Barnes & Noble’s Nook Unit Is Worth More Than Its Parent Company(dealbook.nytimes.com)
dealbook.nytimes.com
Barnes & Noble’s Nook Unit Is Worth More Than Its Parent Company
http://dealbook.nytimes.com/2012/04/30/barnes-nobles-nook-unit-is-worth-more-than-its-parent-company/?nl=business&emc=edit_dlbkpm_20120430
15 comments
That is a funny situation 3Com owned 94% of Palm and 3Com was valued at $28 billion - $23 billion LESS than the value of its holdings in Palm.
What is the stock or option play here when you know two stocks will move closer but don't know if one will move up or the other down? This happens with EMC who owns 80% of VMWare
What is the stock or option play here when you know two stocks will move closer but don't know if one will move up or the other down? This happens with EMC who owns 80% of VMWare
Usually there's a reason that they're priced that way (market uncertainty, debt, etc), but Palm and 3Com is a good example when it works out. You may have problems shorting though.
Sell shares/buy puts on the overpriced company (in your example, Palm), buy shares/buy calls on the underpriced company (3Com). Usually implied vol is pretty high, so you'll definitely pay a premium for the long options position. Alternatively, you could sell premium, but that is quite a dangerous position for a retail trader.
Sell shares/buy puts on the overpriced company (in your example, Palm), buy shares/buy calls on the underpriced company (3Com). Usually implied vol is pretty high, so you'll definitely pay a premium for the long options position. Alternatively, you could sell premium, but that is quite a dangerous position for a retail trader.
The value Microsoft assigned to the Nook unit probably prices in that B&N won't try to disrupt Microsoft's Android Tax business unit any longer.
But does that business even exist? I'd love to see some investigative reporting on this issue. Most of the other deals have hints of quid pro quos like funding advertising for Windows laptops, so basically those companies are taking money in return for PR against non-Microsoft OSes, but continuing to use those non-Microsoft products themselves. It's all very odd.
The Nokia deal could also be seen as Nokia being worth more to Microsoft than to Google because if they adopted Android it could have seriously tilted the market away from all Microsoft's products.
It reminds me of idea that big companies talked about their potential Linux migrations simply to get big discounts from Microsoft. Though that strategy seemed to work for Microsoft, this time I'm not so sure.
The Nokia deal could also be seen as Nokia being worth more to Microsoft than to Google because if they adopted Android it could have seriously tilted the market away from all Microsoft's products.
It reminds me of idea that big companies talked about their potential Linux migrations simply to get big discounts from Microsoft. Though that strategy seemed to work for Microsoft, this time I'm not so sure.
I'm not necessarily saying you're wrong, but supposedly MS gets $5 for every Android HTC sells... http://www.businessinsider.com/htc-pays-microsoft-5-per-andr...
Site here says that in 2010 HTC was selling Androids at a rate of around 18 million per year... http://www.fool.com/investing/high-growth/2010/05/27/deciphe...
So that means around $90 million in income for MS, for which they did basically nothing, pure profit.
On the other hand, $90 million just isn't that much when you're MS. Even if they had a similar deal for all Androids (which they don't AFAIK), it would still only be $180 million, less whatever they gave up to get those deals done.
So MS does seem to be making money on Android, but the amount is clearly dwarfed by their other businesses.
Site here says that in 2010 HTC was selling Androids at a rate of around 18 million per year... http://www.fool.com/investing/high-growth/2010/05/27/deciphe...
So that means around $90 million in income for MS, for which they did basically nothing, pure profit.
On the other hand, $90 million just isn't that much when you're MS. Even if they had a similar deal for all Androids (which they don't AFAIK), it would still only be $180 million, less whatever they gave up to get those deals done.
So MS does seem to be making money on Android, but the amount is clearly dwarfed by their other businesses.
I don't think Microsoft profits much from their Android extortion racket. It exists mostly to generate FUD around Android and Linux and thus to protect their Windows cash-cow.
If I were Amazon right now, I'd start giving away a Kindle for free to Prime subscribers. B&N has to generate revenue from the hardware they sell, otherwise they're in deep trouble financially...Amazon can easily beat them in the race to the bottom and still make it up selling content.
Amazing to see how something that seems so obvious now was missed by Borders.
The Nook is in a great position now much like Instagram-Facebook in that it is one of the few competitors with any traction versus the Kindle and so they make a very nice target for anyone competing against Amazon.
It's pretty radical for a brick and mortal bookseller to go after the eBook market so aggressively, to the point where even now I find it hard to call it "obvious." There are some really nice touches, too, like the ability to spend an hour a day reading any eBook on your Nook while physically inside a Barnes and Noble location. Not only does that feel less than obvious to me, it feels really well designed and thought out. I admit that before walking into a B&N and playing with one of the recent model Nooks I thought that the device was a case of too little too late, but I left kind of wanting one.
> * like the ability to spend an hour a day reading any eBook on your Nook while physically inside a Barnes and Noble location.*
Oh, that's really cool. I didn't know that! I bet they could set up some pretty great partnerships with, e.g., Starbucks, too. If they did that, and I could go hang out at a coffee shop, sip a drink, and read anything I want for an hour... I'd buy it in a heartbeat.
Oh, that's really cool. I didn't know that! I bet they could set up some pretty great partnerships with, e.g., Starbucks, too. If they did that, and I could go hang out at a coffee shop, sip a drink, and read anything I want for an hour... I'd buy it in a heartbeat.
From a shareholder's perspective, does this mean Barnes & Noble is now, in essence, an e-book reader manufacturer/distributor with a retail presence? And the retail presence just happens to be doing terribly at everything except selling the Nook?
I'm trying to wrap my head around what exactly this means for Barnes & Noble. Any insight would be appreciated!
I'm trying to wrap my head around what exactly this means for Barnes & Noble. Any insight would be appreciated!
Hard to say at this point, but I'm not the least bit optimistic. At the rate B&N is burning through cash, Microsoft simply extended their runway an extra three quarters. The fundamental problems with Nook and B&N still exist, so until they announce some compelling change in business direction (other than an app for Win8) I'm not betting on that horse.
I am surprised I haven't seen more people talking about the potential of Nook moving to Windows Mobile platform. Especially given Microsoft's latest work in getting WM to run on low end devices and the generally average Android experience.
If they could maintain the existing level of polish it would be a huge win-win for both Nook and Microsoft.
If they could maintain the existing level of polish it would be a huge win-win for both Nook and Microsoft.
Why would that be a win for B&N? Nokia got a lot more for ditching it's own OS. And my Nook Color has always been smooth, both with its original software and after having Cyanogen installed. It now runs Nook, Kindle and Google Books very well. I can't imagine WP7 would be an improvement.
Besides that, you forget the e-paper model, which is selling very well - WP7 can't run on those.
Besides that, you forget the e-paper model, which is selling very well - WP7 can't run on those.
http://www.nytimes.com/2000/03/03/business/offspring-outweig...