Hacker News Reader

Comment by joonix | Hacker News Reader

Seriously, does Best Buy not have a legal department? How could those people think it was OK to discuss stealing their idea in easily discoverable email, then actually steal it? And then, when the lawsuit comes, not even settle, but go to trial, when there's mounds of evidence that dooms Best Buy? Someone is not doing their job there.

Best Buy is one of those companies that is just all-around mediocre, in every regard.

View on HN

They do and trust me, you'd be surprised, probably even shocked to know what goes on at their corporate HQ.

I worked there for almost a year and can attest this type of behavior is pretty common.

Is that shocked, or "shocked"? Then again, the purpose of a legal department is (unless I misunderstand it) to _advise_, and if the boss decides to do something Tremendously Stupid, it's hard to blame the lawyers. Unless, of course, they said they thought it would be fine. (Which I can't imagine they would have done.)

Some might say that it is in the lawyers' interest at some level that their bosses go against legal advice and open themselves up to lawsuits because when that lawsuit comes in, guess which department stays employed? Now, I think most lawyers operate in good faith and go to great extremes to convince their client of taking the best option but I can see lawyers give up after a certain stage thinking alright whatever, why am I complaining, this just means I'll have enough work for next 2 years because of my client's stupid decision.

Using that logic, it may be in the law profession's best interest, but certainly not for the Best Buy lawyers who were aware of this.

Exposing yourself to detrimental litigation where the odds of you winning are low will probably result in you (the lawyer giving the poor advice) being let go and a new set of in-house counsel coming in to fix the mess.

Woah, no one said anything about lawyers that give poor advice. I was talking about lawyers who give solid advice ... to stubborn clients who choose to go against their lawyer's (solid) advice.

To be fair, a more plausible explanation for the lawyers giving up after a certain point is that nobody wants to argue with their boss that long.

Great point :)

No, it was shocked.

Here's a little diddy. Best Buy brought in a bunch of people after Target got sued for $6 million for not having an accessible website for blind people. Since Best Buy's site was very poor shape in this regard, they were hiring developers, managers, practically an entire team just to work on this issue.

First project I'm assigned, I notice a bunch of these errors and start outlining them and attaching how much time it will take to fix. Once the project launched, guess which ones got axed from the list of requirements in the first meeting?

After two more projects like this, I just gave up trying. I was told it cost too much and it wasn't an important issue. To say it was a confusing place to work is an understatement.

What do you mean? It worked perfectly well for Best Buy; they paid out far less in the judgment than they stole in revenue.

Yeah, sadly this lawsuit is just "cost of doing business" for Best Buy. They earned $140m in the first year, they only had a % chance of paying out for a lawsuit, and the lawsuit was worth less than 20% of the $140m earned. They just profited over $113m (plus the benefit of money now vs. money later) from destroying a startup

Business as usual in America nowadays :/

No, to both of you. No no no. Best Buy didn't "earn" 140MM; according to this story, they achieved 140MM of revenue. Revenue for Best Buy is the price tag on consumer electronics. Bust Buy doesn't pull those consumer electronics out of its butt; it pays vendors to acquire those goods, marks them up, and sells them to customers. Best Buy is a public company and is required to account for this difference, which is its gross margin. Best Buy's gross margin hovers around 25%.

If it all this suit cost Best Buy were the damages and penalties we already know about, then they are already close to wiped out on the deal (27MM vs. ~35MM, less legal). But that still doesn't capture it, because Best Buy spent money to clone this startup's offering and also to run the company and keep the lights on in the stores, which are expenses not captured in Best Buy's gross margin.

Incidentally, the 22MM figure also didn't get pulled out of some judge's butt. If you read the jury's finding, it's the amount of unjust enrichment Best Buy achieved by misusing Techforward's property.

In the very worst case scenario, virtually every penny of profit from this program was redirected from Best Buy to the winners of the lawsuit. But it's even more likely that Best Buy took a bath even beyond the imputed profits we're talking about.

