Rumor: Microsoft Looking To Buy Barnes And Noble

As rumors go, this is one the juiciest ones to come around this year. Barnes and Noble is the biggest in the books business, as far as retail presence goes. But the company has seen better days.

It recorded a net loss of $6.1 million, partly due to its Nook tablet business where revenues fell more than 26 percent to a paltry $316 million.

The company announced in a press release that its Chairman and majority stake holder Leonard Riggio is preparing a bid to buy the bookstore part of the business — just the bookstore part, not Nook Media.

Microsoft actually put in $300 million in early 2012 for its stake in Nook Media, which currently stands at 16.8 percent. All this had led some analysts to suspect that Microsoft may sweep in and buy Barnes and Nobles outright. Barron’s speculated over the weekend:

“B&N’s current market value is $1.1 billion based on 70 million outstanding shares and it has a net cash position. Microsoft could pay $25 a share, or $1.75 billion, and gain full control of Nook plus the retail stores, which produced $371 million of pretax cash flow in the past 12 months. That price would be modest relative to Microsoft’s $60 billion-plus in cash.”

Such a move could instantly provide Redmond with 600 retail stores across the country, which it can use to sell and promote its hardware products like the Surface tablets. Obviously, the location of some of these stores could be a bit of an issue — not all the stores are in prime locations.

Still, others believe the opposite. The Motley Fool posted its own views on this:

“There’s no way that Microsoft 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.”

B&N’s Nook tablets have actually been met with very lukewarm response and Amazon continues to be the leader in the ereader (and subsequently affordable tablets) segment. And even though Microsoft and Barnes and Noble have a partnership going, something concrete has yet to emerge out of it.

Even if Redmond decides against buying the book retailer outright, it will still need to either take complete control of Nook Media — and integrate ebooks into the Windows Store — or cash out while there is still a chance.

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