Supervalu Lays Off 85 IT Employees, 50 in MN

The cuts are part of the struggling grocer’s plans to restructure its technology department in an effort to reduce costs and increase efficiency.

Supervalu, Inc., is laying off 85 IT employees nationwide, including about 50 who work at its Eden Prairie headquarters, spokesman Jeff Swanson confirmed Wednesday.

The layoffs are part of the struggling grocer’s plans to restructure its technology department in order to cut costs. The company will also redefine the roles of approximately 300 IT employees to make the department more efficient, Swanson said.

In addition to the 50 laid-off Twin Cities employees, about 20 workers in Idaho and roughly 15 in Utah will lose their jobs. There are also a few open positions that will not be filled, Swanson said. Affected employees were notified during the past week, and they will be laid off within about a month.

In recent months, Supervalu has been closing stores, cutting jobs, selling off some businesses, and lowering its debts in an effort to turn itself around. In June, the company announced plans to cut between 2,200 and 2,500 jobs at its Albertsons supermarkets in California and Nevada. Last month, it said it plans to eliminate 39 marketing positions across the country, and in February, the company announced plans to cut about 800 positions from its corporate and regional offices, including roughly 200 jobs in Minnesota.

Just this week, the company’s board dismissed Craig Herkert—its chief executive for the past three years—and replaced him with Chairman Wayne Sales. Following the announcement on Monday, Swanson told Twin Cities Business that the board decided “this change would be important to the company’s efforts to improve our sales and earnings trajectory and generate long-term shareholder value.”

Meanwhile, Supervalu said last month that it has begun reviewing “strategic alternatives” and is considering a sale. That announcement was made in conjunction with the company’s dismal first-quarter earnings results, which prompted it to suspend its quarterly dividend.

The Eden Prairie-based grocer earned $41 million, or 19 cents per share, for the quarter that ended June 16—a year-over-year drop of about 45 percent and significantly shy of the 38 cents per share that analysts were expecting. Revenue, meanwhile, totaled $10.6 billion, down 4.7 percent from the same period a year ago and less than the $10.8 billion that analysts expected.

Supervalu is among Minnesota’s five largest public companies based on revenue. It has approximately 4,400 stores and employs roughly 130,000. The company reported a net loss of $1 billion on net sales of $36.1 billion in its most recently completed fiscal year.

—Nataleeya Boss
([email protected])

Marco Buys S.D.-based TelServ Communications

St. Cloud-based Marco said the acquisition is part of its plans to expand nationally.

Marco, Inc., announced Wednesday that it has acquired TelServ Communications, Inc., a voice communications, data networking, and managed IT services provider based in Aberdeen, South Dakota.

Financial terms of the deal were not disclosed.

St. Cloud-based Marco, which has 465 employees at 22 offices throughout the Upper Midwest, will combine its Aberdeen office with TelServ’s operations. It plans to retain all of TelServ’s 13 employees.

Marco specializes in data networking and security, converged voice applications, print and document management, managed services, audio/video services, and video surveillance systems.

The company said that the acquisition—which is its ninth since 2007—is part of its plans for national expansion.

“This acquisition allows us to broaden our services in South Dakota and provide even more innovative technology services and support to our valued customers,” Marco CEO Jeff Gau said in a statement. “We’re excited to welcome the customers and staff of TelServ to our 100 percent employee-owned company.”

Established in 1973, Marco currently has offices in Minnesota, Wisconsin, North Dakota, South Dakota, and Iowa.

—Nataleeya Boss
([email protected])

Major Hedge Fund Sells Best Buy Shares, Takes a Loss

Greenlight Capital told investors that Best Buy is “trying to come up with a strategy” following the departures of CEO Brian Dunn and Chairman Richard Schulze, which could lead to additional “business disruption.”

Hedge fund mogul David Einhorn’s Greenlight Capital has sold its minority stake in Best Buy Company, Inc.—and analysts are reportedly speculating that the move could spell good news for the electronics retailer’s founder and former Chairman Richard Schulze.

