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Amazon Calls an Audible

In a union as suitable as peanut butter and grape jelly, (Nasdaq: AMZN  ) is acquiring digital audiobook seller Audible (Nasdaq: ADBL  ) . The $300 million deal is an all-cash transaction, devouring Audible at $11.50 a share.

As far as premiums go, this one's a pittance. The buyout price is just 23% more than Audible's close yesterday. Audible was trading for more than $11.50 as recently as two months ago.

However, the deal seemed destined to happen. Even the partner page predicted it.

" is our trusted partner for audio download programs and players, and we hope that you'll find their site as informative, fun, and easy to shop at as you find ours," reads Amazon's page pitching its audio downloads.

Well Amazon, you got your wish. Now Audible's site is your own.

Audible is laudable
I've always liked Audible. I even singled out the stock earlier this month in my "5 Stocks Under $10" column. The company's ability to grow both its subscriber base and library of content is commendable. Unfortunately, Audible's spotty profitability and thin moat have kept it from becoming a Wall Street darling, beyond occasional growth spurts.

This is actually where Audible proved its brilliance. It's had long-standing relationships with both Amazon and Apple (Nasdaq: AAPL  ) , the two tech giants that always seemed most likely to launch similar offerings. Keeping potential enemies close is the best way to compensate for Audible's wafer-thin moat.

When Amazon acquired audiobooks publisher Brilliance Audio last year, I even argued that it was the first step toward ultimately battling against its partner. That may have been Amazon's plan, but things must have changed once Audible's share price dipped into the single digits.

Audible is still growing. Revenue climbed 34% through the first nine months of 2007. Margins were improving, but Audible's willingness to accept a low offer hints at either near-term deterioration or the warm breath of Amazon -- or even Apple -- predatorially huffing and puffing against the back of its neck.

Could Amazon be so Machiavellian? Could it have threatened to roll out a rival subscription service, and thus cut Audible out as a partner, while simultaneously offering an $11.50-per-share parachute? We may never know.

After the honeymoon
Amazon has been bent on digital distribution lately. Unbox delivers television shows and movies into your PC or TiVo (Nasdaq: TIVO  ) . Amazon's MP3 store sends out unshackled digital music tracks. Even its original book-shipping business received a digital makeover with the recent rollout of the Kindle.

Wait a minute. Is Audible about to upgrade Kindle's functionality? Not so fast there, sport. The Kindle can already function as a limited media player. However, Audible's addition will likely mean that the next version of the Kindle will come with greater storage capacity (because audio files are a lot chunkier than books) and improved audio playback. A touchscreen wouldn't hurt, while they're at it.

On the other end of the nuptials, Amazon's purchase will probably free Apple to roll out its own rival service. Apple is locking horns with Amazon in more and more areas of this digitally delivered future, and Steve Jobs probably won't want to promote Amazon's newest property much longer. In short, bookmark this page before it's gone forever.

Am I surprised that Amazon -- not Apple -- walked away with Audible's hand? Not really. If there is any real shock, it's that an old-school player like Barnes & Noble (NYSE: BKS  ) or Borders (NYSE: BGP  ) didn't jump on the chance to make a digital splash by picking up Audible at these prices. Even the music-subscription services like Napster (Nasdaq: NAPS  ) and Rhapsody could have moved up to the big kids' table with an Audible purchase.

I'm not suggesting that a bidding war was brewing. Audible wouldn't have gone out this cheap if other potential suitors were sniffing around. It's just all too convenient for Amazon to become the dominant player in digital audiobooks, especially when it would have probably cost the company far more than $300 million to wipe out Audible on its own.

I don't need to turn the next page. I know how this particular story ends.

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