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Tuesday, August 29, 2006

WiFi Nation: Starbucks and Caribou

Stocks: (CBOU)(SBUX)

Caribou is a tiny company, especially compared to Starbucks. The company did only $56 million in sales in the quarter ending July 2, and lost $2.4 million. But, this week Caribou did something that may have a broad reaching affect on Starbucks. It started offering free WiFi service in its stores. Starbucks offers T-Mobile WiFi, but the service costs about $10 a month.

Starbucks does not disclose what T-Mobile makes from offering the service or if Starbucks get a cut.

A casual walk through most Starbucks will undoubtedly find several people with laptops surfing the internet. The WiFi service is and important draw, but, if it is free elsewhere a few Starbucks customers might be drawn away. With Starbucks same-store sales running below where Wall St. would like them, this is another, albeit modest, reason for people to get their coffee, sandwichs and fruit drinks somewhere else.

Starbucks said that one reason same-store sales dropped is that its takes longer to serve people now that it offers drinks that take longer to make. Maybe the people in line will get tired of using their paid WiFi service as well.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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