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Doubts cast on rumor of Apple buying Barnes & Noble

post #1 of 33
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Responding to a new rumor that Apple is considering a purchase of bookseller Barnes & Noble, one Wall Street analyst has said he doesn't think such a deal would make much sense for the iPhone maker.

Brian Marshall with Gleacher & Company said in a note to investors on Thursday that he doesn't think Barnes & Noble is a likely acquisition target for Apple and its $76 billion cash hoard.

In fact, if Apple's sole goal was to obtain brick-and-mortar locations, the company would have been better suited to purchase another bookseller, Borders, which has about 400 stores in liquidation.

Marshall said that Barnes & Noble's real estate footprint is "impressive," with more than 700 stores totaling 18.4 million square feet of space from an average store footprint of 26,000 square feet. But he also says a potential $1.5 billion vestment would not be a wise use of Apple's money.

Apple is currently making an aggressive push in the retail space, and plans to add 30 stores in the September 2011 quarter. Most of Apple's planned expansion, though, is set to take place internationally, and the vast majority of Barnes & Noble's retail space is in the U.S.



"We would much prefer to see AAPL use cash for strategic purposes and balance sheet optimization (e.g., acquisition of content rights, dividend initiation, share repurchases, etc.)," Marshall wrote.

The analysis came in response to a story published by Boy Genius Report earlier on Thursday, in which an "unproven source" claimed to have knowledge of negotiations between Apple and Barnes & Noble.
post #2 of 33
Brian Marshall is correct that the obvious asset of Barnes and Noble that might be interesting to Apple would be retail space, but Apple have been very particular about the spaces they choose. It's not clear how many of Barnes and Noble's retail spaces would be of interest to Apple, but certainly some. However, buying a company just to obtain its retail leases doesn't make much sense to me. Apple would be immediately responsible for all of Barnes and Noble's retail spaces including those which Apple wouldn't want.

Another possibility is that Barnes and Noble might have some patents related to the Nook which might be of some value to Apple.

In either case or in both cases, I think it would be better for Apple to just buy what they want from Barnes and Noble rather than buy the whole company. Apple could buy all of Barnes and Noble's patent portfolio (assuming they have one) with the deal allowing B&N non-exclusive license rights. Similarly, Apple could take over selected leases.
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post #3 of 33
Quote:
Originally Posted by mcarling View Post

Brian Marshall is correct that the obvious asset of Barnes and Noble that might be interesting to Apple would be retail space, but Apple have been very particular about the spaces they choose. It's not clear how many of Barnes and Noble's retail spaces would be of interest to Apple, but certainly some. However, buying a company just to obtain its retail leases doesn't make much sense to me. Apple would be immediately responsible for all of Barnes and Noble's retail spaces including those which Apple wouldn't want.

Another possibility is that Barnes and Noble might have some patents related to the Nook which might be of some value to Apple.

In either case or in both cases, I think it would be better for Apple to just buy what they want from Barnes and Noble rather than buy the whole company. Apple could buy all of Barnes and Noble's patent portfolio (assuming they have one) with the deal allowing B&N non-exclusive license rights. Similarly, Apple could take over selected leases.

If they owned property, the way McDonald's Corp. does, and they needed the equivalent locations and size lots for their stores I could see it being advantageous, but I don't any one of those three items are true.
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post #4 of 33
Quote:
Originally Posted by mcarling View Post

Apple could buy all of Barnes and Noble's patent portfolio (assuming they have one) with the deal allowing B&N non-exclusive license rights. Similarly, Apple could take over selected leases.

What could be a good idea is to partner with Barnes and Nobles on the iBooks store.
BN already has a strong presence and relationships with all the publishers. They could drop the Nook and associated Apps and replace with iPads and iBooks .
That would be a great way for Apple to really compete with Amazon in the space.
post #5 of 33
Quote:
Originally Posted by jacob1varghese View Post

What could be a good idea is to partner with Barnes and Nobles on the iBooks store.
BN already has a strong presence and relationships with all the publishers. They could drop the Nook and associated Apps and replace with iPads and iBooks .
That would be a great way for Apple to really compete with Amazon in the space.

