Readersforum's Blog

May 6, 2012

Nooks, Books, and Schnooks

Filed under: e-tailers — Tags: , , , , , , , — Bookblurb @ 2:02 pm

Is Microsoft’s new alliance with Barnes & Noble folly? Or could it hurt Apple and Amazon?

By Matthew Yglesias

When the market closed last Friday, a share of Barnes & Noble was worth less than $14. By the time the opening bell rang on Monday, that same share was worth more than $25. A couple of days of trading have seen the price settle around $20.

These gyrations are a powerful reminder that financial markets move not only based on highly uncertain forecasts about the future, but also because of the whims of a handful of individuals. Specifically, the book retailer that looked to be on death’s door has been rapidly rescued because someone at Microsoft decided to get into the book business. On April 30, the cash-rich tech giant unexpectedly announced that it was pouring $300 million of startup capital into a new Barnes & Noble subsidiary in exchange for a 16.7 percent stake in the new company. According to basic math, that made the bookstore chain the owner of 83.3 percent of a $1.7 billion company, sending the overall stock price leaping. Beyond giving a shot in the arm to the ailing retailer, this at least holds out the prospect of transforming the e-book industry just weeks after the Justice Department transformed it with an antitrust lawsuit against Apple and several major publishers.

The partnership came together so swiftly that the companies involved didn’t even bother to come up with a name for their new venture, instead provisionally titling it Newco. Newco is made up of Barnes & Noble’s Nook business and its college division, plus a bunch of Microsoft’s money and patents, along with presumably some expertise.

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