Best Buy Co. Inc. CEO Hubert Joly hasn’t said much about his plans for Geek Squad. But his latest hire suggests that the company hasn’t abandoned the idea of entering the highly profitable, competitive world of business services.
The Richfield-based consumer electronics giant recently hired Christopher Askew, a former executive with NCR, Lenovo and Dell, to head its services unit, which includes Geek Squad. As a technology veteran who has overseen complicated global service operations, Askew’s first priority will be to squeeze more profits out of its venerable Geek Squad brand, but his experience dovetails nicely with Best Buy’s push into business services last year.
“Chris Askew’s appointment shows the importance of the Geek Squad to our overall Renew Blue transformation,” Best Buy said in a statement. “Our more than 20,000 Geek Squad agents represent a unique competitive advantage for Best Buy.”
With their trademark black ties and white shirts, Geek Squad agents are arguably the most public face of Best Buy, providing consumers with tech help in stores or home visits. But a quick review of Askew’s career indicates he is more versed in assisting companies with their IT needs instead of running store-based services like Geek Squad.
The company declined to make Askew or any other executive available for interviews.
Colin McGranahan, an analyst with Sanford Bernstein & Co. in New York, said it remains to be seen what role Askew will play at Best Buy.
“Hubert is a finder of talent, so I’d be reluctant to say what [Askew] will do just based on his work experience,” McGranahan said. “His first priority will be to make Geek Squad work better at the store.”
Most recently, Askew served as senior vice president of global services for the NCR Corp., which primarily makes hardware like ATMs, bar code scanners, and cash registers. Lately, the company has made a big push into software and services, such as installation, repair, and management. Under Askew’s three-year tenure, NCR’s sales revenue jumped nearly 20 percent to $2.9 billion with gross profit margins exceeding 23 percent.
His expertise will likely fit well with Best Buy’s strategy for business services. In early 2012, the company paid $161 million to acquire MindShift Technologies, a provider of data storage and other IT services to small- to medium-sized businesses. Best Buy also said Geek Squad will sell 24/7 tech support plans to small companies, which include diagnostics and repair, data security and server administration.
Geek Squad, which already commands significant IT experience and brand recognition, would not need to build a business service unit completely from scratch, some experts say.
Burt Flickinger, managing director of the Strategic Resources consulting firm in New York, said corporations in particular would want to shift their IT needs back to an American company like Geek Squad instead of outsourcing to Asia.
“Absolutely, Best Buy will go to both the personal and professional services market,” Flickinger said. “Customers want service people that are familiar with the products and the language and are based stateside.”
But under Joly, who joined the company last September, Best Buy has focused its resources on growing sales at its U.S. stores. The company needs Geek Squad to help bolster profitability now that it has promised to match competitors’ prices all year around. And while Geek Squad generates plenty of profits, the business has not performed as well it could, said Brian Yarbrough, a retail analyst with Edward Jones Investments in St. Louis.
In addition, getting into business services is quite hard given the cost and crowded competition. Traditional hardware makers like Dell, Hewlett-Packard, IBM and Lenovo have tried, mostly without much success.
“I don’t think it’s easy,” Yarbrough said.
In fact, Askew launched Lenovo’s business services unit in 2006. Today, Lenovo, which does not break down its revenue, still depends mostly on sales of low-cost PCs. Still, Best Buy needs to grow revenue. With Geek Squad, MindShift and Askew’s background, the company could make a credible play for business services down the road after Joly stabilizes Best Buy stores, analysts say. The global market for outsourced IT services will hit $288 billion in 2013, a 2.8 percent increase from the prior year, according to research firm Gartner Inc.
In the U.S. particularly, companies are reluctant to make big capital investments in new computers and servers and will need outside IT support to make sure their current equipment lasts as long as possible, Gartner said.