Barnes & Noble’s (NYSE:BKS) decision to spin out 20% of its Web division
into a separate public story on Wall Street follows the logic of a company
struggling with an old-world, new-world business model, and one caught in
the e-tail envy of Amazon.com (NASDAQ:AMZN), the nimble ‘jack be quick’ of
books, and perhaps soon, music and video.
The essence of the logic is that BKS trades at a discount to AMZN, which it
does on a market cap basis. But if we factor in Barnes & Noble’s 1,000
stores lease obligations–and all but one are leased–then this ‘debt’
could bring total cap between AMZN (debt factored) and BKS on par.
The difference in our view is that Amazon.com is able to move with less
friction in the silicon space and deploy its $325 million-raised-via-debt
offering in an environment that’s almost gravity-free: the Web. Barnes’
leases, meanwhile, are ‘silica’ based, as in earth minerals. That’s
Some of the other more meaningful numbers we
found in looking at Amazon and Barnes this time around (because we’ve
delved into the tale of two book stocks before) are two-fold: total top
line and then Web to Web comparison.
Amazon’s sales of $116 million hit
17% of what Barnes posted in its most recent quarter, despite Amazon having
just 3% of the book market vs. Barnes’ 25% overall share. That demonstrates
yield per reach and customer loyalty for Amazon.
all figures in millions, except per share
Meanwhile, in the Internet space it’s Amazon that’s the market leader:
BarnesandNoble.com sales are 11% of Amazon.com in the latest quarter, $12.5
million. Loss for loss Amazon and BarnesandNoble.com were about even, which
again shows AMZN’s ability to generate more sales off a similar cost basis,
despite being a larger Web entity. Fueling that efficiency is Amazon’s $12
customer acquisition fee which, in turn, is fueled by its pioneering
BarnesandNoble.com reports “thousands” of affiliates
but with recent quarter sales of just $12.5 million we wonder how much
affiliation occurs. That may change next year as a several-hundred million
ad campaign to promote BarnesandNoble.com gets underway.
BKS said it expects to file for the 20% spin-off within the next 30 days,
depending on market conditions. BKS shares closed up 7.5% Thursday, adding
about $192 million to BKS market cap. That’s more than half way there, in
our analysis, as to what BarnesandNoble.com could fetch at IPO.
Going public a good plot twist? Rather a predictable storyline with AMZN
up more than 300% this year. More as the plot thickens (if BKS files or
not in next 30 days).
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