Yeah I could see that being a reason for their discussions, but I don't think B&N would ditch the Nook since its outselling the Kindle now. Maybe we'll see a Nook App and iPads sold in B&N stores?
post #6 of 33
This rumor is one of the dumbest of the week.
post #7 of 33
If Apple is interested in B&N then it's most definitely because of all the contracts B&N has with publishers, Apple can bypass all the hurdles there is with landing deals. Having said that, Apple will most definitely close ALL the B&N brick and mortar stores.
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post #8 of 33
Quote:
Originally Posted by bloggerblog View Post

If Apple is interested in B&N then it's most definitely because of all the contracts B&N has with publishers, Apple can bypass all the hurdles there is with landing deals. Having said that, Apple will most definitely close ALL the B&N brick and mortar stores.

If they bought B&N it certainly would roll tanks onto Amazon's lawn.
post #9 of 33
It does make sense that Apple is targeting Barns and Noble bookseller for acquisition. Other than the real estate portfolio, I believe Apple Store is due for Re-Invent.

In post PC era, people does not buy gears any more, people are buying lifestyle and gears are the means and the tools to help them building the digital-centric lifestyle. This no longer refers to sitting in front of a computer all day lone.

Apple should look into Eslite Book Store in Taipei. Imagine, a department store type of mall anchored by books, Apple gears, TV, digital accessories, cafe, and small eateries... Imagine combining Nordstrom, Apple, Barnes and Noble, Starbucks, all under one roof.

Apple, wakes up, do not be over indulged by your success.
post #10 of 33
Just because there are rumors out there, please pick and choose a little better. This is bottom of the barrel rumoring.

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post #11 of 33
There is a case to be made that eBooks are the biggest source of stickiness in the tablet market. I probably have $10,000 worth of physical books, and I'm mostly buying eBooks now, At the point where Apple has $500 of my simoleans invested in their iBooks I'm a captive consumer. I really can't imagine that I'll ever own $500 of Apps, but 100 iBooks seems entirely likely.

If B&N allow Apple to get to critical mass in bookselling then they may serve a purpose. Book buyers are very interested in Paper+ offers where they get a deadtree edition with a bundled eBook, and for that you really need a partner/subsidiary that sells dead-tree.
post #12 of 33
Folks: BGR published the story at 11:20 this morning. Check Google Finance for Barnes and Noble's stock (BKS) at 11:20 this morning. There's your explanation for this utterly ridiculous rumor.
post #13 of 33
Quote:
Originally Posted by cloudgazer View Post

There is a case to be made that eBooks are the biggest source of stickiness in the tablet market. I probably have $10,000 worth of physical books, and I'm mostly buying eBooks now, At the point where Apple has $500 of my simoleans invested in their iBooks I'm a captive consumer. I really can't imagine that I'll ever own $500 of Apps, but 100 iBooks seems entirely likely.

If B&N allow Apple to get to critical mass in bookselling then they may serve a purpose. Book buyers are very interested in Paper+ offers where they get a deadtree edition with a bundled eBook, and for that you really need a partner/subsidiary that sells dead-tree.

Same here. Although I own many physical books, I've completely stopped buying them in favor of digital books, which will only continue to improve from here on out.

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post #14 of 33
Quote:
Originally Posted by cloudgazer View Post

If they bought B&N it certainly would roll tanks onto Amazon's lawn.

Amazon's profits aren't much in books anymore, they sell everything from shoes to computers.
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post #15 of 33
No matter how big ebooks get there is always going to be a place for dead tree versions. I prefer them for reading as well as for handing around to family & friends. When I'm finished with them they go to the local VA clinic and they take them to the regional VA hospital.

As far as B&N, they have always been better for me than Borders. Love their discount book section (warehouse clearances) and I believe that Apple could take advantage of most of the sites, one way or another. Some places could have a mini-store for limited products. They would also be fantastic for "Drop Shops" for the Holiday Shopping Season. Simply have a semi deliver the fixtures, displays, samples and initial inventory in a manner to set the store up in a few days - probably in the CD/Movie sections. The best sellers might be worth developing into a mini store, significantly expanding the Apple Store foot print.

