UPDATE 3-Best Buy founder Schulze rejoins as chairman emeritus

* Schulze nominates two former Best Buy executives to board

* Shares move higher in early trading

(Adds analyst, investor reaction)

By Dhanya Skariachan

March 25 (Reuters) - Best Buy Co Inc founder Richard Schulze, who left the board last year and later failed in his effort to take the company private, will rejoin the retailer as chairman emeritus and add two of his former colleagues to the board.

The news helped dispel rumors the largest investor in the world's largest consumer electronics chain was contemplating selling his stake in the company he founded in 1966. Best Buy shares rose more than 2 percent on Monday.

"We view today's announcement as a clear positive for Best Buy, as it suggests that Mr. Schulze is unlikely to sell his 20 percent stake in the company at any point in the near future," Barclays analyst Alan Rifkin said.

Rifkin said Schulze's return was likely to be "a huge morale boost," citing his popularity among the company's employees.

One former investor, who sold his shares recently after a run that saw the stock nearly double in the first quarter, said it was only good news as long as Schulze did not meddle in the company's operations.

"It's Richard's way of saying I am still involved in the business," said Frank Lombardi, a portfolio manager at Boston-based Cubic Asset Management. "I don't think it's useful. Hopefully it's not detrimental to the business. But I think they will sort of stay somewhat passive for now and allow the business to be run by Joly."

Schulze, who had a prior agreement with Best Buy that let him nominate two directors, resigned as chairman last June after an internal probe found he did inform the board of allegations former Chief Executive Brian Dunn was having an inappropriate relationship with a female employee.

Schulze then tried to take Best Buy private, an effort that fell apart earlier this year.

"This is a better idea, and better for shareholders this way than if Schulze took the company private," said Morningstar analyst R.J. Hottovy. "In a leveraged buyout transaction you would sell the company for a lot of debt and at this time the company does not have a lot of margin for error."

Best Buy's shares rose 2 percent to $23.24 on Monday morning. The stock is up 92 percent in 2013, as investors have grown more confident in Chief Executive Hubert Joly's turnaround plans.

Lombardi said he did not expect Schulze or his board nominees, former Chief Executive Brad Anderson and former Chief Operating Officer Al Lenzmeier, to bring much to the table.

Even Schulze's original plan to bring these executives back to run the company had drawn some skepticism last August, especially since they ran the retailer before online shopping became popular.

(Reporting by Dhanya Skariachan in New York and Nivedita Bhattacharjee and Jessica Wohl in Chicago; Editing by Gerald E. McCormick, Maureen Bavdek and Andrew Hay)

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Keywords: BESTBUY SCHULZE/