Investopedia: Is Microsoft Hitting Up Barnes & Noble For Some Nook(ie)?

Even though Barnes & Noble (NYSE:BKS) still sports a billion-dollar enterprise value, investors and analysts have hardly been bullish about its standalone prospects. Now it sounds as though its partner Microsoft (Nasdaq:MSFT) may be about to make a move that would significantly transform the company. While a deal for Nook Media would likely be a real positive for Barnes & Noble, I have a harder time seeing how Microsoft gets its money's worth with such a deal.

Just A Rumor … For Now
Barnes & Noble's Nook Media business (both the e-reader/tablet operations and digital media) has been the target of ample M&A speculation for quite some time, with Microsoft and Liberty Media (Nasdaq:LMCA) figuring prominently in the speculation. Now it sounds as though a real bid could be on the way.

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Investopedia: VeriFone Loses The Tailwind Again

Something is going on with VeriFone (NYSE:PAY), and it's not good. Not only is the stock well off its highs, but whatever momentum that the company had gained since its fiscal third quarter miss is likely to evaporate with another miss. Although I don't think VeriFone is a fundamentally flawed business, it may well be transitioning away from that phase of its corporate life where investors look past almost any bad news in the pursuit of growth.

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Investopedia: Will Microsoft Be Key To A Barnes & Noble Turnaround?

For the number of people seemingly willing to pull the plug on Barnes & Noble (NYSE:BKS), you'd think there was a fat inheritance at stake. There's no point in pretending that the traditional retail format for books and other print media is permanently impaired (if not condemned to a steady downward spiral), and there are no guarantees that B&N's NOOK is going to emerge as a viable long-standing e-reader/tablet platform. All of that said, Microsoft's (Nasdaq:MSFT) support, and a relatively thin float, could make this a pretty wild stock from time to time.

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FinancialEdge: Department Of Justice Bites At Apple

Price fixing allegations aren't anything new; investors can usually count on seeing a few threats lobbed at this or that industry every year. What's unusual in this case is that a form of digital media, often seen as the dragon slayer of entrenched controlled prices, is in the center of the fight. What's even more unusual is that Apple, a company often credited for spot-on sense of its customers' sentiments, is involved as well.

A Warning Shot from the DOJ
The U.S. Department of Justice has recently warned Apple, as well as five traditional large publishing houses, that it intends to pursue a suit alleging antitrust/price-fixing behavior in the e-book market.

What this case ultimately boils down to is the allegation that these companies have essentially forced Amazon and other retailers to raise their prices on e-books. While Amazon has generally preferred to use a wholesale pricing model (where it decides the final price and the margin it wants), publishers have forced the company in many cases to adopt an agency model - a model where the publishers set the price and give a fixed percentage over to the retailer.

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FinancialEdge: Can Research In Motion Be Saved?

The technology sector is a merciless market and there are few "fade into the sunset" stories. Instead, whenever and wherever there is success, a horde of rivals soon follow with the express intention of taking what you do best, doing it a little (or a lot) better and driving you out of business. The rise of Research In Motion (Nasdaq:RIMM) was unexpected and remarkable, virtually tethering a whole generation of workers to their jobs in a way never quite achieved before, but the fall has been just as remarkable. (For related reading, see Blackberry Continues Its Downward Motion.)


With the market having moved on from specialized one-function devices to do-everything smartphones, can Research In Motion adapt to and overcome the new competitive realities?

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Investopedia: Amazon Still Rather Amazing

E-commerce giant Amazon (Nasdaq:AMZN) may still be deep in the shadows of Wal-Mart (NYSE:WMT) in terms of its reported sales, but there are precious few companies this size that are producing growth in excess of 40%. Although the Street was spooked by news that this fourth quarter could be a difficult one for this online retailer, investors would seem to have many more years of well above average growth in store with this name. (For more read Steady Growth Stocks Win The Race.)