That's a good point - revenue is not profit - but I'm not sure it is it a conclusive point. First, why would you assume the final estimate of revenue which came out of the sausage system of the legal system, with Best Buy's lawyers presumably heavily incentivized to knock down the estimate at every point in every way possible, is remotely accurate? An economics book on cartels and their prosecution I read (_Global Price Fixing_) noted dryly that the estimates of illicit revenues and hence profits in the cases were nowhere near what an outside would calculate especially in the case of the vitamin cartels.

(A more picayune point is that a small profit or a loss to Best Buy in one case doesn't mean that its practices are not a net expected profit; indeed, if they weren't losing an occasional case, they probably aren't taking enough risks to make the most possible profit.)

The gross margin comes from Best Buy's SEC filings. They have every incentive in the world to report the highest possible margin.

Not really, best buy and any other company of its size are more concerned with tax filings (which should be an "Ah Ha" moment for those of you at home), which generally gives companies an incentive to jack up costs and consequently decrease revenue. If you want a better idea of what their margins actually are you best bet would be to talk to a good (read: independent) investment analyst.

Also, best buy pays ~27 million (adjusting for the time value of money over two years at 2.5% gives us 25 million, btw) for a golden goose they can reuse year over year and had they build it themselves they wouldn't have had it immediately. I don't have all the details, but the project (including legal costs) will likely pay for itself before 5 years is up. They also mitigated any risk with building it themselves and doing it wrong which would cost additional time and money.

As a side note, I am curious if the court decision has any impact on the possible of Best Buy whoring out their duplicate system.

This comment suggests that Best Buy, a publicly traded company, is incentivized to minimize its gross margins. That is an extraordinary claim.

Meanwhile, Best Buy no longer operates the buyback program. The program wasn't a golden goose.

You misunderstand. Minimizing margins and maximizing revenues are not mutually exclusive. Also, saying an entity is publicly traded irrelevant, as you are suggesting we know every detail about a company simply by reviewing their financial documents and investor relations mail; this is not the case.

Furthermore, I will happily make the "extraordinary" claim that, in general, large companies are incentivized to minimize margins to reap the tax benefits. Then again I am Joe Blow with a whole 46 karma, therefore, I must not be as smart or knowledgeable as a lurker like you with 1000's of karma, right? (oh and this one is a rhetorical question)

As usual on this particular site, if someone doesn't like the truth, they simply think its wrong because they don't like it. I half expected to get super down voted by all the closed minded individuals that have <~500 karma, but I guess you had the skeleton shift ehh tptacek.

As far as the golden goose goes, even if they scrap the program they are still better off. Does it sound better pouring far more money into building what you think is a golden goose only to make a lemon? That and they still have the system if they want to modify it and roll it out again a couple years from now. Also, they got the system right away and immediately got feedback from it. They saved a lot of time, time that they will use now on more lucrative projects.

Best Buy is priced in the market in part based on their margins.

I can only assume that you have failed every economics course you have ever taken, because if you left without understanding the concept of supply and demand orthe concept of value, then there is really nothing I can say to you other than avoid procreating. Though I certainly wish market pricing was determined via plot hole. It would certainly lead to more entertaining conversations. Next you can explain to me why the world is flat or why water is made up of hydrogen and nitrogen, or some other fundementally flawed concept. Have you written any books? I think I could do an entire 2-hour talk on just how fucking stupid you are. You my friend are a gold mine.

Ohh maybe you have a blog. But, in all seriousness, avoid procreating, there are enough retarded people that society has to care for.

That is the nastiest comment I have ever seen on HN. Why?

Your point would be right if companies SEC filing matched their tax filings. Companies are ALLOWED to keep a set of Tax record books and accounting record books and pay taxes based on the profits from their tax books. The Tax books have been screwed with beyond all belief, the SEC ones not so much. My wife is a CPA and I've got a masters of finance and have spent time doing the tax book game.

Your calculation ignores the likely dozens of other companies Best Buy and other BigCorps have screwed over with no consequences whatsover. They rolled snake eyes in this case but this will still be business as usual until damage awards become 100x actual damages, since 99 times out of 100 the BigCorp's lawyers will have their way.

