Barnes & Noble, Inc. (BKS), Amazon.com, Inc. (AMZN), Microsoft Corporation (MSFT): Fighting a Losing Battle…

Exiting the e-reader business, maybe

Microsoft Corporation (NASDAQ:MSFT), by the way, is reportedly considering purchasing the remaining NOOK assets for $1 billion, which would be a pretty good deal for Barnes & Noble, Inc. (NYSE:BKS) customers, and is one of the reasons that shares are up more than 15% this month alone. The company’s entire market cap is just over $1.3 billion, so this deal would effectively be valuing the rest of Barnes & Noble, Inc. (NYSE:BKS)’s business at just over $300 million, even after the recent gains.

I have mixed feelings about this. Sure, it would be a good payday for current Barnes & Noble, Inc. (NYSE:BKS) shareholders, but then what? Thinking long-term, what viable growth would Barnes & Noble be left with if it exited the digital business entirely? I do believe that there will always be some place in the market for physical bookstores, but there is much more downsizing to come in this industry.

The college bookstore segment will continue to grow, but it is just a matter of time before that market shifts to a mostly online environment as well. It already has somewhat with the concept of “renting” books, which is much cheaper through online sources and didn’t exist when I was in college about ten years ago.

Final Thoughts

Although sales have increased in recent years, the company’s business model is simply not profitable on any sustainable basis. Aside from the possibility of a nice payday if and when Microsoft Corporation (NASDAQ:MSFT) acquires the NOOK business, there is really no reason to own a stock that is projected to have losses totaling over $4.00 per share over the next three fiscal years, with no turnaround in sight.

The article Fighting a Losing Battle… originally appeared on Fool.com.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and Microsoft. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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