Some of the biggest companies backing the Blu-ray format for high-definition movies are hedging their bets by introducing players that can also show Internet video, which is making surprising inroads in the home-entertainment market.

Electronics retailers and manufacturers including Best Buy Co. (BBY), Samsung Electronics America Inc. and LG Electronics USA Inc. are selling Blu-ray disc players that tap into movies from online rental companies. The devices provide an alternative to pay-per-view cable services.

The hybrid movie players tap a growing library of online movies and television shows from Amazon.com Inc. (AMZN), which screens movies for as little as 99 cents, and from Netflix Inc. (NFLX), which allows unlimited movie streaming for $8.99 a month.

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IRex Technologies threw its hat into the increasingly crowded U.S. e-reader market Wednesday with the launch of its new device, the DR800SG.

The DR800SG will cost $400 and features an 8.1-inch screen and 3G wireless connectivity with carrier Verizon (VZ). In a retro move reminiscent of the Palm (PALM) Pilot, the e-reader comes with a stylus pen to navigate the on-screen menus. The company said it will roll out a touch-screen version in the second quarter of 2010.

IRex said it will partner with electronics retailer Best Buy (BBY) to offer the device in U.S. stores in late October 2009.

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TiVo (TIVO) this morning announced a multi-part deal with Best Buy (BBY) that includes the development of a special version of the TiVo player that would include specialized content–oh, okay, advertising–from the electronics retailer.

Or as the release puts it: “Best Buy intends to utilize TiVo’s robust platform to deliver educational and marketing messages directly to consumers.”

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The news this week that Napster is relaunching with a $5-a-month subscription plan that includes 5 free MP3 downloads would appear to be a troubling development for RealNetworks’ (RNWK) rival Rhapsody service, which will set you back $13 a month for a streaming service that lacks the free MP3s. It is also no doubt irritating to Real that it comes from a company that is now a unit of Best Buy (BBY): in the past, the Best Buy digital music store was a re-branded version of Rhapsody, which came pre-loaded on non-Zune, non-iPod music players sold by the retailer.

Earlier this week, I chatted about the situation with Neil Smith, VP of business management for Rhapsody America. His spin on the Napster story is that what they’re really doing is going head-to-head with Apple’s (AAPL) iTunes store–that Napster is “all about the downloads.” He says Napster basically wants to use the new approach to get into the pre-paid music gift card market, using the free downloads as a driver to steal share from Apple. He thinks selling tracks is more their goal than “turning the tide toward subscription from purchase,” which is where Real is focused.

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There are the things that you say. And then there are the things that you do.

Electronics retail giant Best Buy (BBY) has supplied a fine example of the difference.

What They Said:

Here’s an excerpt from a release Best Buy issued yesterday on some recent store openings:

“The company’s Blue Shirt employees are the core of Best Buy. As a people-powered organization, Best Buy invests heavily in discovering and training employees in customer service, product knowledge and financial acumen. As the store employees are closest to the customers, the company relies on them for their innovative ideas and feedback to enhance customers’ shopping experiences. Whether an individual’s passion is to be the best salesperson on the floor, a Geek Squad Agent, home theater installer or the next CEO, Best Buy fuels employees with the knowledge and resources to achieve their personal ambition.”

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Best Buy (BBY) this morning reported sharply higher-than-expected profits for its fiscal fourth quarter ended Feb. 28.

For the quarter, the last large national electronics retailer posted revenue of $14.724 billion, a bit below the Street consensus at $14.8 billion. But adjusted EPS of $1.61 a share nicely beat the Street at $1.40 a share. (In the release, Best Buy says the Street had been expecting $1.38. But whatever.) Comparable store sales were down 4.9 percent in the quarter, but gross margin improved to 24.6 percent from 23.7 percent a year ago.

For 2010, the retailer sees revenues of $46.5 billion to $48.5 billion; the Street has been forecasting $48.1 billion.

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GameStop (GME) shares are getting clobbered today on news that Amazon.com (AMZN) is getting into the business of buying and selling used video games–and so is Toys ’R Us.

Credit Suisse analyst Gary Balter explained in a research note today that one reason he has maintained an Outperform rating on GME shares is that the company has dominated the used videogame business; he notes that used games generate 44 percent of the retailer’s gross profits, nearly twice the segment’s sales contribution to the company. Over the last several days, he reports, there have been two attacks on the company’s near monopoly in used games.

On Tuesday, Forbes reported that Toys ’R Us has a pilot program to test the sale of used games in some of its U.S. stores; Forbes noted that the program was first reported in the user forums of a Web site called cheapassgamer.com. Other retailers, including Best Buy (BBY) and Blockbuster (BBI), have previously experimented in the segment, but haven’t made much of a dent.

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Best Buy (BBY) shares are getting a boost this morning from a bullish note by Goldman Sachs analyst Matthew Fassler, who added the stock to his firm’s Conviction List. Fassler had upgraded the stock to a Buy rating in early January. He has a price target on the stock of $33.