In a Monday letter to investors, New York-based Greenlight Capital said that it sold its stake. A May filing with the U.S. Securities and Exchange Commission revealed that Greenlight owned 7.7 million shares, which equates to about 2.27 percent of Best Buy’s stock.

Greenlight said in its letter that its investment in Richfield-based Best Buy was “particularly irksome,” and it outlined some “unexpected problems” that ultimately prompted it to sell its shares. Among them: the departures of CEO Brian Dunn and Schulze.

Dunn abruptly resigned in April. Then in May, Best Buy released the results of an independent investigation, which found that he violated company policy by engaging in “an extremely close personal relationship with a female employee that negatively impacted the work environment.” The investigation also determined that Schulze “acted inappropriately” when he failed to notify Best Buy’s audit committee after learning in December about allegations of such a relationship—and Schulze subsequently resigned from the company’s board and announced plans to explore options for his 20.1 percent ownership stake. (Entities that he controls own another 1.1 percent.)

“As a result, the company has an interim CEO and is trying to come up with a strategy,” Greenlight said in its letter to investors. “We worried that this could lead to additional business disruption so we exited with a loss.”

Greenlight didn’t disclose its exact loss, but the Star Tribune reported that its own analysis of the hedge fund’s stock purchases suggests that the sum could approach $100 million.

Citing analysts, the newspaper also reported that Einhorn’s move may help Schulze. Unnamed sources with knowledge of Best Buy’s situation told the Star Tribune last month that the options Schulze is considering include trying to take Best Buy private or replace the board of directors.

A prominent and well-respected hedge fund manager dumping his shares and taking a loss is “not a vote of confidence” in the company, longtime Wall Street analyst Jeremy Brunelli, who has closely followed Best Buy, told the Star Tribune.

However, on the flip side, Einhorn could have sold because he doesn’t think Schulze will make a serious offer to buy the company, Brunelli reportedly said; if Einhorn did anticipate such an offer, it seems logical that he would have waited to find out what it was before selling his stake and taking a loss.

Best Buy, which is expected to release a long-term growth plan by the end of the summer, is Minnesota’s third-largest public company based on revenue, which totaled $50.7 billion for the fiscal year that ended on March 3.

—Christa Meland
([email protected])

MakeMusic Receives $13.5M Buyout Offer

Private equity firm LaunchEquity Partners said that if its offer were accepted, it would invest $10 million in MakeMusic over the next two years and retain all of the company’s employees.

Music software company MakeMusic, Inc., said Monday that its largest shareholder, LaunchEquity Partners, LLC, has offered to buy the operating assets of the company for $13.5 million.

LaunchEquity—which has been a MakeMusic investor since 2006—would also assume all of the Eden Prairie-based company’s liabilities. Scottsdale, Arizona-based LaunchEquity and its affiliates together own roughly 27.7 percent of MakeMusic’s stock.

MakeMusic said that it has appointed a special committee of independent directors to consider the proposal.

Under the terms of the buyout proposal, the $13.5 million from LaunchEquity, along with any cash MakeMusic has at the time it is bought out, would be distributed among its shareholders. According to LaunchEquity, the deal would provide shareholders with approximately $4.30 per share, which would represent a 20 percent premium over Friday’s stock closing price.

LaunchEquity said that if its buyout offer were accepted, the private equity firm would spend at least $10 million over the next two years to recruit and retain a new CEO, upgrade the company’s two main music software lines, and cover working capital and seasonal liquidity needs. It also said that it intends to retain all MakeMusic employees.

MakeMusic is the developer of music notation software Finale and interactive music learning software SmartMusic—which is used by more than 10,000 schools, colleges, and university music programs in North America.

But the company has suffered in recent years. Last year, it reported net income of $4,000 on revenue of $16.9 million—down from 2010 when its net income was $1 million and its revenue totaled $17.1 million. In May, the company reported an $840,000 net loss for its first quarter that ended in March—significantly greater than the $180,000 net loss for the same period the prior year. First-quarter net revenue, meanwhile, totaled $4.2 million, up from roughly $4 million a year earlier.

