najdorf

Barnes & Noble's Earnings Call from a Borders Investor's Perspective

I don't pretend to know whether BKS should buy BGP, but your analysis is inadequate.

First of all, you compare a BKS pay membership to the BGP free membership. Of course more people sign up for the free option, but if their Borders turns into a B&N and they get asked to pay a fee, what percentage of BGP customers will keep that membership? You completely ignore this issue. Also, some significant percentage of current Border's Rewards members already hold Barnes & Noble cards, but you don't even attempt to estimate this percentage.

On the online issue: Amazon has already won this contest, so your analysis is moot unless a BGP/BKS combo has some secret plan to topple the market leader (they don't). Furthermore, making up guesses at to how many people shop at Barnesandnoble.com and what they spend doesn't count as analysis. Finally, the Borders site that doesn't yet exist has a value of zero ($0) because it is a

conceptualized website
of a nearly bankrupt company
that has failed to move units online in the past
that gave up and partnered with Amazon

is not a valuable commodity just because the CEO has said "Wouldn't it be nice if we could sell more books online?"

If BGP has any value, it resides in the opportunity for BKS to convert some of their leased store sites into more profitable B&N stores with their superior inventory management, cost control, etc. For instance, Borders has a great location in Concord, NH, where Barnes and Noble has nothing.