Best Buy bid complicates CEO hunt

  • Article by: THOMAS LEE , Star Tribune
  • Updated: August 7, 2012 - 9:41 PM

Richard Schulze's attempt to buy the firm, analysts say, means Best Buy may need to hire a more well-known name in retailing.

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Richard Schulze has tapped two Best Buy veterans, Brad Anderson and Al Lenzmeier, to join his team as he attempts to purchase the company he founded.

Photo: Richard Sennott, Star Tribune

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Since assuming the role of interim CEO at Best Buy Co. Inc. in April, G. "Mike" Mikan has campaigned aggressively for the permanent job, appearing in company videos, giving speeches, visiting stores. So much so that Wall Street assumed the job was Mikan's to lose.

As it turns out, Mikan could very well lose the job, industry observers say, either to a more well-known outside candidate or to a man who was one of Best Buy's previous CEOs.

Founder Richard Schulze, who said Monday he wants to buy the Richfield-based company for as much as $9 billion, has recruited former CEO Brad Anderson to lead the company should he succeed with the bid. Analysts say Schulze's efforts could lead Best Buy to counter with a chief executive who has more prominence in the retail sector than Mikan, who has spent nearly his entire career at UnitedHealth Group Inc.

"They may need more of a heavy hitter," said Christopher Horvers, an analyst with JPMorgan.

As an example, take Yahoo Inc. After a string of failed leaders, the technology company recently scored a public relations coup by hiring Marissa Mayer, a top Google executive and high-profile face of Silicon Valley, as its new CEO. Jim Citrin, a top headhunter at Spencer Stuart who recruited Mayer for Yahoo, is also leading Best Buy's CEO search.

Best Buy has been distracted by internal strife this year, beginning with the departure of CEO Brian Dunn, who abruptly resigned in April amid allegations that he had an affair with a female employee. Schulze eventually lost his chairman title and later resigned after acknowledging that he failed to inform the board about Dunn's behavior.

After Dunn resigned, Best Buy appointed Mikan, 41, interim CEO. The board of directors said a permanent CEO would be named within six to nine months.

Patricia Lenkov, founder and CEO of Agility Executive Search in New York, says the company shouldn't wait that long. "Absolutely, [the board] has to speed it up," Lenkov said. "Uncertainty at the top spreads all the way down. Waiting until the end of the year is a recipe for disaster."

A source close to Best Buy, who was not authorized to speak for attribution, said the board has not changed its timeline for finding a new CEO. The company declined an interview request on Tuesday.

Whomever Best Buy hires, the company will have to offer the person a generous severance package should Schulze ultimately succeed and install Anderson as CEO, Lenkov said.

Schulze, Anderson and former president and chief operating officer Al Lenzmeier, whom Schulze tapped to join his team, helped build Best Buy into the world's largest consumer electronics retailer. Over the past two years, however, the company's sales have declined, leading some critics to doubt whether big-box veterans like Anderson and Lenzmeier would be a good fit in the digital age.

Nonetheless, analysts say, Schulze's play to reclaim the company has put Best Buy leadership on the defensive by presenting a management team that Wall Street already knows and respects.

At UnitedHealth, Mikan served as executive vice president and chief financial officer and also led the company's Optum Health unit. In a recent conference call with analysts, Mikan suggested his experience running Optum, which deals extensively with data analytics, would be an asset for Best Buy, as it tries to better predict consumer behavior and manage inventory.

While analysts say Mikan, who also serves on the board, has performed well as interim CEO, his lack of name recognition and retail experience may hurt his chances.

"We actually believe that Mike Mikan is on the right track with what he has been doing for the company since becoming interim CEO," David Strasser, an analyst with Janney Capital Management, wrote in a research note. "That said, [Schulze] has a strong understanding of this industry, and this company, and we imagine strong opinions on how to right the ship."

Thomas Lee • 612-673-4113

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