Reading into Barnes & Noble offer

Malone’s $1b bid seen as big bet on electronic future

May 21, 2011|By Anne D’Innocenzio, Associated Press

NEW YORK — Why buy a bookstore?

John Malone, who made a fortune in cable television, is offering $1 billion for Barnes & Noble, trying to jump into a business so sick that its number two competitor, Borders Group Inc., is on life support.

Malone and his Liberty Media conglomerate aren’t betting on the bricks-and-mortar past, analysts say, but the promise of the electronic future.

Barnes & Noble’s Nook electronic reader accounts for 28 percent of the market for those devices. And the Nook has the potential to go beyond books to deliver all types of digital products, including music, magazines, TV shows, and movies. That makes it a competitor not just to Amazon.com’s Kindle but also to Apple’s iPad.

“This deal is all about the device,’’ said Sherif Mityas, a partner in the retail practice of global management consulting firm A.T. Kearney. “As Apple proved, you need to have the content and the device. Malone has the content, and Barnes & Noble has the device. You’re not buying the stores; you’re buying the Nook.’’

Malone’s Liberty Media Corp. operates three publicly traded companies — Liberty Interactive Inc., Liberty Starz Group, and Liberty Capital Group — through which it runs home-shopping network QVC and movie channel Starz. It holds stakes in numerous other online, media, and communications companies. Some believe that QVC could be used as a marketing vehicle for Barnes & Noble’s Nook. With the backing of a media conglomerate, Barnes & Noble’s digital business would be able to compete better with Amazon, Apple, and others, said Gary Balter, a retail analyst at Credit Suisse.

Barnes & Noble’s 700 stores may appear to be an albatross. But they could be transformed into places that highlight mostly digital devices and content and mimic Apple’s successful stores. Barnes & Noble has cleared space at the front of its stores to display the Nook and push e-books.

Barnes & Noble’s shares surged almost 30 percent yesterday and passed Liberty’s bid of $17 a share in cash, closing at $18.33.