Sell Off in Barnes & Noble (BKS) Could Be Overdone, Here's Why...

August 20, 2012 10:29 AM EDT
Barnes & Noble (NYSE: BKS) could be lower on the session, but might investor reaction be overdone?

According to a report out of Bloomberg, shares of Barnes & Noble are well off highs hit in April, with the bookseller and Microsoft (Nasdaq: MSFT) entered a new e-Book partnership. The stock is down over 53 percent since surging to an annual high of $26 on the deal announcement.

However, the deal called for more collaboration between Barnes & Noble's digital and College content, which is exactly the way the company wanted it. Barnes & Noble has said it was looking to move away from the hardware segment, expecting to focus more on putting apps on devices from Apple (Nasdaq: AAPL), Google (Nasdaq: AAPL), and others.

Which makes today's announcement it is expanding into the U.K. even more curious. First, Barnes & Noble launched the NOOK Color in 2009, a full year ahead of's (Nasdaq: AMZN) Kindle Fire debuted. If you're looking to exit a segment, why expand?

Because Windows 8 is coming out, that's why. Microsoft's deal with Barnes & Noble sets the path for a new app to debut on the operating system, which will probably be a hot seller right out of the gate as millions look to embrace the new ecosystem Microsoft is trying to create. Because no real details have been released about the deal, specifics of how the two will integrate an app is fuzzy. However, prior comments suggest that Banes & Noble's app will be "deeply integrated" into Windows 8, meaning it could start off as the default reader when users upgrade later this year and into 2013.

Personally, we're still behind Microsoft acquiring Barnes & Noble, which would give Microsoft instant exposure for new company-specific stores nationwide.

Shares of Barnes & Noble are down 2.6 percent while Microsoft is off 0.7 percent Monday morning.

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