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Halftime Pt. 2: Trading Barnes & Noble in Wake of Stalled Settlement

Barnes & Noble said it was unable to reach an agreement to end a rift with billionaire investor Ron Burkle as the top bookselling chain seeks to attract buyers.

"Barnes & Noble and Yucaipa were unable to conclude an agreement on mutually acceptable terms," the company said in a statement, referring to Burkle's investment firm.

Late on Wednesday, a source familiar with the talks said the two sides could be close to a settlement that would put an end to Burkle's lawsuit against the company and avoid a proxy battle. An activist investor, Burkle will resume his fight for control of the company's board, reports CNBC's David Faber. Burkle is reportedly trying to have the company remove a "poison pill" anti-takeover provision that prevents him from acquiring additional shares, added Faber.

"We think the business is in permanent decline," Whitney R. Tilson, founder and managing partner of T2 Partners, said Tilson of Barnes & Noble. "We can't see anything that can reverse it."

Tilson is short Barnes & Noble and has been for some time. He said the stock has been following the "collapse" in the company's profits over the past couple years. The stock popped, however, when the company announced it would attempt auctioning off the company, he said. He viewed this as an action of "desperation" and shorted the stock even more.

"The company may well get bought, but we doubt at a premium to today's prices," said Tilson. "Even in this loose financing environment, we're struggling to see who's going ot finance a business where cash flows are in a free fall like this."

Should the bookseller go private, CNBC's Melissa Lee asked if the stock would go down to zero. Tilson said the board might get bids, but he thinks they would be below the current share price. Either way, he thinks there is more downside than upside to BKS and that's why he's shorting.

Watch the video for the full interview with Tilson.

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A "RALLYING CRY" TO APPLE: INCREASE DIVIDEND

Analyst Toni Sacconaghi, of Sanford C. Bernstein, wrote an open letter to Apple's board stating it's time the company return cash to its shareholders.

"I ultimately hope that, you know, our letter will be a rallying cry for major shareholders because ultimately the board and the company are responsible to them," he said.

Watch the video for the full conversation with Sacconaghi.

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POLL OF THE DAY

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Trader disclosure: On Aug 12, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Jon Najarian owns (CSCO) short calls; Jon Najarian owns (VIX) Call spread; Jon Najarian is short (SQQQ); Cortes owns (MOS), (FCX), (TK); Cortes owns S&P 500; Cortes is short (XLF); Cortes is short (BAC); Cortes is short Japanese Yen; Grasso owns (ASTM), (ABK), (BA), (BAC), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

For Whitney Tilson
Funds Managed By Whitney Tilson Own (BUD), (MSFT), (BP), Berkshire Hathaway

For Toni Sacconaghi
Bernstein currently makes a market in (AAPL)

Toni Sacconaghi maintains long positions in (PLMO), (STX)

Accounts advised by Bernstein own more than 1% of the outstanding common stock of (AAPL)

(AAPL) is or has been in the past 12 months been clients of Bernstein

Bernstein expects or intends to seek compensation for invetment banking services from (AAPL) in the next three months.

—Reuters contributed to this story (see article here).

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