In June, President and CEO Karen van Lith abruptly left the company. Chief Operating Officer and Chief Financial Officer Karen VanDerBosch has since assumed the CEO duties on an interim basis.

In a July 15 letter to MakeMusic’s board of directors, LaunchEquity said that the music software company’s “lack of material revenue and profit growth, the steep decline in the company’s notation product line, the recurring turnover of senior leadership, and the accelerating level of spending during the six years that LaunchEquity has been a shareholder” led it to conclude that the company is in need of “aggressive strategic leadership.”

“We cannot simply sit idly any longer,” LaunchEquity wrote in its letter.

It also pointed out that in February, MakeMusic adopted a shareholder rights plan, also known as a “poison pill,” which would essentially dilute the stock of an investor that acquires 4.9 percent or more of the company’s shares. LaunchEquity said in its letter that the provision has stagnated MakeMusic stock’s trading, “essentially turning the company into a semi-private entity without the opportunity to attract any significant, new, institutional shareholders.”

Poison pills are typically measures that corporations take to discourage hostile takeovers.

Shares of MakeMusic’s stock were trading up 13.6 percent at $4.08 late Monday afternoon following the announcement about the buyout offer.

—Nataleeya Boss
([email protected])

After Cutting 600, Best Buy Hires 500 for Geek Squad

The company is reportedly retooling its Geek Squad team as it shifts employees away from basic home installations to focus on services for small businesses and on providing technology expertise at Best Buy’s smaller, “connected”-format stores.

Best Buy Company, Inc., which recently announced plans to cut about 600 Geek Squad workers, reportedly intends to hire roughly 500 new Geek Squad employees by the end of this year.

Less than two weeks ago, Best Buy said that it would eliminate 2,400 jobs companywide in its latest move to cut costs and turn the company around. In addition to the 600 Geek Squad cuts, the layoffs include roughly 1,800 Best Buy store employees.

The Geek Squad reduction targeted technicians who exclusively serviced individual products, like televisions and personal computers, Best Buy Senior Vice President of Services George Sherman told the Star Tribune. Now, the Richfield-based electronics retailer is hiring higher-skilled workers, as it shifts more Geek Squad employees away from basic home installations to focus on services for small businesses, the Minneapolis newspaper reported.

The move seems to align with statements interim CEO G. Mike Mikan made last month at Best Buy’s annual meeting. He said the company would refocus on improving customer experience and “strengthening technology expertise.” Mikan also said that the company “cannot be seen just as a hardware retailer.”

Best Buy previously took other steps to focus on small businesses. Late last year it announced plans to acquire MindShift Technologies—a Massachusetts-based managed service provider for small and mid-sized businesses—for $167 million.

And in March, Best Buy unveiled the Geek Squad Partner Program, through which the company works with vendors, including telecom and cable resellers, that serve small businesses.

Best Buy is also boosting the number of Geek Squad employees at its stores that feature the smaller, “connected-store” layout, the Star Tribune reported.

To read more about Best Buy’s plans to hire 500 new Geek Squad employees, read the full Star Tribune story here.

To learn more about the company’s restructuring efforts—as well as other developments, including an exodus of key leaders and the founder’s potential attempt at taking the company private—click here.

—Jake Anderson
([email protected])

Multiband to Acquire Competitor in $42.6M Deal

The New Hope-based provider of DirecTV, voice, and high-speed Internet services is buying New Jersey-based MDU Communications International, Inc.

Multiband Corporation said Tuesday that it is acquiring a New Jersey-based competitor, and the deal will significantly boost its customer base.

New Hope-based Multiband installs DirecTV, voice, and high-speed Internet services to residents in apartments and condominiums. It’s buying MDU Communications International, Inc., which also provides Internet and digital satellite television services to multi-dwelling units.

