Crain's New York - October 1, 2012 - (Page 4)

expand YOUR BUSINESS IN THE MARKETS by Matthew Flamm NEW NOOKS: CEO William Lynch touts Barnes & Noble’s focus on content, not mall shopping. Experience The Port Authority of New York and New Jersey’s Supplier Diversity Program E XPOSE YOUR COMPANY to quality contract opportunities. Each year, as part of its mission, the Port Authority of NY & NJ awards millions of dollars in contracts to certiﬁed minority, women-owned, small, and disadvantaged business enterprises (MWSDBEs). Nooks cost B&N cash but buy time Excel with one of the largest transportation systems in the nation. The Port Authority relies on hundreds of MWSDBEs to fuel its vast transportation system. In 2012, it is investing over $3 billion in capital projects, including tunnels and bridges. Learn more about our supplier diversity program and contract opportunities at www.panynj.gov/ supplierdiversity or call 212-435-7843. H ere is one place where embattled bookseller Barnes & Noble has numbers on its side: The new seven-inch Nook HD and nine-inch Nook HD+ that it showed off to the press last week are lighter and cheaper and have higher-resolution screens than Kindle Fire HD tablets offered by its vastly larger rival Amazon. Starting in November, the Nooks will be available in more the pressure to keep cutting prices. In the first quarter of fiscal 2013, which ended July 28, Barnes & Noble posted revenue of $1.5 billion, up 3% from the year-earlier period, and a net loss of $41 million. The company’s share price, which has lost almost two-thirds of its value in the past five years, was up 7% last week, to $12.78. Barnes & Noble’s leadership argues that the company is not intimidated by Amazon’s clout and that the bookseller will thrive by focusing on tablets meant for content consumption, not mall shopping. “We feel like we need to understand who we are and what we do, and then do that better than anyone,” CEO William Lynch said.“We’ve done that with these devices.” Having Nook showcases in Barnes & Noble stores may prove to be another, increasingly important advantage—one the company could do more to exploit. “They don’t have the deep pockets of Amazon, but they do have millions of square feet of retail space and committed associates who can position a product well,” said Michael Norris, a senior analyst with Simba Information, which covers the book industry. “They need to make the stores more of a strength, like Apple has done.” While Mr. Wahlstrom of Morningstar doesn’t recommend Barnes & Noble’s stock, he does see the Nook business turning a profit eventually and the brick-and-mortar stores generating cash flow for some years to come. “They can maintain their niche in a core booklover category,” he said.“I think they do hang in there.” brick-and-mortar stores than the Kindle Fire,and that’s not including the nearly 700 Barnes & Noble bookstores where they’ll be showcased. Amazon’s devices got booted from Walmart in September and were dropped by Target in May, apparently after the mass retailers decided the Kindle could destroy their businesses by putting an online mall in customers’ hands. And the Nook content application will soon be featured on the Windows 8 operating system, which is set to launch in late October.The arrangement is the result of a partnership with Microsoft, which is investing $600 million in the Nook business over the next five years. But analysts question whether cool, high-def Nooks—as well as a Nook Video service that’s set to launch this fall and Microsoft’s investment—can keep Barnes & Noble competitive in an industry that demands new products almost yearly. And here’s where the numbers don’t look good for the last major U.S. bookstore chain: Its puny market cap of $761 million is dwarfed by Amazon’s $116 billion and Apple’s $639 billion. “So Barnes & Noble has 150 software engineers sitting in San Francisco—how many does Amazon have?” asked Morningstar analyst Peter Wahlstrom. “How many does Apple have? They have the means to beat up on Barnes & Noble if they wanted to, in their spare time.” He added that while Microsoft’s millions should buy time for the Manhattan-based retailer, they’re unlikely to make up for the mounting costs of tablet development and newscom http://www.panynj.gov/ http://www.panynj.gov/ http://www.caplindrysdale.com http://www.caplindrysdale.com

Table of Contents for the Digital Edition of Crain's New York - October 1, 2012

IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
CORPORATE LADDER
FROM AROUND THE CITY
OPINION
GREG DAVID
REAL ESTATE DEALS
REPORT: SMALL BUSINESS
CLASSIFIEDS
FOR THE RECORD
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crain's New York - October 1, 2012