Tricky Third Quarter Earnings  
Amazon is having no particular difficulty finding top-line growth, but that growth is coming at a cost. Reported revenue rose 44% this quarter, with organic revenue climbing 37%. Growth in media came in at 24%, with North American media sales growing 21%. Electronics and general merchandise looked strong at 59% growth (up 56% in North America), but this result was below most sell-side expectations.

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Investopedia: Can Barnes & Noble Change One More Time?

One of the most dangerous things investors can do is confuse what they want to happen with what is most likely to happen. Barnes & Noble (NYSE:BKS) is a good example of that Achilles heel for me - I'm a book nerd and very much want this company to succeed. The trouble is, though, that Barnes & Noble's market has changed dramatically, Amazon (Nasdaq:AMZN) and Apple (Nasdaq:AAPL) are formidable competitors, and a sober and unemotional reading of the evidence suggests little more than "maybe" when it comes to the question of whether this company can make it.

Another Tough QuarterUnfortunately, Barnes & Noble's fiscal first quarter results don't offer a lot of encouragement. BKS missed the consensus with its revenue performance, as sales rose a little less than 2% this quarter. Retail revenue was down almost 3% (on a nearly 2% negative comp), while BN.com revenue rose 37% and revenue from the college business fell about 2%.

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Investopedia: Transocean's Lull Creates Buying Opportunity

Offshore drilling company Transocean (NYSE:RIG) shows the power of the "whisper" number. Although the company reported disappointing results on Thursday, the stock actually traded up - a move that does not seem to make much sense until you look at the prior month's trading and see that the stock has been going almost straight down. 


Even allowing that other drillers like Noble (NYSE:NE) and Pride (NYSE:PDE) haven't done well either, Transocean stands out. Likewise, Rowan (NYSE:RDC), Atwood (NYSE: ATW), and SeaDrill (Nasdaq:SDRL) have all been weak on a generally poor near-term outlook for offshore operators. Also keep in mind that Transocean's earnings estimate dropped by about one-third over the past three months - investors were bracing for bad news, they got it, and they are apparently relieved it was not even worse than they assumed.


Q1 Results - No Work, No Money
Transocean owns an impressive fleet of rigs (about 20% of the worldwide offshore fleet), but they are little more than depreciating hunks of metal when there are not enough orders to keep them busy. For the first quarter, revenue was basically flat with the fourth quarter. Dayrates were actually a fair bit better, up about 5%, and rates were even better for ultra-deepwater and harsh-environment rigs. (For more, see A Primer On Offshore.)


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Borders Group - Time For The Last Act?

Looks like my beloved Borders (NYSE: BGP) will quite likely leave the stage at some point in 2011. The company announced that it has been delaying payments to some vendors will trying to work out a refinancing/funding with its current lenders.

This is not exactly what you call "bargaining from a position of strength", and it is unlikely that there is any miracle solution. Now, allowing for the fact that there is a time lag in the company's operating model that can create liquidity issues (they have to reorder inventory after a sale before the payments actually reach them), there is just no reason to be optimistic here insofar as I can see. The holidays are generally a time when retailers should be getting fat, not struggling to keep merchandise on the shelves and angering vendors by paying late.

The writing is on the walls, though. Maybe Barnes & Noble (NYSE: BKS) survives, but nationwide chains of big-box booksellers will not. The power of Amazon (Nasdaq: AMZN) is just too much to resist, to say nothing of the myriad alternatives to actually reading a book. All in all, book stores look more and more like arcades - another place I used to love to while away hours, but really no longer exists.

Off Topic: When Economics And Love Collide

As a reasonably firm free-marketeer, I suppose I should not mourn the impending demise of Barnes and Noble (NYSE: BKS) or Borders (NYSE: BGP). This is what is supposed to happen in a functioning free market, right? Good companies rise, bad companies fall and go away, and throughout the process capital is supposed to move towards the best returns.

So, I am not denying that the markets are working as Barnes and Noble and Borders go away as physical stores, to be replaced (presumably) with Amazon's (Nasdaq: AMZN) online-only methodology. Perhaps a few Quixotic private bookshop owners stay around, those who either have not gotten the memo about the demise of the industry, or simply refuse to read it.

