Microsoft Considering Dropping $1 Billion To Take Nook Away From Barnes & Noble

Might Barnes & Noble (NYSE:BKS) return to its physical bookstore roots and sell its Nook Media unit to Microsoft for $1 billion? Wall Street certainly seems to think it might happen after it sent the chain's stock soaring 22 percent Thursday (May 9) after TechCrunch reported on the Microsoft offer.

Microsoft already owns 17 percent of Nook Media, but this deal would deliver all of the rest of Nook's digital assets, other than the college bookstores. The report also said that Nook would stop selling Android-based tablets entirely by the end of fiscal 2014 in favor of distributing content via other publishers' platforms.

Reuters reported that an independent source confirmed that the Microsoft documents are authentic and are dated in March, but neither story shed any light on how B&N's board reacted. That means that, theoretically, this offer might have been rejected or withdrawn weeks ago. Clearly, though, Wall Street believes it's still alive.

Earlier this year, B&N Chairman Leonard Riggio said he wanted to buy the company's chain of nearly 700 namesake bookstores. Selling off Nook could simplify that process, especially if it reunited Riggio with the college bookstore business, which he sold to B&N in 2009.

B&N has been full of surprises this year. Many had suspected that B&N might go all digital and sell off the stores. In fact, it's gone in the opposite direction, and its stores—although they seem to be a lot emptier than just a few years ago—are actually quite profitable, and it's the digital content that has been losing money.

Reuters points out that the history of Microsoft and Nook puts this deal into an interesting context. Microsoft acquired its stake in the Nook Media unit a little more than a year ago in a deal that valued the entire unit at $1.7 billion. In December, the British publisher Pearson Plc bought a stake in the unit at a $1.8 billion valuation.

But Nook Media sales have disappointed since. Revenue dropped 26 percent in the most recent holiday quarter as Nook sold fewer digital readers and tablets and had to cut prices. Just this week B&N slashed the price of its best tablet by one-third as a special promotion for Mother's Day.

For more:
- See the Reuters story
- See the TechCrunch story

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