Odd for Apple to look at a bookstore, but interesting what someone like Stave Jobs could do with it.

And, BTW, why only use cash to purchase B&N? Lots of value in AAPL right now. Why not max out that leverage and keep most of the cash?
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post #16 of 33
Quote:
Originally Posted by AppleInsider View Post

[...] The analysis came in response to a story published by Boy Genius Report earlier on Thursday, in which an "unproven source" claimed to have knowledge of negotiations between Apple and Barnes & Noble.

The negotiation probably went something like this:

B&N exec: "Hey fellas! Apple just called and asked us how much we wanted for the company!"

Fellas: "What happened?"

B&N exec: "I told them and they hung up."

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post #17 of 33
B&N also has a ton of college bookstores.

Apple could buy their way onto 600 college campuses in America. Want to start pushing e-books for college? This would be a great way to do it.

Whether or not its worth $1.5B is another question.
post #18 of 33
Quote:
Originally Posted by siromega View Post

B&N also has a ton of college bookstores.

Apple could buy their way onto 600 college campuses in America. Want to start pushing e-books for college? This would be a great way to do it.

Whether or not its worth $1.5B is another question.

If Apple agreed to buy up the existing distribution channels, close them down and switch everything to e-book format, I still don't think it would be a good deal for them because they could cut out the middleman and simply go straight to the students. What's important is the book content and the distribution, which would be changed to iTunes.

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post #19 of 33
At least at first blush I don't see apple needing to buy all of that real estate in order to get their target audience to buy ebooks. Doesn't make much sense to me.
post #20 of 33
Quote:
Originally Posted by bloggerblog View Post

Amazon's profits aren't much in books anymore, they sell everything from shoes to computers.

It's still the core of their brand identity though, which is why they broke their normal practice and made their own e-reader. A serious reversal in books would make investors start to question why they've given Amazon such a crazy P/E ratio.

They won't take it lightly.
post #21 of 33
Ooooh, I hope they do!
Then they could call the stores, "Apple Barnes"!
post #22 of 33
Why in the world would Apple want to do something this stupid? Companies like B&N have ticking timebombs strapped to their bodies, they won't last past the 2016 election. With 700 stores of varying quality, the company is nothing but a tangled mess of liabilities. Apple is doing plenty fine on their own, building their own business well enough and slowly putting companies like this out of business. No need to help them along by buying them out.

Wall Street is so eager to have Apple spend their 70 billion on BS aquisitions that they forget what a rough ride the company had during the 90's. You can be dead sure that Apple doesn't forget. Hoarding their cash means they can ride out whatever changes may come, and gives them enormous cash leverage to secure components, which is far more valuable to their business in ensuring they stay on top than buying some retailer. Really glad these analysts and wall street firms aren't running the company.
post #23 of 33
Most astute comment yet.

Quote:
Originally Posted by mackowen View Post

This rumor is one of the dumbest of the week.
post #24 of 33
Quote:
Originally Posted by AppleStud View Post

Folks: BGR published the story at 11:20 this morning. Check Google Finance for Barnes and Noble's stock (BKS) at 11:20 this morning. There's your explanation for this utterly ridiculous rumor.

Agreed, someone(s) is going to get a closer look from the SEC (and I"m not talking football either) for this one. Quite the jump in volume for those few seconds.
post #25 of 33
Quote:
Originally Posted by mcarling View Post

Brian Marshall is correct that the obvious asset of Barnes and Noble that might be interesting to Apple would be retail space, but Apple have been very particular about the spaces they choose. It's not clear how many of Barnes and Noble's retail spaces would be of interest to Apple, but certainly some. However, buying a company just to obtain its retail leases doesn't make much sense to me. Apple would be immediately responsible for all of Barnes and Noble's retail spaces including those which Apple wouldn't want.

