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Electronics chain Media-Saturn squares up to e-commerce challenge

BERLIN/DUESSELDORF (Reuters) - Europe's biggest electronics chain Media-Saturn said on Wednesday it would restructure its business in response to a rapid shift towards online retailing, skirting around a new phase in a power struggle between its owners.

Media-Saturn, which is majority-owned by German retailer Metro and runs more than 950 stores in 17 countries, wants to integrate online sales more closely with stores and will create a new "e-business" unit to coordinate strategy.

"The European electronics trade is currently facing major challenges. As the market leader of the industry, we have decided on a profound reorientation to future-proof ourselves," Chief Executive Horst Norberg said in a statement, calling the upheaval the biggest since the company was founded in 1979.

Media-Saturn's move into e-commerce was delayed until 2010 by a long-running dispute between Metro and the chain's founder Eric Kellerhals, who still owns a stake of close to 22 percent.

That power struggle burst into the open again on Tuesday when Kellerhals attacked Metro's running of Media-Saturn. Metro retaliated by saying Kellerhals was hurting the business and its employees with "amazing and outlandish" comments.

In an interview published on Wednesday but conducted before the latest salvo from Kellerhals, Norberg said Media-Saturn had the support of all its owners for its strategy, adding he saw more resistance to change from some store managers, who sometimes tried to "cling to the past".

"Our daily business is barely affected by the conflict," Norberg told Germany's Die Welt daily.

The latest war of words was triggered after Kellerhals made a call last week on his own website for applications to replace Norberg when he retires. Norberg, 66, said he still enjoys the job and wants to see through his contract until the end of 2015.

"THROUGH THE TROUGH?"

After a slow start, online sales are now growing fast at Media-Saturn but some investors say the chain's target for 20 percent of sales to eventually come from e-commerce is not ambitious enough and they have questioned whether store managers have the right incentives to promote online.

Media-Saturn, the world's second biggest consumer electronics chain after Best Buy , which competes with

Dixons Retail and Darty Plc , saw sales fall 0.7 percent to 6.6 billion euros ($9.12 billion) in the last quarter of 2013, hurt by falling currencies in eastern Europe.

Sector experts expect another drop for the January to March period when Metro reports results on May 8. Media-Saturn accounts for about a third of Metro's sales.

Metro shares were down 0.4 percent at 0950 GMT, outpacing a 1.3 percent drop in the European retail index <.SXRP>.

Media-Saturn said it would be investing in technology as part of its new strategy, but would also make cuts in its administration, with around 200 jobs set to go.

Norberg said the rise of online commerce meant Media-Saturn would probably have to close some stores or reduce their size, but said he still expects to increase the total number of stores to over 1,000 by the end of 2014 or start of 2015.

"There are still a lot of people who like to browse and look at innovations and have new things explained to them. Store trade is far from over," he told Die Welt.

"I am sure that we are now through the trough and we will be considerably more successful in coming years."

As it seeks to outflank the likes of Amazon , Norberg said Media-Saturn is launching a pilot program to offer home delivery within three hours in big German cities.

It is piloting a discount store under the Media Markt Depot name in Hungary and plans another three in Poland and possibly other countries, he said. It is also testing Saturn Connect, a smaller store format concentrated on mobile phones, laptops and computers in Poland and the Netherlands.

($1 = 0.7237 Euros)

(Reporting by Emma Thomasson and Matthias Inverardi; Editing by John Stonestreet)

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