Can the Nook help Microsoft?
B&N isn’t in a good position right now, but thankfully for them, it is a fixable one. The bookstore culture is clearly still in demand, and is something that Amazon can’t duplicate at the moment. So for B&N, look to see more emphasis on retail sales going forward, as well as making stores more relaxing for patrons. This can be done in a cost-effective manner if, as planned, the company spins off the Nook. They should have no problem doing so because tablet computing is becoming increasingly popular, yet the demand is more for tablets made by tech companies like Microsoft rather than for bookstore-based tablets.
In 2012, Microsoft Corporation (NASDAQ:MSFT) bought a 17% stake in the Nook, valuing it as a $1.7 billion franchise. Since that point though, the Nook has lost a lot of value owing to only around $600 million in sales. Microsoft Corporation (NASDAQ:MSFT), meanwhile, has fallen behind competitors Google and Apple in the tablet market. It would seem like a match made in heaven if Microsoft is able to snatch up a controlling share of the Nook at a discount rate, which may be on the table given the desire to spin off the Nook. It would free up Barnes & Noble, Inc. (NYSE:BKS) to focus on its strengths, while putting the Nook in the hands of a company that can develop it for the purpose of becoming more competitive in the growing tablet industry.
What this means for your books
If Microsoft buys the Nook in full, expect to see some upward movement in Microsoft Corporation (NASDAQ:MSFT)’s share price, as well as with B&N, since it will be a sign to investors that the company is serious about trimming down and focusing on its core business of retail.
Barnes & Noble, Inc. (NYSE:BKS) has every potential of becoming a go-to hangout spot and social area again, the way bookstores should be. Sure, there will still be people predicting the end of the bookstore, but it appears as though as long as B&N doesn’t try to be the next Amazon, because it simply can’t be, it can stick around as not only a solid bookstore, but also as a place of refuge in the urban jungle. This is B&N’s strong suit, and for investors, this urban oasis may be a good place to invest.
The article How to Save Barnes & Noble originally appeared on Fool.com and is written by John McKenna.
John McKenna has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and Microsoft. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