Fassler expects the company to benefit from the demise of rival Circuit City. He now sees EPS for the February 2009 fiscal year of $2.40, up from $2.27. For 2010, he goes to $2.54, from $2.47. Fassler thinks the company will capture a significant portion of the “freed-up” Circuit City sales.

Slightly tempering Fassler’s enthusiasm for the shares is a view that once the market adjusts to the disappearance of Circuit City, the company will have to take on Wal-Mart (WMT) and Amazon.com (AMZN).

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Gimme Credit analyst Carol Levinson late Friday cut her credit rating on Best Buy (BBY) to “Deteriorating” from “Stable.”

In a research note, Levinson notes that the company in the long run should benefit from the bankruptcy and liquidation of Circuit City (CC), Tweeter and “whomever among its competitors might be the next to go.” But she adds that “in the short run it must join the lengthy list of retailers experiencing weaker sales, strained liquidity, and contracting margins.”

Levinson also notes that most of its merchandise is “largely discretionary in nature and margins in electronics were low to begin with even before the latest promotional binge.”

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Not a good day for Dell (DELL) shares, which are down even more sharply than the overall market.

Thomas Weisel analyst Doug Reid this morning noted that he is “incrementally more cautious” on the company after a survey of 35 “PC experts” over the Black Friday weekend at Best Buy (BBY) stores. Reid writes that Dell remains “a weak competitor” in the retail channel and that “quality problems may be re-emerging.”

Reid says that Dell’s mind share at U.S. retailers “remains weak.” He says sales people preferred Hewlett-Packard (HPQ) over Dell by 5-to-1, asserting that it offers better overall value. “While HP has been sold at Best Buy for much longer than Dell, quantitatively, the results are still somewhat disappointing considering that Dell has been sold at BBY stores for 11 months,” he writes.

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So, just how big will be the bargains tomorrow when Apple (AAPL) unveils its pricing for Black Friday?

Bigger than last year, asserts Kaufman Bros. analyst Shaw Wu.

Wu, who just yesterday picked up coverage of the stock with a Buy rating, asserts in a research note this morning that discounts on Macs, iPods and accessories this year could be up to 15 percent, compared with discounts of 5-10 percent in previous years. He said it is “unclear” if there also will be discounts on iPhones.

Wu notes that Best Buy (BBY) and Amazon (AMZN) are already selling Apple merchandise at discounted prices.

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Well, I for one never know what to make of a day like this one, with the market jumping back and forth over the flat line before staging one of those crazy end of the day runs that have become so much a part of the current market pattern. The Nasdaq Composite finished at the high for the day, up 97.49, or 6.5 percent, to 1596.70, and 168 points above the day’s low. The other major indexes had similar gains, with the Dow up 552 points, or 6.7 percent, to 8835, or 900 points above the low for the day, after briefly dropping below the 8000 level.

It sure is tempting to think that we’ve set a sustainable bottom; but what it really feels like is yet another unsustainable bear market rally. I will note that it seems encouraging that investors opted to more or less ignore the bearish earnings news yesterday from Intel (INTC), Best Buy (BBY), National Semi (NSM) and others, and focus instead on hunting for bargains. But I would also note that, as Bernstein Research pointed out earlier today, earnings estimates for many tech company are likely still too high, and due for further cuts in the weeks and months ahead.

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Research In Motion (RIMM) turns out to be yet another company that simply can’t escape the clutches of the crumbling global economy.

Several analysts weighed in today with estimate cuts, pressuring the stock.

Merrill Lynch’s Vivek Arya cut this EPS estimate for the fiscal third quarter ended November to 80 cents from 95 cents, which is now below the Street at 92 cents. For the February 2009 fiscal year, he goes to $3.45, from $3.61, and for 2010, he goes to $4.08, from $4.45. Arya cited a number of factors for the downgrade, including macro headwinds, the late North American launch of both the Storm and the Bold, and increased competition from the Apple (AAPL) iPhone. He also notes that warnings from Best Buy, Circuit City and Intel suggest we are in for weak consumer demand in calendar Q4. “While smartphone demand would normally be more resilient due to carrier promotions and productivity benefits, the current environment demands caution,” he writes. His target price on the stock drops to $65, from $80.

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Looks like Chris Gorog really was serious about selling off perennially troubled Napster, after all. He’s selling the company to Best Buy for $121 million. That’s $2.65 per share, which works out to be $54 million net of cash.

The good news for Napster shareholders is that Best Buy is paying twice Friday’s closing price. The bad news, for anyone who’s held the stock for any length of time: A year ago NAPS was trading above $3.

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Best Buy (BBY) this morning announced a deal to buy online music site Napster (NAPS) for $2.65 a share in cash. That comes to $121 million, or $54 million net of Napster’s $67 million in cash and short-term investments as of June 30. The deal is expected to close in the fourth quarter. Best Buy said it signed employment agreements with Napster CEO Chris Gorog and other key senior managers of the company to stay on after completion of the deal.

Napster had revenue in the March 2008 fiscal year of $127.5 million, with a loss of $16.5 million. Best Buy will use cash on hand to complete the deal.

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