Best Buy 2007 Annual Report Download - page 27

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12
Condition and Results of Operations, of this Annual Report
on Form 10-K.
Intellectual Property
We believe we own valuable intellectual property including
trademarks, service marks and tradenames, some of which
are of material importance to our business, and include
“Best Buy,” the “Yellow Tag” logo, “Geek Squad,” “Five
Star,” “Future Shop,” “Magnolia Audio Video” and “Pacific
Sales.” Some of our intellectual property is the subject of
numerous United States and foreign trademark and service
mark registrations. Our trademarks in the United States
generally have 10 year renewable terms. We believe our
intellectual property has significant value and is an
important factor in the marketing of our company, our
stores and our Web sites. We also believe we own valuable
patents and intellectual property for which we have patents
pending. We are not aware of any facts that could
negatively impact our continuing use of any of our
intellectual property.
In accordance with accounting principles generally
accepted in the United States (“GAAP”), our balance sheets
include the cost of acquired intellectual property only. The
only material acquired intellectual properties presently
included in our balance sheets are the Future Shop, Five
Star and Pacific Sales tradenames, which had a total
carrying value of $81 million at the end of fiscal 2007. The
values of these tradenames are based on the continuation
of the Future Shop, Five Star and Pacific Sales brands. We
currently classify these tradenames as indefinite-lived
intangible assets. If we were to abandon the Future Shop,
Five Star or Pacific Sales brand, we would incur an
impairment charge based on the then-carrying value of the
associated tradename.
Seasonality
Our revenue and earnings are typically greater during our
fiscal fourth quarter, which includes the majority of the
holiday selling season in the United States and Canada.
Working Capital
We fund our business operations through a combination of
available cash and cash equivalents, short-term investments
and cash flows generated from operations. In addition, our
revolving credit facilities are available for additional
working capital needs or investment opportunities.
Customers
We do not have a significant concentration of sales with
any individual customer and, therefore, the loss of any one
customer would not have a material impact on our
business. No single customer has accounted for 10% or
more of our total revenue.
Backlog
Our stores and online shopping sites do not have a
material amount of backlog orders.
Government Contracts
No material portion of our business is subject to
renegotiation of profits or termination of contracts or
subcontracts at the election of any government.
Competition
Our stores compete against other consumer electronics
retailers, specialty home-office retailers, mass merchants,
home-improvement superstores and a growing number of
direct-to-consumer alternatives. Our stores also compete
against independent dealers, regional chain discount
stores, wholesale clubs, video rental stores and other
specialty retail stores. Mass merchants continue to increase
their assortment of consumer electronics products, primarily
those that are less complex to sell, install and operate, and
have been expanding their product offerings into higher-
end categories. Similarly, large home-improvement retailers
are expanding their assortment of appliances. In addition,
consumers are increasingly downloading entertainment and
computer software directly via the Internet.
We compete principally on the basis of customer service;
installation and support services; store environment,
location and convenience; product assortment and
availability; value pricing; and financing alternatives.
We believe our store experience, broad product assortment,
store formats and brand marketing strategies differentiate us
from most competitors by positioning our stores as the
destination for new technology and entertainment products
in a fun and informative shopping environment. Our stores
compete by aggressively advertising and emphasizing
a complete product and service solution, value pricing and
financing alternatives. In addition, our trained and
knowledgeable sales and service staffs allow us to tailor the
offerings to meet the needs of our customers.