEO reins this summer. Like other brick-and-mortar retailers, the company faces stiff competition from online rivals, including the new Circuit City Web site.

Best Buy's fourth quarter was better than anticipated even though profits were down from a year ago amid an economic downturn. The company also noted that the quarter ended stronger than it began, indicating that consumer spending stabilized. And the Circuit City liquidation certainly didn't hurt Best Buy's cause.

The company reported net income of $570 million, or $1.35 a share, on revenue of $14.7 billion. In the same quarter a year a year ago, Best Buy reported net income of $737 million, or $1.71 a share, on revenue of $13.4 billion. Excluding restructuring charges, Best Buy reported earnings of $1.61 a share, well ahead of Thomson Reuters estimates of $1.40.

Same store sales, however, fell 4.8 percent in the quarter, which ended Feb. 28. Best Buy had cut its outlook, revised it, and restructured to prepare for the downturn. The company said it cut its inventory more than it had expected and faced product shortages late in the quarter.

For fiscal 2009, Best Buy reported earnings of $2.39 a share, down from $3.12 a share in fiscal 2008. Fiscal 2009 revenue was $45 billion, up from 13 percent a year ago. For the year ahead, Best Buy projects earnings of $2.50 to $2.90 a share on revenue of $46.5 billion to $48.5 billion. The company also projects same store sales to be flat to down 5 percent for the year. Analysts were expecting earnings of $2.45 a share.

In a statement, Best Buy executives portrayed the year ahead as one focused on cost-cutting and a rocky economy. However, the company should benefit from the liquidation of Circuit City. A negative factor is likely to be increased competition from Wal-Mart, which is increasingly focused on electronics. Best Buy estimated that its market share improved to almost 22 percent.

Best Buy CFO Jim Muehlbauer said:

We expect consumer spending to remain challenging in fiscal 2010, and the complex mix of external factors that will influence their behavior makes forecasting the future increasingly difficult.

Best Buy's breakdown of sales showed a few interesting cross currents. For instance, consumer electronics sales fell 8.6 percent and entertainment software fell 11 percent. Home office equipment surged 8.1 percent in the fourth quarter and notebook PC sales showed small gains.

(Credit: Larry Dignan/ZDNet)

Best Buy President and Chief Operating Officer Brian Dunn is set to be promoted to CEO this summer, when current Chief Executive Brad Anderson retires, the company announced Wednesday.

Anderson, who's led Best Buy for seven years, plans to retire from the electronics retailer at the company's annual meeting in June. He'll keep his position as vice chairman of the board of directors in order to help with the transition.

Dunn began his career at Best Buy as a store associate 23 years ago, rising through the company's ranks to become president and COO in 2006. He has been responsible for the company's 1,000 retail outlets in the United States, as well as its Geek Squad repair and installation services unit.

Best Buy is the largest consumer electronics retailer in the United States, and it has stores in 13 countries. It lost a major rival last week, when Circuit City, the second-largest electronics seller, was forced to liquidate all stores.

Although Best Buy has done comparatively well, it hasn't been unaffected by the current recession. Third-quarter revenue in 2008 dropped 77 percent from the year before, prompting the company to offer buyouts to nearly all corporate employees.

After Best Buy mega-stored Circuit City to oblivion, the hapless retailer has quickly gone to pieces.

On Friday, Circuit City said it was liquidating all of its stores. Then, on Saturday, there was a big liquidation sale at my local Circuit City--up to 30 percent off. The checkout line was almost as long as the lines you encounter on a typical Saturday at Fry's--the mostly California- and Texas-based sprawling electronics warehouse. (The line actually snaked to the back of the store.)

Understand that I'm not giving Fry's any backhanded praise. Fry's is so big, so unwieldy, and, in some respects, its sales policies so lax that, as a rule, I avoid it (unless I need a nuts-and-bolts item like a Torx screw).

But Fry's is still a going concern. Circuit City isn't. The store that I visited on Saturday had been taken over lock, stock, and barrel by the liquidator. I interviewed (very briefly because she was on checkout duty) the "store manager" who said that, as of Saturday, her new immediate boss was the person from the liquidation company. That person, in effect, was now running the show, she said.

My local Circuit City (in southern California) on Saturday had lines inside as long as Fry's--though that isn't necessarily a compliment

(Credit: Brooke Crothers)

Inside, it was close to pandemonium. (The manager would not let me take pictures inside the store.) Consumers swarming everywhere: every one of them with at least a few breathless questions and scant employees to provide answers. And consumers seemingly snapping up anything that wasn't nailed down. (I've never seen so many HP wide-screen monitors in one checkout line.)

One male employee in the section I was browsing, spent most of the time I was there (about 15 minutes) pleading ignorance and searching for a manager who never (apparently) materialized.

A female employee I talked to outside (she was on break) said no one knew it would happen--until it happened.

What was ironic (and sad) was that I had been to this same Circuit City a few weeks before and an employee had boasted that this store would not close (in the wake of the limited nationwide store closings Circuit City had announced in November) and would be around for a long time.

My take as a consumer? The sheer scale, selection, organization, and relative attention to display detail that one senses at Best Buy proved to be a huge disincentive for going back to Circuit City--and CompUSA for that matter. Statistics don't lie. I have been to Best Buy dozens of times in the past two years. I've been to Circuit City--even though it's closer--maybe six times, and always as a last resort.

Ask your casual consumer, who is familiar with both stores, why Circuit City failed and the answer is often summed up in two words: Best Buy. Others will say Amazon--but that's another story.

This was originally posted at ZDNet's Between the Lines.

Circuit City said Friday that it is in talks with "two highly motivated and interested parties" about selling the company as a going concern. Meanwhile, Best Buy, the largest electronics retailer in the U.S., reckons it continues to take market share.

Circuit City asked the bankruptcy court to approve procedures that officially would sell Circuit City in total, by business units, or by assets such as inventory.

In a statement, Circuit City said:

These interested parties are considering providing additional financing to allow the company to sustain operations and move forward with a subsequent restructuring through a stand-alone plan and/or purchasing the company or all or substantially all of the company's assets. The parties have substantially completed due diligence and now are in negotiations with the company and the company's major stakeholders in order to finalize such a transaction. While the company is optimistic that a transaction can be successfully finalized, no assurance can be given that this will occur.

If these transactions don't occur by Jan. 16, Circuit City could liquidate.

Separately, Best Buy narrowed its financial outlook. Best Buy on Friday said its holiday revenue was in line with revised expectations, but same store sales fell 6.5 percent.

The electronics retailing giant made the announcement at the Consumer Electronics Show.

By the numbers:

• Revenue was up 4 percent for the month ending Jan. 3 to $7.5 billion, in line with expectations.
• Best Buy narrowed its earnings targets. The company is predicting fiscal 2009 earnings to be $2.50 to $2.70 a share, excluding a $111 million investment impairment charge. The company had projected 2009 earnings between $2.30 and $2.90 a share.
• The company will take a fiscal fourth quarter charge of $60 million for its voluntary severance program.

Here's the breakdown of sales by category: