Should Blue Nile Marry Itself?

Here's a marriage match for your consideration: Should Blue Nile (Nasdaq: NILE) consider proposing to ... itself?

The engagement-ring specialist isn't talking about taking itself private, but at least that's the wishful thinking of co-founder and former vice president Ben Elowitz. He was a panel member at last night's Washington Technology Industry Association's annual predictions dinner. According to panel moderator John Cook from TechFlash, Elowitz was asked what company he would buy next year if he could take it in any direction. He chose Blue Nile.

"I would love to take it private and to make that an investment for the future," he says. "I think there are [a] number of opportunities like that where you could eliminate those public company costs, invest for the long term, bear out the economic cycle and come out in a much, much stronger position."

It's important to point out that Elowitz is no longer at Blue Nile. He hasn't been there since 2001. He is now running the show at social networking site Wetpaint. He was speaking theoretically, but his idea does raise the scenario of seeing Blue Nile take itself private. It may as well, since nobody else seems to be buying into the e-tailer these days.

Shares of the online jeweler traded higher this morning on a Stifel Nicolaus upgrade, but this is a rare moment of upside. Fourteen months ago, Blue Nile peaked at $106.16. The stock has shed nearly 80% of its value since then.

The unrelenting bear market hasn't helped, but Blue Nile's fundamentals have also been cracking. Last week's quarterly report was a disaster. Net sales fell by 3% and profits took a 21% plunge. Blue Nile has now suffered through three consecutive quarters of year-over-year stateside sales declines.

Selling high-end diamond rings is unlikely to be a growth industry in this sour economy, so why not go private and ride the cyclical storm out away from publicly traded scrutiny?

Away from market vigilance, Blue Nile could take advantage of the dirt cheap prices in related sectors. It can snap up jewelry auctioneer Bidz.com (Nasdaq: BIDZ), to have a presence in the low-end jewelry market. It can acquire The Knot (Nasdaq: KNOT), the popular wedding planning and bridal registry site that would dovetail nicely with its engagement ring specialty.

Another option would be for it to go from the role of acquirer to being acquired. Real world jewelers like Tiffany (NYSE: TIF) and Signet (NYSE: SIG) would be no-brainer buyout candidates. Even Amazon.com (Nasdaq: AMZN) makes sense, after the online juggernaut launched high-end handbag and shoe store Endless.com two years ago.

Either way, this is not a time for Blue Nile to stand still. Buy or be bought. Go private or earn the right to be publicly traded. There are worse things than marrying oneself. At least you'll know the answer before you pop the question.

Other Blue's clues:

• Blue Nile posted lackluster results last week.
• Bidz followed with a similarly uninspiring report.
• It's So Much Worse Than You Think .