Why Barnes & Noble Stock Surged Today

Microsoft (NASDAQ: MSFT  ) gave shares of Barnes & Noble (NYSE: BKS  ) a much-needed lift on Thursday, after news surfaced that the tech giant could buy the bookstore chain's Nook business. Shares of Barnes & Noble climbed 23% on the news. According to TechCrunch, Microsoft could pay as much as $1 billion to acquire the division of Barnes & Noble responsible for making e-readers and tablet devices.

TechCrunch speculates that a potential deal would not include Nook Media's college bookstore chain. Allegedly, Nook Media also plans to drop Android-based tables from its selection by the end of fiscal 2014, and migrate the Nook store onto Windows 8 and other third-party platforms.

What does this mean for Barnes & Noble?
This is great news for current Barnes & Noble shareholders. Nook Media's revenue for the recent quarter dipped 26%, which left shareholders questioning the future of the business. However, a possible Microsoft buyout could mean big things for the stock. According to David Strasser of Janney Capital Markets, "If the rumor proves to be true, Barnes & Noble is worth between $25 and $35 a share."

Barnes & Noble stock was trading around $20 a share at the time of this writing. A possible acquisition also makes sense for Microsoft, which currently holds a 17% stake in Nook Media. However, it remains to be seen how a possible buyout would affect Barnes & Noble's retail business. Investors should stay tuned for more details as the story develops.

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  • Report this Comment On May 09, 2013, at 11:14 PM, mapompei wrote:

    Fools you were dead wrong on this stock. Negative article after negative article about BKS. One needs to consider the stock not just the company. The company has had large corporate investments into the Nook (over the past 12 months) that would value that part of the company at twice what BKS was selling for when it was below $15. The stock has had one of the the largest short positions for a NYSE listed stock compared to its total stock outstanding. Any news seen as positive had the potential to shoot this stock up like a rocket-like today. The fuse was lit in January and those who went long between 12 and 15 are and could approach triple digit returns. I would not be surprised to see this stock trade at 33. Thanks for your lunch, dinner and your summer vacation.

    M.A.Pompei

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