But I will tell you ... I love bookstores. I love going to them, I love sitting in them, I love reading in them, and I love buying in them. And yet, I have done my part to kill what I love - I am not the only person to thumb through a book at Borders, confirm its worth, and then go home, pop on Amazon (because it is a buck or two cheaper than ordering from Borders' website) and buy it there. Basically, bookstores have turned into places where we test-drive our reading material.

So, as I look at the latest news from Barnes and Noble (bad, of course), I cannot help but feel a little sad that this industry is going away. I do not miss portable cassette players, Atari 2600's, video rental stores, or other flotsam and jetsam of the 1980's, but I will miss bookstores.

Judge Tosses Drilling Moratorium

A Federal District Judge in Louisiana has just ruled against the administration, overturning the government's 6-month ban on drilling in U.S. waters. Assuming it holds up on appeal (and the government has already said that it will appeal), it will once again be legal to drill in U.S. deepwater areas, and those 33 exploratory projects in the Gulf that were suspended by the ban can now restart.

I don't think it surprises anybody that there has been opposition to the ban, including industry representatives like Transocean (NYSE: RIG) and Chevron (NYSE: CVX).

Frankly, I'm with the drillers on this one. Locking things down after a rare disaster is an overreaction that plays well on TV and with the environmental groups, but doesn't score high on common sense. The reality is that drilling was going to recommence whether people liked it or not; the economic demands for ongoing offshore drilling are just too powerful to ignore.

What's more, it seems more and more certain that the rig disaster and oil spill were a product of a thankfully rare combination of reckless operation, very challenging geology, and ill-maintained equipment. Assuming that other drillers are going to be checking their blowout preventers VERY carefully and insisting upon conservative practices for cementing, the risk of another accident is very low.

After all, name the last major oil rig accident that resulted in an oil spill before the BP (NYSE: BP) Macando/Deepwater Horizon accident. Go ahead ... take your time ... I'll wait.

Clearly this could be good news for a whole host of Gulf and deepwater operators. Drillers like Rowan (NYSE: RDC), Ensco (NYSE: ESV), Noble (NYSE: NE), Nabors (NYSE: NBR), and Diamond Offshore (NYSE: DO) should benefit, as well as a whole host of service providers like Cal-Dive (NYSE: DVR), Oceaneering (NYSE: OII), Tidewater (NYSE: TDW), and equipment companies like Cameron  (NYSE: CAM) and National Oilwell Varco (NYSE: NOV).

The initial reaction hasn't been all that strong, though, as the Oil Equipment ETF (NYSE: IEZ) is down more than 1.5% as of this writing. If nothing else, this ruling could add even more pressure and uncertainty to situation as the administration may go to greater lengths to enforce its wishes on the industry. After all, you certainly don't make someone more friendly to your cause by suing them.

All in all, this ruling is a minor bit of positive news for a beaten-up sector, but it's only one round in a long battle. There are plenty of long-term reasons to stay positive on drilling and the energy sector, but also a lot of near-term noise and volatility. That's a great recipe for folks with the nerves and stamina to buy at a low price and just ride out any turbulence, but investors who find themselves shaken up when they see a holding down 10% or more from where they bought it should probably stay on the sideline for now.

A New Dawn For Old Media?

The publishing world seems to be putting on an impromptu rendition of "Monty Python and the Holy Grail." First we had the scene with the Black Knight where the internet began dismembering old media and old media bravely told us "'tis but a scratch," as gouts of blood spurted out of the cash flow statement. Now, though, we may be to the scene with Eric Idle and John Young, in which Mr. Young bravely declares "I'm not dead yet!" 

What's Old is New AgainIronically, it may be new media and technology that ultimately saves the day for old media. As consumers continue to buy up the Kindle from Amazon (Nasdaq:AMZN) and competing devices like Barnes & Noble's (NYSE:BKS) Nook, Sony's (NYSE:SNE) Reader, and Apple's (Nasdaq:AAPL) iPad, it looks like publishers may have finally accepted the reality that their future is digital.  

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