My calculation ignores a whole world of injustices and unfairnesses, because it is about this particular case.

Where do you get the numbers for BB's gross margin? Isn't 25% a bit small? (also does it mean they mark up the vendor price by 25% or that 25% of the consumers price tag is profit?)

I googled "Best Buy gross margin" and this was the second result: http://ycharts.com/companies/BBY/gross_profit_margin

I'm willing to bet the $5MM in punitive damages put Best Buy squarely in the red if they weren't there just after the $22MM.

As has been discussed multiple times on here and the original link, revenue != profit. Given the margins a company like Best Buy has to run to maintain competitive, it's almost assured that they made less than $27MM in profit off the program. Let's not forget that $5MM of that is non-compensatory damages, which are designed solely to punish the perpetrator (hence the term punitive).

Don't know why they didn't settle, but

    + $140M in revenues
    - $22 million in favor of TechForward
    -  $5 million in punitive damages
    -   X million in lawyers fees

Best Buy still did alright if you ask me.

Best Buy's gross margins hover around 25%, and that's before all the rest of their overhead kicks in. Best Buy probably took a bath here.

Is their gross margin just revenue - whole_sale_cost? If that's the case, they also have cost in labor, real estate, marketing, and others. After all those, the lawsuit would have put them in red.

Good. Screw them. Now the evil a-hole caption will hang over their logo in my mind forever. Probably others on HN.

Even if this damages their brand in only a small way, it's a real cost.

If you really want to screw Best Buy the way the rest of the market is screwing them (that is: to death), then, next time you want to buy a big-ticket electronic product, go to Best Buy to try it out.

Then buy it on Amazon like everyone else does.

I agree this is the best way to buy electronics :)

(except over here it's a different large electronics chain and smaller online retailers instead of Amazon)

For an extra slap in the face, a friend of mine even used one of their on-display Macs to place the order in that very store :) (while he did take some precautions against keyloggers, I'd be a bit more hesitant myself, to enter such data into a public computer).

Their problem is that smart customers need to go online anyway, because the specs on the cards in the store are always incomplete (or even incorrect) so you can never quite compare two items. (and then it turns out that their cheapest model runs at nearly the same wattage as their expensive "energy saver" model ...) (that was for monitors btw)

Revenues aren't profits. Over the last 4 years their pre-tax profit on revenues was 3.6%. Even assuming this was much more lucrative than average, I suspect they lost money.

The real cost doesn't come in the suit, though. It comes in lost opportunities and increased deal-making costs because potential partners are much less likely to trust them now.

I agree. Also, the 140 that BB would have made wouldn't have all gone to Techforward anyway, whether it was profit or not. What we'd really have to compare is the 22 million + fees to how much they would have paid Techforward as part of the partnership. Since there are a lot of other costs to a buyback program (e.g. actually buying things back from customers), 22 doesn't sound unreasonable. This was a huge, shortsighted waste on BB's part.

This program, the buyback program they got sued over, was almost all "pure profit". Kinda like the extended warranty they try to sell you. It's 300% profit margin business. The court documents talk about it Best Buy expecting it to be a cash machine and driving instant profits to the Best Buy bottom line, and that TechForward would have made about $20MM per year just from the licensing deal.

Best Buy still made "tons of cash" from this. The punitive damages of only $5MM are a shame. This was wilful theft of IP.

They would've made that revenue anyway if they had kept the deal with TechForward.

this was simple calculus. big companies do it all the time. their legal department, their leverage... their money -- against the lack of all three (by comparison) possessed by a small company. it's not that they didn't know what was going on or the risk - it's just that they assumed that it wouldn't matter. this is why it's so great that FRC fought the whole way. about time!

Mediocre? Not possible, they had two geniuses revolutionize the workplace!

Seriously ROWE [0] is the biggest excuse for people not doing real work I have ever witnessed.

[0] http://en.wikipedia.org/wiki/ROWE

I've implemented versions of ROWE in two different companies and the results have been excellent. Not sure what your experience has been, but mine is most definitely different.

Reply on news.ycombinator.com