The news at Best Buy just doesn’t seem to get better. The electronics retail giant last week announced 2,400 jobs across the U.S. would be cut as part of its ongoing turnaround effort. Surprisingly, one-quarter of the cuts are coming from Geek Squad, the IT support subsidiary, which is seen by many as a potential transformation engine for the company.
Best Buy says the job cuts are part of a previously announced restructuring plan, in which 1,800 jobs will be eliminated from the retail store operations and 600 jobs from Geek Squad.
Best Buy is struggling to regain its footing following seven out of eight negative sales quarters, steadily declining same store sales and a leadership shakeup following the abrupt resignation of its CEO Brian Dunn following revelations that he had an “inappropriate” relationship with a subordinate.
The struggles and Dunn scandal also took down Best Buy founder and chairman Richard Schulze, who resigned after it was learned that he did not properly report Dunn’s inappropriate activities. Speculation was rising that Schulze is trying to raise capital to buy out Best Buy. The threat was so credible that Best Buy’s interim management paid senior managers retention bonuses to keep them from leaving. However, Schulze is reportedly slowing is buyout bid with sources saying no deal is imminent.
While the retail store job cuts are understandable giving the operation’s declining performance, the Geek Squad positions are less rational. Because Geek Squad operates in both the consumer and commercial IT segments, some see the division as part of Best Buy’s future as a large VAR or managed services company.
Geek Squad this spring embarked on a channel program designed to extend its reach into the business IT market. The channel initiative is essentially a referral program in which partners are bringing service contracts to Geek Squad. So far, Geek Squad is signing up a number of telephony agents that are referring IT deals that they cannot support independently.
Best Buy is also building a managed services presence through MindSHIFT, the managed services specialist it bought last year for $167 million. MindSHIFT, which operates as an autonomous unit, appears unaffected by the layoffs or the restructuring.
Layoffs and restructuring are often painful, but the Best Buy job cuts seem more like an adjustment than a restructuring. Best Buy has 167,000 employees and Geek Squad employs 20,000 people. The combined job cuts are less than 1.5 percent of the total workforce.
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