Microsoft Corporation (MSFT) Isn’t Buying Barnes & Noble, Inc. (BKS)

Nook on the line
Keep that HP image fresh in your mind, because Microsoft’s investment in Nook is starting to seem a lot like HP’s decision to buy Palm to get its hands on the then fading webOS.

Nook is already an insult to Microsoft. A year after Mr. Softy’s investment, the Nook tablet is still an Android-flavored device. Switching operating systems on a device that’s already fading in popularity — sales this past holiday quarter plunged a whopping 26% — would only hasten its mortality.

Microsoft made a bad bet last year, and it knows it. Throwing good money after bad would just be silly.

Amazon.com, Inc. (NASDAQ:AMZN) has crushed Nook with its Kindle, and once we step up from stand-alone e-readers to tablet e-readers, the Kindle Fire, iPad, and a growing fleet of Android devices are the market leaders.

A couple of years ago, Microsoft could’ve cashed in on the initial Nook popularity, making it the default e-book solution for the eventual Windows 8 tablets. Now it’s too late. Nook is fading, and that’s rarely reversible.

Just ask HP. It’s still smarting after that $1 billion Palm buyout.

The ultimate deal breaker
If none of these reasons are convincing enough to explain why Microsoft would be nuts to consider swallowing Barnes & Noble whole, let’s imagine what it would do to the software giant’s stock price.

Microsoft isn’t afraid of cutting 10-figure checks. It did so in buying Skype, aQuantive, Yammer, and Fast Search. It has committed as much for alliances with search and smartphone companies that may be laggards but provide volume to amplify its reach in areas where it’s lacking.

Yes, Microsoft overpaid in nearly all of those cases, but at least the market understood the rationale. The tech bellwether was simply trying to make up for lost time by paying for skin in growing industries.

Barnes & Noble wouldn’t make sense to the market. It’s not about the $2 billion investment. Microsoft has that money to burn. It’s what it would communicate to investors — the desperation and resignation — that would send its stock lower.

This deal isn’t happening.

The article Microsoft Isn’t Buying Barnes & Noble originally appeared on Fool.com and is written by Rick Aristotle Munarriz.

Longtime Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com, Apple, and Microsoft.

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