Best Buy's Best Bets for Consumer Electronics Shoppers/Investors

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CNBC.com

We just got off the phone with Best Buy and the call yielded some interesting results.

Here we are a week before Christmas, the last night of Hanukkah, and it's the perfect opportunity to find out what's selling, what's not, and what investors ought to be paying attention to.

We know Amazon's Kindle is one of the season's best sellers with Citi just this week upping its unit sales expectations to 2 million units from the original 1.5 million. The product should generate about $1.6 billion in revenue for Amazon, and while that's only about 5 percent of the total sales the company generates, it speaks to the tipping point this technology and these products are enjoying. And while Barnes & Noble sold out of its Nook relatively early in this Holiday Shopping Season, Sony continues to try to sell its eReader. Surprisingly, in talking to Best Buy, eReader was almost an afterthought, but it is tracking healthy sales in that product too.

What IS selling? Apple's iPhone seems to be the chain's hottest seller, which is noteworthy against the backdrop of yesterday's big earnings news from Research in Motion. RIM says 80 percent of its Blackberry sales went to "non-enterprise" customers, which is the heart of Apple's market. And yet Best Buy says iPhone is probably its single hottest-selling product.

Quick, name the second most popular smart phone: Blackberry? Something from HTC?Samsung? Nope. The Motorola Droid is doing exceptionally well, says Best Buy.

Other big sellers: All flat-panel televisions are selling well, but there are brisk sales among so-called LED flat panel TVs, and that's very good for the likes of Samsung and Sony, not so good for Panasonic and Vizio. This is also good news for Corning, the company that makes so much of the flat panel TV glass which characterized sales as "outstanding" earlier this week, and apparently unaffected by price-slashing at retail. Dovetailing the LED craze, Blu-ray players are also apparently big sellers too, says Best Buy, across most of the major manufacturers. But since Sony still owns the technology, the more these players sell -- no matter who makes them -- the better it is for its bottom line.

Laptops and netbooks are also big movers, which bodes well for Hewlett-Packard, Asus, Dell, but probably most notably Intel and Microsoft. Windows 7 is actually performing as promised, spurring a consumer spending upgrade cycle.

Digital cameras are also doing well and that might be good news for Sandisk which makes the memory cards inside most of them.

Not making the list: Video game titles and hardware. The industry has been clobbered. Growth seems to have stalled and while a few key titles might be selling well, there doesn't seem to be the buzz that Microsoft's Xbox, Sony's Playstation family and the Nintendo Wii commanded in Holiday Shopping Seasons past. Electronic Arts, Activision, THQ and others seem to be struggling. As shoppers look for better deals, Gamestop might be a good option as the secondary and used market begins to heat up for game titles. (Anecdotally, my 8-year-old son's old favorite stores were Target and Walmart because of the toy aisles. Nowadays, he loves, loves, loves Gamestop.)

Gadgets are still hot, no question. But it seems shoppers are looking for real value. Best Buy's earnings earlier this week showed the cost of all this: Margins are getting squeeze, and that will likely translate into the earnings reports of some of these key suppliers. The company's that can maintain pricing, ala Apple and Samsung (LED TVs are down in price but they're way more expensive LCDs and plasmas) and Amazon and Intel might come out of this season a lot better than investors thought.

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