Barron’s stirred up an interesting notion over the weekend.
Since Microsoft Corporation (NASDAQ:MSFT) already shelled out $300 million for a 17.6% stake in Barnes & Noble, Inc.(NYSE:BKS)‘s college bookstore and Nook business last year, and Barnes & Noble’s founder wants to take the company’s namesake book retailing business private, why doesn’t Mr. Softy just snap up the entire company?
“Ownership of B&N would jump-start Microsoft Corporation (NASDAQ:MSFT)’s retail strategy and give it control of 677 bookstores,” Barron’s argues, suggesting that Microsoft could pay $25 a share — or $1.75 billion — and gain control of the entire company.
Sure, Microsoft has been known to overpay for acquisitions and strategic alliances. It’s silly that way. However, what would it really gain in Barnes & Noble?
Bricks and mortar
I hate to sound harsh, but Barnes & Noble, Inc.(NYSE:BKS) stores are growing more irrelevant with every passing year. Physical books are dying, and that will result in Barnes & Noble migrating to smaller stores in the future. Sales shrank 10% at the retail level for Barnes & Noble, and this is as it continues to benefit from the prior year’s shuttering of rival Borders.
Using the bookstores as a way to gain retail ground with Apple Inc. (NASDAQ:AAPL) doesn’t make sense.
There’s no way that Microsoft Corporation (NASDAQ:MSFT) could fill the cavernous Barnes & Noble stores, which also happen to be largely located in strip malls that lack the foot traffic of Apple’s smaller footprint in shopping malls. If Microsoft wanted that girth, it could’ve picked up Borders’ remnants for a pittance two years ago.
The last thing that Microsoft wants is an intimidating superstore concept. You can dream up a cool Xbox gaming lounge and areas devoted to different product categories that feast on Windows, but who is actually going to set foot inside a mammoth Microsoft Corporation (NASDAQ:MSFT) Store?
The thinning ranks of leaf-turning bibliophiles may be regulars at Barnes & Noble, but there will be no need for folks to continue hitting up a Microsoft-centric retail outlet with books at a time when media is going digital.
Big Microsoft on campus
The division that held up the best in Barnes & Noble’s latest quarter is its 678-unit college bookstores business. It suffered a mere 2% slide in revenue, and the thinking here is that Mr. Softy can begin to gain influence with younger users here if it can cash in on both the campus stores and namesake locations.
“Microsoft could create a store-within-a-store with its Surface tablet, and other products in over 1,300 stores, including those at universities, where Apple is now a student favorite,” Barron’s argues.
That’s just crazy talk.
Does anyone really think that Microsoft Corporation (NASDAQ:MSFT) taking the keys to hundreds of campus bookstores will find coeds dumping their iPhones and Android smartphones for a Windows-fueled Lumia? College bookstores will inevitably also go digital, but it won’t be on a Surface. Apple’s iPad remains the tablet of choice, and Android gadgetry continues to gain market share.
Students aren’t going to flock to a mobile operating system that will be more expensive than Android and less of a tastemaker than iOS. This is as silly as arguing that Hewlett-Packard Company (NYSE:HPQ) should buy up the company’s college bookstores.
“Hey, class, next semester we’re all going webOS!”