Barnes & Noble, Inc. (BKS)’s Big Bet Isn’t Paying Off

With a yield of around of 2.7%, a top line that’s been heading higher since the recession, and a collection of new products and software either in the market (Windows Mobile, Windows 8, the Surface tablet) or soon to be launched (Xbox), Microsoft shares looks like a good option for growth and income investors. Its price to earnings ratio in the high teens is reasonable for a company of Microsoft’s scale and potential.

Just a Bookstore

Barnes & Noble, Inc. (NYSE:BKS), meanwhile, is looking more and more like just a book store. That’s not a bad thing, however, since the book store business has been supporting the Nook business. In fact, Leonard Riggio, the company’s founder, has been talking about buying the physical book stores for some time, taking them private.

The shares have dropped sharply over the last few weeks, first on weak Nook sales and now because of the decision to shutter the color Nook. Trading in the mid-teens and posting sizable losses in each of the last two years, this is looking more and more like a high-stakes bet on the company’s book store business.

That said, Investors should avoid the shares until the company works through its seemingly failed Nook bet. The sizable investments from other companies complicates any corporate actions that might be taken to boost shareholder value. That includes the potential of Riggio buying the bookstores, which could leave the public owning just the money losing Nook business.

The article Barnes & Noble’s Big Bet Isn’t Paying Off originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and Microsoft. Reuben 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.