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BestBuy Acquires Speakeasy

The nation’s largest standalone seller of electronics has paid $97 million to acquire Seattle-based Speakeasy, America’s leading indepdenent broadbant Internet service provider and a forerunner in marketing Internet-based phone services to small businesses nationwide. Best Buy said it would continue to run Speakeasy as a subsidiary, and will keep its current managers. Speakeasy employs about 300 people and has more than 40,000 customers, Best Buy said. Speakeasy had $80 million in revenue last year and is “just turning the corner on profitability.”

The $97 million price tag is minor for Best Buy, which is expected to report full-year revenue of $35.65 billion next month. But the Speakeasy purchase is another step in Best Buy’s quest to add services to its retail offerings. In the same vein, Geek Squad was a standalone technical support company before Best Buy bought it in 2002. Best Buy eventually put Geek Squad in all its stores.

Speakeasy began as an Internet cafe in Seattle in 1994, and became a broadband Internet service aimed at heavy residential users like home-based businesses and gamers in 1998. The company eventually attracted venture capital funding.

Under Chief Executive Bruce Chatterley, Speakeasy began shifting away from the residential market in 2003, looking to avoid a broadband price war between cable and phone companies.

Chatterley said the Internet phone portion of the business is “the fastest-growing segment of our company, and will comprise a majority of our company within a couple of years.”

“We’re a vibrant successful smaller business that’s growing at a pretty good clip and Best Buy wants to provide resources to accelerate that growth without messing with the business model,” he said. [24×7]