Revolutionary New Electronics Are on Their Way, and That's Great for Best Buy
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Last year, hedge fund manager David Einhorn sold his stake in electronics retailer Best Buy (NYSE: BBY). In a letter to investors he explained why:
We thought that the core debate was whether or not the company could compete with Amazon. The answer at this point is that maybe it can and maybe it can’t...There has been some deterioration in BBY’s domestic performance, which we attribute to a lack of a “must have” consumer electronics product, rather than an erosion of BBY’s competitive position.
Einhorn was of the belief that it wasn't online retailers that were plaguing Best Buy, but rather a lack of new products.
If that’s the case, things are about to get much better for the company. A number of tech giants are about to introduce new products over the next year, and that should get shoppers back to Best Buy stores.
A mini phone on your wrist
With the high end smartphone market showing signs of saturation, companies are branching out into watches.
Sony plans to roll out the second version of its Android-based SmartWatch next month. Samsung has confirmed that it too plans to release a watch, although the capabilities of the device, as well as its release date, remain unknown.
Multiple reports have said that Apple (NASDAQ: AAPL) is working on its own iWatch, and that it could go on sale in the near-future.
Right now, Apple remains largely dependent on the iPhone and iPad for its revenue and profit. With growth in both markets slowing, investors need to see Apple introduce revolutionary new products. The company’s management has promised new products this fall and into 2014.
Google is also rumored to be building a smartwatch, although that’s nothing compared to Google Glass. The search giant’s high tech glasses will likely make their way to Best Buy stores sometime in the next year.
Reinventing the TV
Sales of TVs have been weak in recent years as the move towards 3D technology has failed to stoke demand.
But, that could change.
In addition to a watch, Apple might have its full-featured, iOS-enabled TV set for sale in the coming months. Piper Jaffray’s Gene Munster expects Apple to unveil the TV in the fall, and sell it next year.
Google’s Chromecast isn't a full TV set, but it does allow users to beam content from their smartphones and tablets to their TV. It’s already on sale, but good luck finding one anytime soon -- it’s sold out on Best Buy’s website.
And then there’s Amazon. As Einhorn alluded to in his letter, the company is traditionally thought of as a rival to Best Buy. Yet, Best Buy sells Amazon’s tablets, and as the Internet retailer moves further into the electronics space, Best Buy could actually benefit.
Reports have indicated that Amazon is working on a TV set top box. That device should probably launch this fall, alongside refreshed Kindle Fire tablets.
After seven years, gamers can rejoice
Microsoft’s Xbox One is, in its own right, a powerful smart TV. However, those that buy it this fall will likely do so for its games. Sony’s rival PlayStation 4 will launch around the same time.
Expectations for the new consoles have pulled shares of GameStop higher in recent months, and while GameStop is a more of a pure play, Best Buy should also benefit. The store has a large, dedicated video game section.
Intel thinks it can sell PCs with its new chip
To date, Microsoft’s Windows 8 has been a dud. The operating system offers a hybrid interface that can be used on both tablets and traditional PCs. The problem is that few hybrid devices exist, and the ones that do exist aren't particularly good.
For example, Microsoft’s own Surface Pro can serve both as a tablet and as a laptop. Unfortunately, there are some significant trade-offs -- the device has terrible battery life and is heavy for a tablet.
Intel’s (NASDAQ: INTC) next generation processor, code named Haswell, could change all that. This time, Intel focused on efficiency over raw power, producing a chip that uses less energy.
This should result in lighter hybrid PCs with better battery life. The battery on Apple’s next MacBook Air, which uses Haswell, lasts almost twice as long as the old model.
Intel is hoping that Haswell will result in better PC sales. The chip maker would certainly like that to be the case -- shares are down over 10% in the last year as PC sales have experienced an unprecedented decline.
Investing in Best Buy
Best Buy is a retailer, and like any retailer, its fate depends on the demand for its products. Best Buy’s recent troubles may be due, at least partially, to a lack of “must have” electronics.
But that should change soon. Companies across the consumer electronics spectrum are planning revolutionary new devices: smart watches, smart TVs, game consoles, and PCs. As they appear on Best Buy’s shelves, new customers will come into the store, and Best Buy’s shares should soar.
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Joe Kurtz owns shares of Best Buy. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!