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Microsoft Deal Re-Writes Barnes & Noble’s Story: Analysts

Tuesday, 1 May 2012 | 6:21 AM ET
Barnes and Nobles
AP
Barnes and Nobles

Microsoft’s $300 million investment in Barnes & Noble’s“Nook” digital-book business not only lit up the bookseller’s share price on Monday, but it fundamentally changed its ability to compete, analysts said.

“This is the story of Barnes & Noble going from a little bookseller to a major player,” Maxim Group analyst John Tinker told CNBC’s “Squawk on the Street.”

“The book business is actually quite profitable and obviously benefited from Borders going out of business,” he said. “Now they really are the only national bookseller in the game.”

While “still reviewing” his formal stock price target, Tinker is leaning toward $27 per share. The stock closed trading at $20.75 on Monday.

In the same interview, Morningstar analyst Peter Wahlstrom said he is also bullish on the stock following Monday’s news.

A Tale of Two Titans: BKS & MSFT
Insight on the $300 million partnership between Barnes & Noble and Microsoft. John Tinker, analyst at Maxim Group, and Peter Wahlstrom, analyst at Morningstar, weigh in.

“The landscape has changed,” said Wahlstrom. “The strategicagreement with Microsoftprovides increased distribution domestically and internationally, which I think is going to be a big push for Barnes & Noble.”

Revenue sharing from Microsoft will enable the bookseller to get its digital strategy “trending towards profitability,” he said.

Without the funding, Wahlstrom says, Barnes & Noble would have faced an “uphill battle” getting the Nook to compete with Amazon.com’s Kindle as well as Apple’s iPad.

Maxim Group’s Tinker agreed, saying Barnes & Noble now will have the chance to boost its digital and brick-and-mortar business.

“Everyone’s trying to figure out how to make a brick-and-mortar and digital strategy go together,” he said. “You can’t just go digital today.”


Additional News: Barnes & Noble Stock Soars On Microsoft Stake

Additional Views: How Microsoft Is Scaring Apple

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CNBC Data Pages:

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Disclosures:

Neither Peter Wahlstrom nor John Tinker personally own shares of BKS.


Disclaimer
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Follow Jennifer Leigh Parker on Twitter @jparker741.

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