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Is This a Red Flag for Starbucks?

Starbucks (Nasdaq: SBUX  ) made waves last week, when it announced its huge $620 million acquisition of Teavana (NYSE: TEA  ) . The price put a 52% premium on the company and has many wondering whether Starbucks overpaid. 

The company has been on an acquisition tear recently, which puts up a small red flag for the Fool's Austin Smith. While Starbucks is an incredible operator, he argues that it became great by intensely focusing on its strengths. These moves put the company in new markets and may dilute its energy away from being the great operator we've seen in the past.

See more in the following video.

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  • Report this Comment On November 23, 2012, at 12:24 AM, jwlarson3 wrote:

    I really hope that SBUX can take this company in a new direction. I stop in a Teavana if I happen to pass one in a mall, but they are not really near me. They tend to be in the more upscale malls in the DC suburbs. I don't see the overlap with the TAZO brand really. TAZO is in the starbucks store almost as an afterthought. The quality and variety in a Teavana store really goes after the "true" tea fans. If they can expand the number of stores, put in a beverage bar at each of them, and bring the exotic teas to their new Verisimo; that's where i see this acquisition really being able to pay off. I just hope they have the vision to do it. The international demand for high quality tea houses could be another major revenue stream and expansion goal.

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