Here's why Barnes & Noble attracts John Malone
Liberty Media, which operates the Starz cable networks and the Home Shopping Network, offers to buy the bookstore chain for $1 billion. It makes sense for Malone. Will it make sense for Barnes & Noble?
If you think about the totality of what John Malone does, then you begin to understand why he wants to buy Barnes & Noble (BKS).
Late Thursday, Malone's Liberty Media (LINTA) offered to buy the big bookstore chain for $17 a share, or about $1 billion, a 20.5% premium over the company's $14.11 closing price. The stock traded as high as $17.60 after hours, which is a signal some investors expect the offer to increase somewhat. The shares closed up 29.9% to $18.33 on Friday.
The offer comes with a condition: Chairman Leonard Riggio needs to stay, and he needs to have an equity position in the business. Barnes & Noble wouldn't say what it or Riggio will do. But it will consider the offer, which will need financing.
Malone is interested because he is in the media business, and he sees Barnes & Noble as a media business because of its sizable online operation and its Nook electronic reader.
Malone's company owns Gifts.com; 40% of Expedia (EXPE), the online travel agency; 81% of Backcountry.com. Malone has interests in cable television, including Starz, the premium cable network; HSN, which operates the Home Shopping Network, and QVC, which operates a host of online retailing businesses.
There's more: a 67% stake in McNeil/Lehrer Productions, which produces the "PBS News Hour"; a 40% interest in satellite radio operator Sirius XM Radio (SIRI). His Leisure Arts business publishes needlework, craft, decorating, entertaining and other of what his company calls "lifestyle interest how-to books." He has a host of smallish stakes in other media companies, including Time Warner (TWX) and Time Warner Cable (TWC).
Apple's (AAPL) iPad may get a lot of attention, but, according to a Goldman Sachs report in February, the fact is that Amazon.com's (AMZN) Kindle has a 67% share of the electronic-reader business. Barnes & Noble has a 22% share. But Barnes & Noble has a 27% share of the electronic-book business, compared with Kindle's 58% and Apple's 9% share.
Barnes & Noble's online business, which is where Nook resides, saw revenue jump 52% to $319.4 million in its fiscal third quarter, which ended on Jan. 31. Most of the gain is Nook-related. The online business represented about 14% of Barnes & Noble's business in the quarter, up from 10% a year earlier. In March, Marc Parrish, a Barnes & Noble executive predicted that ebooks would dominate the book business perhaps as soon as two years.
Barnes & Noble has offered two versions of the Nook; a third version may be introduced next week, The Wall Street Journal said.
But the traditional book business has been troubled in recent years. Borders is in Chapter 11 bankruptcy and is shutting down stores. Independent shops are closing. Riggio put Barnes & Noble up for sale a year ago.
So, a great deal about Barnes & Noble would interest a John Malone, especially if Riggio stays. Riggio built Barnes & Noble from a modest New York bookseller into a national book chain and was willing to invest in Nook to compete against Amazon when a lot of analysts thought he was crazy.
Would Riggio be willing to sell? Yes, because he might get some backing to continue to build up the Nook business. Certainly, he would be able to tell his shareholders -- especially Ron Burkle, who owns 19% or so of the company -- he got them out of a horrible situation. The stock was at $47 in 2005 and fell to as low as $8.77 on April 18.
Barnes & Noble operates more than 700 bookstores across the country and is the world's largest specialty retailer, with revenue of nearly $7 billion in the last four quarters. Riggio started out running a college bookstore in Manhattan’s Greenwich Village. In 1971, he bought the Barnes & Noble name and its flagship store in Manhattan. The company expanded through acquisitions, buying B. Dalton Bookseller and Doubleday Bookshops.
The problem with the Nook and Kindle is that it will never surpass the technology and the force behind the iPad and iNet.
Ummmmm...they aren't trying to. Kindle doesn't want to be an Ipad or even a PC tablet. That's not the point.
