Analyst Roundup: Microsoft (MSFT) Makes $300M Investment in Barnes & Noble (BKS)

April 30, 2012 3:32 PM EDT
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A number of analyst firms are considering the deal between Microsoft (Nasdaq: MSFT) and Barnes & Noble (NYSE: BKS) Monday afternoon. Barnes & Noble shares have surged more than 50 percent amid news of the tie up. Shares of Microsoft, meanwhile, are up 0.1 percent at last check.

An analyst at Janney said Barnes & Noble could be valued at as much as $33 per share, or about $2.3 billion in total. The firm's target is based on Microsoft's investment in the College and Nook segments and a 3.5x multiple on estimated EBITDA for the retail segment for 2012. This view excludes $510 million in long-term debt.

Nomura's Rick Sherlund believes the deal was aimed at guaranteeing the availability of digital content for Windows 8 devices. Specifically, Sherlund feels Microsoft is looking to "counterbalance" against Apple's (Nasdaq: AAPL) content partnerships and Amazon's (Nasdaq: AMZN) Kindle.

A Gabelli analyst said the deal makes a spinoff of Barnes & Noble's Nook and College unit more likely. The analyst said this segment could garner $31 per share alone in a private transaction.

Goldman Sachs said, "The key question is what MSFT can do to enhance the BKS/NewCo earnings stream..." The firm wonders if Microsoft "will develop additional mobile devices that can enhance the sale of ebooks, as the desktop has not been a compelling platform for ebook sales."

Undoubtedly more analyst notes will be released on prospects of the deal. Stay tuned to our Analyst Ratings

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