Is Apple a Threat to Best Buy?

Includes: AAPL, BBY
by: David Jackson

At its invitation-only event yesterday, Apple (NASDAQ:AAPL) pre-announced a product that will only be available in the first quarter of next year: a home entertainment device that looks like a Mac Mini but offers connectivity to TVs and other entertainment devices. (You can read Carl Howe's analysis of Apple's announcements here.) Meanwhile, earlier yesterday, consumer electronics retailer Best Buy (NYSE:BBY) held its quarterly conference call with analysts. CEO Brad Anderson and Senior VP Merchandising Mike Vitelli were asked whether Apple -- and PC/TV convergence in general -- posed a threat to Best Buy's business. Here were the answers they gave; decide for yourself whether you find them convincing:

Gary Balter - Credit Suisse

You see AT&T (NYSE:T) made an announcement today about being able to converge the PC and the TV, and I think Apple -- I am waiting to see so much -- that Apple has put out something yet on what they are doing. How do you think about how the convergence, and obviously that has been something you had been playing towards for years now, how do you think that is going impact the sales of certain kinds of categories, and how are you positioning yourselves as more and more TV content will be available on PC?

Mike Vitelli

I will try the first one, the TV side. First of all, you are accurate that there is more places for consumers to consume content than ever before. It is a part of what we are doing every day with end-to-end solutions. We are demonstrating today how MCPC computers can actually get source and content to your TV, whether it is licensed content or personal content. Those options are going to proliferate over the next several years. In the short-term, it probably will not have a major impact other than to get people continually excited about the category and their potential sources for high definition and other content.

Brian Dunn

Lastly, it is also the reason why we are investing so heavily in services that are going to be connecting it, and that is why we believe that Geek Squad, from a computer service, and Magnolia home theater from an install standpoint, are the two critical competencies to make it come together for the customer.

Brad Anderson

I think an example of that is what you are seeing in the market right now, where we are putting the skill sets we have got together to do “I Pledge”, which we think is a unique value proposition. We are trying to engineer the enterprise. As that computer integration occurs, we will also be able to do that in a unique way that no one else can do.

Brian Dunn

Also, it creates some complexity in the marketplace in the consumer’s view, and we think it underscores the importance of our deepening our relationship with the customer and what we are doing with customer centricity to make sure that we are positioned to help the customer navigate.

The promise of technology is that it is going to make your life simple and exciting. The paradox is it is complex to get to the benefits. We think centricity and our connection with the customers is the avenue that we can provide value.

The full Best Buy conference call transcript is here. You can also view other recent conference call transcripts, and sign up to receive them by email as soon as they are published. And you can find more discussion of Apple's announcements here.