MDU Communications, which will become a subsidiary of Multiband, serves more than 75,000 subscribers. Multiband, meanwhile, serves about 116,000 subscribers in multi-unit properties.

Under the terms of the deal, MDU Communications’ stockholders will receive 0.759 shares of Multiband stock for each MDU share they own. The transaction, through which Multiband will assume $29.7 million in debt, is valued at about $42.6 million, the company said.

Shares of Multiband stock fell 6.7 percent Tuesday and closed at $2.21. They fell 5.4 percent and closed at $2.09 on Wednesday.

MDU Communications’ shares, meanwhile, climbed 71.6 percent and closed at $1.51 on Tuesday. They slid 7.3 percent Wednesday and closed at $1.40.

The planned acquisition comes about five months after a different Multiband deal fell through. The company last June signed a non-binding letter of intent to buy Exton, Pennsylvania-based WPCS International Incorporated for $3.20 per share—a deal valued at roughly $22 million. But the price of WPCS’ shares subsequently fell, and Multiband said in January that the transaction “is not viable” given “current market valuations.”

Multiband signed a definitive agreement for the acquisition of MDU Communications, and the boards of both companies have approved the deal. The transaction is subject to approval by MDU Communications’ shareholders and other closing conditions, and Multiband expects the deal to close during the fourth quarter of this year.

Multiband CEO James Mandel said in a statement that the acquisition is “a strategic opportunity that will be meaningfully and immediately accretive to our business.”

“The combined subscriber base will not only add scale to our support services, but will be an important growth center to achieve a higher penetration of multiple revenue streams, namely our push to deliver broadband and digital voice,” Mandel added.

MDU Communications CEO Sheldon Nelson said that the merger will give her company’s stockholders “shares of a strong, successful company with great potential for diversified growth.”

Multiband has roughly 3,700 employees in 33 states, and MDU Communications has 102 employees in 17 states.

Multiband is among Minnesota’s 60 largest public companies based on revenue, which totaled $300.2 million in 2011.

—Jake Anderson
([email protected])

Creative Kidstuff Opens Baby Shop in Grand Ave. Store

The company is expanding its infant offerings through its new CK Baby Shop, an area within its St. Paul store that carries products for newborns.

Minneapolis-based toy-store chain Creative Kidstuff on Monday launched a new baby shop within its St. Paul store.

CK Baby Shop, which the company describes as a store within a store, is an area where shoppers can find merchandise for a baby’s first year, including cribs, strollers, high chairs, nursery décor and bedding, car seats, infant carriers, and diaper bags.

“We are thrilled to launch this new service,” Happi Olson, director of sales and marketing for Creative Kidstuff, said in a statement. “Finding all the right products for a new baby can seem overwhelming to say the least.”

Creative Kidstuff sells developmental and educational toys at its six locations, all of which are in Minnesota. Its St. Paul store is located at 1074 Grand Avenue.

The company’s CEO, Roberta Bonoff, told Twin Cities Business that the products found in the new baby shop are an expansion of the retailer’s current infant offerings, which include toys and baby-care products sold at all of the retailer’s locations. Infant products currently represent about 6 percent of the company’s total sales, and Bonoff said it is too early to tell how much that figure will increase given the new offerings. However, she said that the baby shop concept might be expanded to other locations if it takes off at the St. Paul store.

The CK Baby Shop is part of a remodel at the Grand Avenue store, which also involved adding a new play and party room that the store will rent out for birthdays and other events.

Creative Kidstuff was founded in 1982 as a single store in Minneapolis’ Linden Hills neighborhood. It has expanded considerably since then—and it has won numerous "Best Toy Store" awards. It has also been nominated by the Toy Industry Association as one of the top specialty toy stores in the United States.

—Nataleeya Boss
([email protected])

Best Buy Cuts 2,400 More Jobs in Turnaround Effort

The cuts, which include roughly 600 Geek Squad positions, are in addition to 400 corporate layoffs announced in March.

