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During last summer’s annual shareholders meeting, Mikan outlined his vision for Best Buy that suggested the retailer move away from its core business of physical stores and instead focus on selling Geek Squad services to outside customers like small businesses and expanding further overseas. (Mikan later resigned from the board after he didn’t get the CEO job.)
Joly’s ‘Renew Blue’ strategy
Joly, however, took the opposite stance. During a presentation to investors in New York last November, Joly debuted his “Renew Blue” strategy, which ruled out any major store closings. Instead, Best Buy could generate nearly $1 billion in additional operating income just by improving store performance by retraining Blue Shirt store employees, reducing product returns and shifting more floor space to faster-growing merchandise like smartphones, tablets and small appliances.
“Yes, there is a place in the world for a real life experience where consumers can touch, feel and understand what we sell,” Schulze said.
Joly also wooed Schulze in other ways. He made sure to openly praise Schulze to analysts and the media. Joly also kept Schulze informed of key hires and promotions, including CFO Sharon McCollam, U.S. retail chief Shawn Score and Bestbuy.com head Scott Durchslag.
In an interview, Joly said he viewed the volatile situation in a simple way. Despite the hoopla surrounding Schulze’s buyout campaign, Joly still approached the job as he normally would have.
“As CEO, you have to work with employees, vendors and shareholders every day and Dick is our largest shareholder,” Joly said. The buyout effort “didn’t change anything. I would have had to build a relationship with Dick [in any case]. Dick is our founder. He is our largest shareholder. [No matter what happened with the buyout] he would still be our founder and our largest shareholder.”
During the November meeting in Schulze’s office, Joly discussed strategy with the founder, Anderson and Lenzmeier. Schulze began to realize he and Joly were on the same page.
“After exchanging views, I have become more confident that Hubert looked at the business much as I do,” Schulze said.
Nevertheless, Schulze continued to pursue his buyout attempt. In December, Schulze and the company agreed to extend the buyout deadline until Feb. 28. But as the deadline approached, it became clear that it would cost Schulze and his partners a lot more money to acquire Best Buy, because Wall Street gained greater confidence in Joly and his management team. Best Buy stock had jumped from $11.20 in late December to over $16 by the deadline, meaning Schulze would need to offer shareholders billions of dollars more than he had originally anticipated.
In the end, Schulze decided to cast his lot with Joly and rejoin the company as chairman emeritus.
“It was the least expensive” of the options, Schulze said.
Thomas Lee • 612-673-4113