Another possibility is that Barnes and Noble might have some patents related to the Nook which might be of some value to Apple.

In either case or in both cases, I think it would be better for Apple to just buy what they want from Barnes and Noble rather than buy the whole company. Apple could buy all of Barnes and Noble's patent portfolio (assuming they have one) with the deal allowing B&N non-exclusive license rights. Similarly, Apple could take over selected leases.

But one would have to ask what patents B&N could possibly hold that Apple would need. It's like a rocket scientist buying two sticks to rub together from a caveman.
post #26 of 33
This is the part of the rumor that I thought was more important: (from MacRumors)

"This unproven source also said that iTunes 11 would be released in September along with iOS 5 and iCloud, and will support reading iBooks on computers as well as textbook purchases and rentals."

The Textbooks, I think, would (should) be a big deal, with or without B&N.
post #27 of 33
Quote:
Originally Posted by estyle View Post

This is the part of the rumor that I thought was more important: (from MacRumors)

"This unproven source also said that iTunes 11 would be released in September along with iOS 5 and iCloud, and will support reading iBooks on computers as well as textbook purchases and rentals."

The Textbooks, I think, would (should) be a big deal, with or without B&N.

I hadn't spotted that, iBooks on the Mac would go a long way towards convincing me that Apple is serious about the book business.
post #28 of 33
Quote:
Originally Posted by SHOBIZ View Post

At least at first blush I don't see apple needing to buy all of that real estate in order to get their target audience to buy ebooks. Doesn't make much sense to me.

Exactly. They don't need the stores in the least bit. Maybe 5-15 of 700 might be nice. Apple wouldn't be buying the real-estate either. They would be assuming the leases which run for years. To break those leases and close stores would be extremely costly. Plus, Apple hates managing phyisical inventory for more than a small number of SKUs
post #29 of 33
Quote:
Originally Posted by Turley Muller View Post

Exactly. They don't need the stores in the least bit. Maybe 5-15 of 700 might be nice. Apple wouldn't be buying the real-estate either. They would be assuming the leases which run for years. To break those leases and close stores would be extremely costly. Plus, Apple hates managing phyisical inventory for more than a small number of SKUs

The stores aren't as useless as you might think, because bookstores still shift significant amounts of content, and the more content you shift the better your leverage with publishers. Dead-tree will not die as fast as CD did, because it still provides a distinctly different and sometimes better experience - so whether online or B&M, bookstores will survive for years yet.

Bookstores are definitely suffering, and will continue to decline, but that is priced into the shares. The real question is, how important does Apple think iBooks is to the iPad.
post #30 of 33
Quote:
Originally Posted by Jumpmaster View Post

Agreed, someone(s) is going to get a closer look from the SEC (and I"m not talking football either) for this one. Quite the jump in volume for those few seconds.

Maybe the Boy Genius will end up as the Federal Penitentiary Genius.

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post #31 of 33
Quote:
Originally Posted by mackowen View Post

This rumor is one of the dumbest of the week.

Yep. They are buying Borders -- way cheaper
post #32 of 33
The blende of books, a coffee shop and a Mac store in one location would be very nice, even though I'm not holding my breath. The lack of a nice coffee shop in Apple stores has always been a miss IMHO although with the high rent areas Apple uses I understand why. The lower rent areas the B&N stores are in would be perfect for the blend (pun intended) ... imagine the wafting aroma of java while perusing a new MacBookAir ...

The additional space could also lead to larger and more training areas, complete with danish and coffee breaks.
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post #33 of 33
Quote:
Originally Posted by siromega View Post

B&N also has a ton of college bookstores.

Apple could buy their way onto 600 college campuses in America. Want to start pushing e-books for college? This would be a great way to do it.

Whether or not its worth $1.5B is another question.

Yes, this is the only way in which I could imagine it making sense. What if every college bookstore were to suddenly also become an Apple Store? Add on to that possibly taking over B&N's Nook business, with an updated Touch Nook now running some version of iOS.

I still wouldn't bet on it.
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