Richfield-based Best Buy Company, Inc., is eliminating 2,400 jobs companywide in its latest move to cut costs and turn the company around.

The cuts are related to a major restructuring plan outlined in March, but they are in addition to the 400 corporate job cuts announced at that time, Best Buy spokesman Bruce Hight told Twin Cities Business on Monday.

The 2,400 jobs include about 600 Geek Squad positions and roughly 1,800 Best Buy store employees, Hight said. The positions will be eliminated by August 1.

The company did not disclose how many of the layoffs will occur in Minnesota or the Twin Cities. Best Buy employs about 167,000 people globally, so the latest round of cuts represents about 1.4 percent of its work force. Affected employees are eligible for severance and job placement assistance, Hight said.

When the company announced plans to cut 400 jobs in March—and to close 50 big-box stores this year—it said those actions would result in $800 million in savings during the next three years. Hight didn’t disclose how much Best Buy expects to save from the latest 2,400 job cuts.

“These changes were previously announced as part of the leadership team’s ongoing turnaround plan,” Hight said in a prepared statement. “We are working to minimize the impact of the changes on employees while building the foundation for a strong future.”

Best Buy, which has been hurt by competition from Internet retailers like Amazon, experienced a 5.3 percent decline in same-store sales during its most recent fiscal quarter. Central to its restructuring plan is the shift away from big-box stores to a smaller, “connected store” format.

Last month, during the company’s annual meeting, interim CEO G. Mike Mikan told shareholders that Best Buy’s aim is to become “more relevant, more intelligent, and more nimble.” He said the company cannot be seen merely as a hardware retailer and must strengthen its technology expertise and improve customer experience.

Given those statements, some analysts were puzzled by Best Buy’s decision to eliminate Geek Squad positions, according to a report by the Star Tribune. The company is “cutting its best and brightest people at a time when the company is fighting for its future,” Burt Flickinger III, managing director of Strategic Resource Group consulting group in New York, told the Minneapolis newspaper.

The Pioneer Press, however, reported that the Geek Squad downsizing “appears to be mostly focused on repair positions, with fewer cuts to service operations.”

As Best Buy implements its restructuring plan, it has also experienced significant changes to its leadership team. The company saw an exodus of many key leaders this year, including Geek Squad founder Robert Stephens, and it recently doled out bonuses worth $10 million in an effort to retain its remaining key executives.

The company is still searching for a new chief executive to replace Brian Dunn, who stepped down in April amid an investigation that found that he violated company policy by engaging in a close personal relationship with a female employee.

The investigation also found that Chairman and founder Richard Schulze “acted inappropriately” when he failed to notify the company’s audit committee after learning about allegations of such a relationship. Schulze abruptly resigned from Best Buy’s board last month and began exploring options for his roughly 20 percent stake in the company. Shares of Best Buy’s stock jumped last Monday on speculation that Schulze may be close to making a buyout offer for the company, but a Reuters report indicated that such an offer is still a ways off, stifling the market’s momentum.

Best Buy’s stock price slid about 0.7 percent on Friday as news of the 2,400 layoffs surfaced. Shares were trading down about 2.8 percent at $20.99 mid-day Monday.

Best Buy is Minnesota’s third-largest public company based on revenue, which totaled $50.7 billion for the fiscal year that ended on March 3.

—Jake Anderson
([email protected])

Securian Says Its New App Can Calculate Life’s Worth

The Human Life Value Calculator iPad app gives users a range of their economic value based on current income and debt, as well as expected lifetime earning capacity—and Securian says it might make users “think twice about their life insurance coverage.”

Think it’s impossible to place a value on a person’s life? Not so, according to a new iPad app.

Minnesota Life Insurance Company, an affiliate of St. Paul-based Securian Financial Group, recently launched an iPad app that claims to calculate how much a user is worth, now and through retirement.

The Human Life Value Calculator app takes into account factors including current income and debt, number of years to retirement, ongoing financial commitments, funding or savings goals, and current resources.

