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Nook's potential lures Liberty Media purchase bid for Barnes & Noble

NEW YORK — Why buy a bookstore?

John Malone, 70, who made a fortune in cable television, is offering $1 billion for Barnes & Noble — trying to jump into a business so sick that its No. 2 competitor, Borders Group, is on life support.

The difference is that Malone and his Liberty Media conglomerate aren't betting on the books-and-mortar past, analysts say, but the promise of the electronic future.

Barnes & Noble's Nook electronic reader now accounts for 28 percent of the market for those devices. And the Nook has the potential to go beyond books to deliver all types of digital products, including music, magazines, TV shows and movies. That makes it a competitor not just to Amazon.com's Kindle, but also to Apple's iPad.

"This deal is all about the device," said Sherif Mityas, a partner in the retail practice of global management consulting firm A.T. Kearney. "As Apple proved, you need to have the content and the device. Malone has the content, and Barnes & Noble has the device. You're not buying the stores; you're buying the Nook."

Malone's empire, Liberty Media, operates three publicly traded companies — Liberty Interactive Inc., Liberty Starz Group and Liberty Capital Group — through which it runs home-shopping network QVC and movie channel Starz. It also holds stakes in numerous other online, media and communications companies. Some believe that QVC could be used as a marketing vehicle for Barnes & Noble's Nook.

With the backing of a media conglomerate, Barnes & Noble's digital business would be able to compete better with Amazon, Apple and others, said Gary Balter, a retail analyst at Credit Suisse.

Barnes & Noble's 700 stores may appear to be an albatross. But they could be transformed into places that highlight mostly digital devices and content and mimic Apple's successful stores. Barnes & Noble has already cleared space at the front of its stores to display the Nook and push e-books.

Barnes & Noble's shares surged almost 30 percent Friday and passed Liberty's bid of $17 a share in cash, closing at $18.33. The companies haven't yet signed an agreement, and the deal is still subject to closing conditions, including one that founding chairman Leonard Riggio keep a stake in the company and remain in a management position, Barnes & Noble said.

Barnes & Noble reiterated Friday that a committee of its board is evaluating the offer.

Last month, Barnes & Noble added an app store and an e-mail program to its Nook Color e-reader. That brings the $249 device closer to working like a tablet computer like the iPad, which sells for twice as much.

Barnes & Noble is expected to announce a new version of the Nook next week, though it hasn't disclosed its features.

Nook's potential lures Liberty Media purchase bid for Barnes & Noble 05/20/11 [Last modified: Friday, May 20, 2011 10:00pm]
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