The Retail Threat Amazon.com, Inc. (AMZN) Never Saw Coming: Barnes & Noble, Inc. (BKS), Google Inc (GOOG)

It’s dangerous to assume that industry leaders will stay leaders forever. Rick is assuming that Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) have such a huge lead that it’s insurmountable. I would suggest where Microsoft needs to be is in all of those colleges. What better way to turn the tide in the tablet and smartphone war? Microsoft could market their products to generations of future smartphone and tablet buyers.

Younger consumers are more willing to try new and different devices. It’s not unrealistic to believe that Microsoft could gain market share through these additional distribution points. On this same topic, Rick says that college bookstores will eventually go digital, but not on a Surface. I would counter by saying, why not? While iPad and Android tablets are current leaders, there is no reason a Surface tablet couldn’t do the same job. There is no reason between the NOOK lineup and the Surface lineup that digital books would be a problem.

Pricing them into the ground
Of course most of this is speculation, but there is one hard fact that should have Amazon shaking in its boots. Microsoft has the margins and the cash to put the company out of business. Consider in the current quarter, Amazon’s gross margin was 24.13% and Microsoft’s margin was 73.46%. Microsoft’s high-margin software business could more than offset any weakness in cutting prices to compete with Amazon in digital content, books, smartphones, tablets, video games, etc. In addition, Amazon.com, Inc. (NASDAQ:AMZN) ended last quarter with about $8.36 billion in net cash versus over $67 billion in net cash at Microsoft.

I’m sure Google Inc (NASDAQ:GOOG) is aware their margins might take a hit if they roll out this Shopping Express concept, as local retailers won’t just sign up for free. However, Google’s advertising business gives the company a 60% gross margin, so they can afford to take a small hit if it means protecting their search dominance.

The fact is, Barnes & Noble’s sales were just $2.2 billion versus over $21 billion at Microsoft in the last three months. If the king of software decides to take over Barnes & Noble, they could essentially sell everything through the stores as loss leaders and crush Amazon in those categories. This crazy idea isn’t as crazy as it first sounds. Microsoft could make this buy, and they would instantly become Amazon’s worst nightmare.

The article The Retail Threat Amazon Never Saw Coming originally appeared on Fool.com and is written by Chad Henage.

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