Best Buy takes step back from Internet phone business

Minneapolis Best Buy Co. has agreed to combine its Internet phone business Speakeasy with two California-based companies in a move analysts characterized as a step back from an effort to diversify into business services, according to Minneapolis/St. Paul Star Tribune.

The company had picked up Speakeasy in 2007 for $97 million to boost its offerings outside its core business of selling consumer electronics. It will continue to hold a minority stake in the combined venture, though analysts questioned for how long.

Speakeasy will be combined with San Jose-based Covad Communications Co. and Costa Mesa, Calif.-based MegaPath, both of which provide Internet services to businesses.

The companies billed the transaction as creating a business that will provide Internet voice phone service, security, as well as virtual private network and Internet services.

Financial details were not disclosed in the transaction, which is expected to close in the third quarter.