And surpass them? In e-reading? e-books? Apple has a miniscule share of that market (did you not read the article? They have about 10%) and that didn't change even though they sold 15 million Ipads. Soooooooooooooo....why is it going to change?
What this does tell you is apple is not interested in a "reading consumer" people who have that misconception don't understand their marketing, their goals, etc. They make devices for people who want to only use devices to surf the web and listen to music. That's it.
It's not a bad move to aquire the Nook brand. Revenue jumped 50% in that segment for Barnes and Noble, is 1.2 billion a year annualized, and the margin is extremely high. There's no overhead for stores, etc. It's just online retail of e-books. No storage at all either.
In fact, most analysts said the bid was low.
By the way I bought the Barnes and Noble Nook and I love it. It is great to just go on line and purchase a book and download it. My Nook goes with me everywhere.
AND, I am not a spam artist. This is just an honest statement . . .Wow! Can't believe what you said my comment was!
I like Barnes and Noble. People like window browsing book stores like people used to like window browsing in movie rental stores. (Some still do.) Yes, online can be cheaper for certain services. For example, you can usually find hardback books on Amazon at a discount. And don't even get me started on the crazy DVD prices that B&N marks on their items. The true niche of B&N is the smaller paperback book side of the business. These books (which seem to run around $7.99) aren't discounted on Amazon at all, which makes a B&N more convenient. If you buy a lot of paperback books and use their internal Starbucks cafe a bunch, then their 10% discount program is really worth paying the annual $25.
B&N is a niche. Their Nook is expanding its business. They are very price competitive on the traditionally sized paperback book. If B&N focuses on these areas, then they should do fine as a business.
Sounds like B&N might be heading the way of the other big boys. See ya.
I've never been that fond of B&N, I was more of a Borders person, RIP. Now they are about the only game in town, so I go there if I need to pick up something (or someone gave me a gift card). I used to like B. Dalton, until B&N bought them out and shut them down. I really loved The Book Stop, but B&N did the same thing. Waldenbooks is also gone, so these are about the only big guys left. It's just no fun browsing the stacks in our local B&N. If I'm in the mood to look around, I'll visit our local independant bookseller. If I know what I want, I'll either get it from Amazon or the book club.
Many have already said. Amazon is the best cheapet way to go for used and new books. That's mostly true. The nook is good with periodicals and magazines, going color has made all the difference. Kindle competes with Sony with the advantage of bringing the price of books down and wi-fi technology instead of downloads from a computer everytime.What I don't like about Kindle, is there ability to take your books away.
Tablets and iPads are really a waste of time, literally, they are entertainment devices, web surfing, movies, youtube, music. social networking, email. Perhaps productiviity will go up with reading pdf's easily and other documents. Nook with the android technology, now upto 2.2 gives you some of the above with the emphasis on reading.
Allowing businesses to take over media is a bad idea, though. But with everything in politics and business this is USA, Inc. I just wonder when States default in their budgets if businesses will then take over, too.
If you own Liberty Media after this purchase goes thru:
Barnes & Nobles: lousy customer services, expensive merchandises, and not too friendly employees in San Jose store, but she is very sweet to her supervisor.
My wife sent me there to pick up a book for her and I forgot what the title was so I tried to call her. I discovered I left my cell phone on my kitchen table so I went to the front desk to ask to call home quickly.
What did Barnes & Snoble tell me?
A) Of course Sir, what is the phone number and I'll dial it for you.
B) What type of book was it Sir, maybe I can jog your memory OR
C) I'm sorry sir, you will have to buy something before I can let you use the phone. That's what I'm trying to do maa'm, buy a book. I need the title and I'll buy the book.....I'm sorry but you need to purchase something first even if its a water or something small before I can let you use the phone.
Did you folks choose C? DING, DING, DING you won. That was the incredible response I got from the person at the Barnes and Snoble book store in the Eagleridge shopping center in Pueblo Colorado in 1998......
I have never set foot in that store again and have created the new name Barnes & Snoble. I hope it was worth it....I wonder how many people I have told about this since 1998? Hmmmm
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