It’s been a rollercoaster week for Barnes and Noble.
Five days ago the Internet overloaded with rumours that Microsoft was eyeing bookseller Barnes and Noble’s e-book business Nook Media. Bloggers, journalists and Tweeters all took to their keyboards to predict the outcome of the estimated $1 billion take-over by the tech giant.
TechCrunch broke the news after coming across internal documents hinting that Microsoft wanted to build on the $300 million investment it had already made in Nook Media in April 2012. Back then the partnership aimed to get Microsoft into the ereader market, with Nook developing content for Windows 8 tablets. With Microsoft already holding a 16.8 per cent stake in the company via this investment, it seemed plausible that the takeover could happen.
The market was interested in the rumours. Barnes and Noble’s stock jumped 24% by the end of the day on 10 May. But just three days later, B&N stocks slumped 13% when the takeover bid was dispelled by business site, Insider Monkey.
According to Insider Monkey’s David Woodburn, a ‘highly placed source’ inside Microsoft dismissed the story as a rumour, indicating that there are no imminent plans by Microsoft to buy Nook Media in its entirety.
Insider Monkey reports that the source said: ‘This deal was nothing more than a rumour. Microsoft Corporation will not come out and deny or confirm for legal reasons, but the company has no intention of acquiring the NOOK unit. NOOK is closely integrated with Android (hence their recent Google Play feature) and there is no way it could be ported to Windows 8. This was simply something TechCrunch rushed to report with no fact-checking.’
It did seem like a possibility. One of the reasons for the buy-out harked back to that $300 million dollar investment, which was made 18 months prior when Nook Media was valued at around $1.8 billion.
Since then, Nook Media launched the Nook HD and Nook HD+, new high-def e-readers driven by an Android. Hoping to capitalise on the traditional US holiday sales period, it was actually a season in hell for B&N, with a 10.9 per cent decrease in sales compared the period the year before, which was attributed to decreased Nook hardware sales at retail locations. Tablet and e-reader sales fell 12.6 per cent during 2012. Total revenue in the most recent holiday period dropped by 26 per cent according to Reuters.
Barclays analyst Alan Rifkin now values Nook Media at around $1 billion, implying that Microsoft’s take over could have been an attempt to secure a better return on their $300 million investment, made while Nook Media was valued at $1.8 billion, by taking control of the business.
The TechCrunch article also states that Nook Media will ‘discontinue its Android-based tablet business by the end of its 2014 fiscal year as it transitions to a model where Nook content is distributed through apps on “third-party partner” devices.’
