Microsoft Corporation (MSFT)’s Buy of Barnes & Noble, Inc. (BKS)’s NOOK Looks More Likely After Nokia (NOK) Deal

Some might have believed that Microsoft would waver from that strategy in the wake of Ballmer’s exit. That idea was destroyed when Microsoft announced that it would acquire Nokia Corporation (ADR) (NYSE:NOK)’s handset business. By buying most of Nokia Corporation (ADR) (NYSE:NOK), Microsoft is in complete control of the Windows Phone platform. It will design both the operating system and the hardware.

Buying NOOK would have a similar effect, though not precisely the same. Microsoft wouldn’t be buying NOOK for its hardware prowess. It would be buying a digital book store. Apple sells e-books as part of its iTunes business. Microsoft could do the same.

As the iPad has exploded in popularity, Apple has become an increasingly important part of the digital book business. By its own estimates, iBooks now account for 20% of the market. While Apple doesn’t derive much profit from iTunes directly, its media business strengthens its overall ecosystem.

If Microsoft is looking to do something similar, buying and then incorporating NOOK into Windows would be a logical step.

Barnes & Noble’s upside
Absent a Microsoft bailout, Barnes & Noble looks like a terrible investment. Its stock has been trending down as its business has slowly faded into irrelevancy. Insiders are selling, and Riggio is suddenly no longer interested in acquiring the retail operation.

But Microsoft buying NOOK seems much more likely in the wake of its decision to acquire Nokia Corporation (ADR) (NYSE:NOK)’s handset business. Because Microsoft is obviously very committed to pursuing Apple’s strategy — being an integrated device maker — acquiring a major e-book business makes intuitive sense, particularly because Microsoft already owns nearly one-fifth of Barnes & Noble.

Although it’s hard to be a fan of Barnes & Noble’s underlying business, it could have value as a speculative play.

The article Microsoft’s Buy of Barnes & Noble’s NOOK Looks More Likely After Nokia Deal originally appeared on Fool.com and is written by Sam Mattera.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. 

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