Wait... Microsoft Should Buy Barnes & Noble?

Speculation is rising around how Barnes & Noble (NYSE: BKS  ) is going to shake up its retail operations. Last week, the company announced its plan to evaluate the sale of its retail operations to the company's founder and chairman of the board, Leonard Riggio, who just so happens to the be the company's largest shareholder. Then we had Barron's running a weekend story about how Microsoft (NASDAQ: MSFT  ) may be a great suitor for Barnes and Noble's retail operations, as it would jump-start Microsoft's own retail operations; the company is dying to sell more Surface tablets. Team Redmond already made a $300 million investment for 16.8% of Barnes & Noble, so why not just go for the whole thing? Well, for one, since when is Microsoft in the bookstore business?

Lack of experience
Whenever Microsoft seems to stray too far from its core strength of developing software, it doesn't seem to go well for it. I can think of a $6.2 billion reason why this is probably a bad idea. Although it's tempting to increase the Surface's retail footprint by over 1,300 more stores, such an acquisition doesn't compliment Microsoft's expertise. Moreover, between its retail agreements with Staples and Best Buy, the Surface already has a network of nearly 3,000 potential stores in the U.S. and Canada. Increasing the retail footprint of the Surface isn't likely the solution to addressing the Surface's lack of sales.

Adjust to the realities
Perhaps the Surface family is off to a bit of a sluggish start because the market doesn't see the great need for a tablet device that charges a premium to the Apple iPad (when you include the keyboard). Granted, users can in theory "do more" with a Surface, but that doesn't necessarily mean they will pay up for a nascent platform that's largely unproven. The non-Apple tablet market comprises primarily of lower-cost Google Android options, which therein lays the problem. According to IDC, Microsoft and its partners should "adjust to the realities" of lower prices if it wants to drive increased market share.

Barnes & Nope
The last thing Microsoft needs is another one-off distraction away from its core business. Although 95% of Barnes & Noble's stores are profitable, this deal doesn't make sense from a strategic perspective. Microsoft's long-term growth strategy boils down to the trajectory of PC sales and how well it can increase its market share in mobile computing. That said, I'd be more focused on what Nokia is doing to kill Android's dominance in emerging markets.

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