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Technology Stocks : barnesandnoble.com Barnes & Noble
BKS 6.4900.0%Sep 20 12:00 AM EDT

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To: Francis Gaskins who wrote (3)8/20/1998 4:52:00 PM
From: Francis Gaskins   of 32
 
"Barnes & Noble to spin off online unit" CBSMarketWatch

By Darren Chervitz, CBS MarketWatch
Last Update: 11:50 AM ET Aug 20, 1998
----------------------------------------------------------

"Merrill Lynch analyst Daniel Barry wrote in a recent report that he
expects BarnesandNoble.com, which kicked off its first ad campaign in
April, to generate $150 million to $250 million in sales for 1999,
compared with the $650 million in sales expected by Amazon.com."
----------------------------------------------------------

NEW YORK (CBS.MW) -- Shares of Barnes & Noble jumped 10
percent Thursday morning after the bookseller announced its intention to
spin off its online operations in an initial public stock offering.

The company said it will file with the Securities and
Exchange Commission for a BarnesandNoble.com
IPO within 30 days, a possibility mentioned by
CBS.MarketWatch.com on July 29. (See
related story.)

At the time, Barnes & Noble's (BKS) executive
vice president of finance, Marie Toulantis,
acknowledged the company was considering a
spinoff. "We're very well-positioned in the capital markets, and we'll be
exploring all of these options with a view toward enhancing shareholder
value," she said.

Mary Ellen Keating, senior vice president for corporate communications,
said Barnes & Noble will continue to hold about an 80 percent ownership
stake in the online unit after the IPO.

Following Amazon's lead

Analysts and investors had been hoping for some
time that Barnes & Noble would make this move
so that its online operations would be valued along
the same lines as market leader Amazon.com
(AMZN). The pioneer Web-based bookseller's
market cap stands at about $6.3 billion, excluding
debt. That's more than Borders (BGP) and Barnes
& Noble combined, though together the two rivals
generated about 18 times the sales of Amazon in
the trailing four quarters.

According to a recent research report from
Salomon Smith Barney's Maureen McGrath,
Barnes & Noble could be trading about 35
percent higher if its online operations, expected to generate $100 million in
sales this year, were valued like Amazon.com's.

'Subtracting from stock price'

"Its Internet business is subtracting from the stock price, so you either
have to convince people to look at it differently or you have to spin it off,"
said Bill Harnisch, president and chief investment officer of Forstman-Leff
Associates, the largest institutional shareholder in Barnes & Noble.

On the news, Barnes & Noble's stock rose 2 3/4 to 40 in recent trading
of 1.3 million shares.

The benefits of a Barnes & Noble spinoff would go well beyond raising
money and increasing shareholder value, according to observers. "It
would attract a different type of investor and give the Internet venture a
little more focus, which is necessary in a fast-growing and competitive
marketplace," Ryan Jacob, portfolio manager of The Internet Fund and
research director of IPO Value Monitor, said in an earlier interview.

Merrill Lynch analyst Daniel Barry wrote in a recent report that he
expects BarnesandNoble.com, which kicked off its first ad campaign in
April, to generate $150 million to $250 million in sales for 1999,
compared with the $650 million in sales expected by Amazon.com. If
BarnesandNoble.com were valued at just half the multiple of
Amazon.com, the online operation would be worth $8 to $14 a share,
Barry wrote.
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