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Why Michael Huseby Can Turn Barnes & Noble Around

Jul. 16, 2013 1:33 PM ETBarnes & Noble, Inc. (BKS)
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Long/Short Equity, Growth, Momentum, Contrarian

Seeking Alpha Analyst Since 2013

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Barnes & Noble (BKS) has had a difficult time since 2006 when the stock traded around 45 dollars per share. As of July 15, 2013 the stock traded around 17 dollars per share. This is a decline of more than 60 percent since 2006, reflecting a number of mishaps for the company-one being that they entered the e-reader segment too late, while traditional books declined in volume and revenue.

Last Monday the former company CEO William Lynch stepped down. What is more interesting is the new CEO, Michael Huseby, has extensive digital media experience. He had been the CFO and Chief Executive Officer of NOOK Media LLC. Given the company's focus on simply turning around the core business, it seems not too surprising that they named a financial expert to head the company. Huseby joined Barnes & Noble just over a year ago, and prior to that he had been CFO at pay-TV provider Cablevision. Still, it points to a company not currently set on being visionary, and instead hunkering down to business.

Four out of five equity analysts have a buy signal for Barnes & Noble. Now let's crunch some numbers: based on the 2012 annual report, the loss per share was $2.97 USD, compared to $1.35 for the same period the year before. The company more than doubled its loss before taxes. The good news is, Barnes & Noble sits on $160 million cash pile, up from $54 million in 2012. This gives Barnes & Noble some room for much needed investing into digital media, while continuing to execute on the mainstream side of the business.

Now let's take a look at the technical set up:

Barnes & Noble: technical view

In the long run the company has had three tops at around $40 per share. With proper execution and getting Barnes & Noble back to profitability, those levels may occur again. Consider a drastic change in direction for the NOOK device business, by opening up the brand to tablet OEMs and killing off dedicated Mac and Nook apps. Such decisions look to be just the first steps in the company's journey to turn things around.

Here is a short run view of Barnes & Noble:

Barnes & Noble: short run

Not much movement-the stock just covered a gap from late June and we are now in a decision phase. For prospective traders, there are no clear signals yet.

Bottom Line
If the new Nook strategy gets off the ground and starts returning some decent revenue streams, we'll see the stock in the $30 range. Can it be done? No investments are safe bets, but if anyone can get it done-it will be Michael Huseby.

Also, don't forget that a while back Microsoft was eyeing up a $1 billion purchase of Nook Media, so a sale to someone, somewhere, could be in the wings. Barnes & Noble owns 78% of the tablet and e-reader division, while Pearson and Microsoft are the other shareholders.

My recommendation: Buy for long term. Not tradable in the short term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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