Microsoft and Best Buy Join Alliance Frenzy

In the midst of a flurry of co-promotion agreements between retailers and Internet brands, Microsoft (Nasdaq: MSFT) and Best Buy Co.,(NYSE: BBY) announced a strategic alliance today that includes Internet, broadcasting and in-store promotional projects.

The agreement will include marketing efforts in Best Buy’s retail stores, online at BestBuy.com, and through print and broadcast vehicles. The deal will also include profit sharing and the promotion of BestBuy.com to the 40 million users of Microsoft properties and technology.

During the past several weeks, Microsoft forged a marketing agreement with Radio Shack, and Yahoo! countered by unveiling an alliance with Kmart. America Online followed by forming a deal with Circuit City, and then announced today that it has devised a pact with Wal-Mart.

Microsoft Web Products In Best Buy Stores

Microsoft will use the new agreement to expand its distribution and grow subscribers to its Internet services. The company’s full line of connectivity products will be available at Best Buy’s 350 stores, including MSN Internet access.

Microsoft’s line will also be promoted and sold at BestBuy.com. As part of the agreement, Microsoft will invest $200 million (US$) in Best Buy common stock.

BestBuy.com On Microsoft

The agreement also provides that Best Buy and BestBuy.com will be prominently displayed and promoted at Microsoft Web sites and broadcasting properties, including the Expedia.com travel service, Microsoft’s e-mail services, Hotmail, WebTV Network, the new MSN eShop online, and MSNBC.

Best Buy will also become a major advertiser on Microsoft’s Internet and broadcast properties.

Microsoft chairman and CEO Bill Gates views the Best Buy alliance as part of his company’s strategy to make Internet access ubiquitous in consumers’ lives. “As the largest retailer of PCs to the home user,” Gates said, “their ability to sign up more than half a million subscribers in five months through in-store instant rebates illustrates the power of the Best Buy brand.”

Best Buy chairman and CEO Richard M. Schulze affirmed Gates’ goal to make Web access as prevalent as the telephone. “Best Buy annually serves over 200 million customers and sells more than 12.5 million connected devices, so together, Best Buy and Microsoft create a strong team fostering our mission of improving people’s lives by making technology affordable and easy to use,” he said.

Best Buy operates 354 stores in 37 states, retailing consumer electronics, computers and entertainment appliances and software.