The app then provides users a range of their economic value. The lower end of the range reflects what one would need to pay off immediate debt, such as college costs and car payments. The higher end of the range, meanwhile, reflects all of that plus the person’s potential earnings through retirement.

Securian said that the calculated range is meant to help users determine their “desired life insurance coverage.” It also helps users estimate the amount of life insurance needed to cover financial loss should one die prematurely, the company said.

“People often do not realize how big that number can be,” Andrea Mack, director of Securian’s life product promotions unit, said in a statement. “Once they do, they think twice about their life insurance coverage.”

The app can be downloaded by anyone for free from Apple’s iTunes store, and users can share the results with their financial advisors via e-mail, Securian said.

Securian Financial Group offers a range of financial planning services to individuals and businesses. Minnesota Life Insurance Company is among the state’s 10-largest life insurers based on premiums written in the state.

—Nataleeya Boss
([email protected])

Best Buy Board Changes Bylaws, Makes Takeover More Difficult

Best Buy’s bylaws now require that an investor own at least 25 percent of the company’s stock in order to call a special meeting related to a “change of control”; founder Richard Schulze and entities that he controls own 21.2 percent.

Best Buy Company’s board has hampered any plans that founder Richard Schulze might have had to take the electronics retailer private.

At the Richfield-based company’s annual shareholders meeting Thursday, the board of directors changed Best Buy’s bylaws to require that an investor own at least 25 percent of the company’s stock in order to call a special meeting related to a “change of control.”

Schulze abruptly resigned his director post earlier this month and simultaneously announced plans to explore options for his 20.1 percent ownership stake—although entities that he controls collectively own another 1.1 percent. Some analysts subsequently predicted that Schulze would simply sell his stock, but unnamed sources close to the situation have reportedly told the Star Tribune that he’d like to take Best Buy private under new owners and management. (Citing those sources, the Minneapolis newspaper also reported that Schulze has already hired a prominent New York attorney and investment bank Credit Suisse, which specializes in leveraged buyouts, to advise him.)

Best Buy’s bylaws previously required a shareholder to own at least 10 percent of the company’s stock in order to call a special meeting. Schulze is the only shareholder whose stake exceeded that threshold.

In a filing with the U.S. Securities and Exchange Commission, Best Buy said that the change of bylaws was made to conform to a specific Minnesota law, but a company spokesperson couldn't immediately provide further details.

Following a scandal involving the company’s former CEO, Brian Dunn, Schulze was scheduled to step down as chairman at the conclusion of Best Buy’s annual meeting last week—and the company previously announced that he would serve out the remainder of his director term, which goes through June 2013. His board resignation earlier this month accelerated his departure from both posts.

In April, Dunn abruptly resigned. Then last month, Best Buy released the results of an independent investigation, which found that Dunn violated company policy by engaging in “an extremely close personal relationship with a female employee that negatively impacted the work environment.”

The investigation also found that Schulze “acted inappropriately” when he failed to notify Best Buy’s audit committee after learning in December about allegations of such a relationship. The report indicates that an unnamed company executive provided Schulze with a written statement from another employee that contained allegations about a possible inappropriate relationship. Schulze did confront Dunn and handed him a copy of the written statement.

In other news from the company’s annual meeting: Best Buy has agreed to comply with a nonbinding shareholder resolution requesting that directors stand for reelection on an annual basis. Best Buy said that the measure “was supported by the board of directors as a demonstration of the company’s commitment to transparency and strong corporate governance practices.”

The company previously had shareholders vote on one group of directors one year—and the remaining directors the following year.

Best Buy is Minnesota’s third-largest public company based on revenue, which totaled $50.7 billion for the fiscal year that ended March 3. The recent shakeup involving Dunn and Schulze comes amid a major company restructuring involving the closure of 50 big-box stores and 400 corporate layoffs, which were announced in late March. Best Buy has since lost a number of key leaders.

—Christa Meland
([email protected])