Barnes & Noble Quarterly Loss Widens on Digital Investments

Barnes & Noble Inc. (BKS), the target of a $1 billion bid from Liberty Media Corp., posted a wider fourth- quarter loss from a year earlier, hurt by bankruptcy liquidation sales at Borders Group Inc. and investments in digital books.

The net loss totaled $59.4 million, or $1.04 a share, in the quarter ended April 30, the New York-based company said today in a statement. That missed the projected loss of 87 cents of David Strasser, an analyst at Janney Montgomery Scott LLC.

The bookseller, which suspended its dividend this year to conserve cash, has been using its profits to invest in e-books and its Nook digital reading devices as sales of paper books falter. That helped attract interest from John Malone’s Liberty Media, which offered $17 a share for the bookseller last month.

“They’re spending a huge amount of money developing a reader that people are afraid is going to go the way of the VHS tape or the CD,” Bill Kavaler, an analyst at Oscar Gruss & Son Inc. in New York, said in an interview. Kavaler recommends investors sell the shares.

Barnes & Noble fell $1.20, or 6 percent, to $18.94 at 4 p.m. in New York Stock Exchange composite trading. The stock has gained 34 percent since Liberty’s bid was announced on May 19.

Amazon Competition

Sales at stores open at least a year fell 2.9 percent in the quarter, hurt by the liquidation of more than 200 Borders locations in the period, according to the statement. Ann Arbor, Michigan-based Borders filed for bankruptcy in February.

Barnes & Noble said today it is reviewing Liberty Media’s offer, the first bid disclosed publicly since the company put itself up for sale in August. While the offer is being considered, earnings projections for fiscal 2012 won’t be announced, Barnes & Noble said.

Fourth-quarter revenue rose 4 percent to $1.37 billion, while sales in its college unit increased 3.5 percent to $211 million.

The company has had to ramp up spending on marketing on product development to stay competitive with Amazon.com Inc. (AMZN), whose Kindle is the top selling e-reader, according to Michael Souers, an analyst for Standard & Poor’s in New York.

The Nook is “the only driver of long-term growth and they have to establish that niche,” said Souers, who recommends holding Barnes & Noble shares.

Last month, the largest U.S. bookstore chain unveiled a smaller, lower-cost Nook in an effort to boost its share of the growing e-book market. Barnes & Noble has about 25 percent of the e-book market in the U.S. and trails only Amazon.com, which introduced the Kindle e-reader in 2007.

The fourth-quarter loss a year earlier totaled $32 million, or 58 cents a share.

To contact the reporter on this story: Matthew Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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