Barnes & Noble Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Barnes & Noble (NYSE: BKS  ) slid more than 10% for the second day in a row following yesterday's news the bookseller would suspended its dividend to free up $60 million in cash flow to invest in the digital side of its business.

So what: Yesterday, Foolish colleague Matt Koppenheffer compared B&N to Ice-T racing madly through the woods in the B-movie Surviving the Game. To me, the scene feels a lot more like the Colonial fleet trying to escape the Cylons in the Scyfy Channel's excellent reimagining of Battlestar Galactica.

Now what: The competition is just as tough. Google (Nasdaq: GOOG  ) has created a store for any device in a move somewhat reminiscent of Amazon.com's (Nasdaq: AMZN  ) strategy to spread its Kindle store far and wide. Barnes & Noble was never going to have an easy time in that environment. It certainly hasn't so far.

In the closing episode of Galactica (spoiler alert!), the relative handful of survivors left from the original 50,000 colonists spread across a new planet stuck in a prehistoric age. Their aim? Start over from scratch, or die trying. Barnes & Noble's fate may prove to be no better.

Interested in more info on Barnes & Noble? Add it to your watchlist.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is at least 10% better than other disclosure policies.


Read/Post Comments (3) | Recommend This Article (4)

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  • Report this Comment On February 23, 2011, at 6:10 PM, Millsteen wrote:

    Isn't there enough traditional book business to sustain at least one retail bookstore chain? After all, not all paper books are going away. Unfortunately, the answer is no and B&N next couple of years is not a pretty story. Although B&N will pick up sales from the first phase of the 200 stores closing by Borders and then a lot more sales when Borders faces the inevitable and completely shuts down, it will not be enough to sustain the Barnes and Noble superstores. Even if ebooks only poaches 20% of readership in the next year, that's still too much of a loss of business for B&N to sustain their current business model- mammoth stores with large staff and in high rent shopping malls. The nook is B&N noble attempt to compete in the ebook space but B&N it's not a technology company and Amazon, Google, Apple are too big and too good at this already.

  • Report this Comment On February 24, 2011, at 12:52 PM, megoogler wrote:

    Again talking about Barnes & Noble stores and not mentioning BN.com - while BN stores are not too much of the technology (although every store provides free Wi-Fi to Nook devices), BN.com IS a technology company on par with Amazon. Learn the facts before attempting to claim being an "analyst".

  • Report this Comment On February 25, 2011, at 12:59 PM, a135nav wrote:

    I was in a B&N store on Dec. 23. That store and the chain as a whole had their best ever sales day that day. Given the overall economy the holiday sales were excellent. If you bothered to check, you might find that these stores are not heavily staffed. In many of the stores the cafe department is a profit center. Paper books, ebooks, & online B&N is either the leader or in 2nd place. They have adjusted their business model on a regular basis to keep up with changes in the marketplace. My bet is they will be around for a long time to come. I'm hanging on to my stock.

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