Barnes & Noble: The Next Bridge to Nowhere (BKS, MSFT, AAPL, AMZN, GOOG)

Ron Burkle and his Yucaipa funds have distributed nearly 12 million shares of Barnes & Noble Inc. (NYSE: BKS) to shareholders of two of the funds, according to a filing yesterday with the SEC. Burkle owned nearly 20% of B&N’s outstanding shares before the disposition and retained ownership of a less than 1% of outstanding shares following the distribution.

Burkle has apparently given up on B&N’s prospects, even after private equity firm Jana Partners took an 11.6% stake in the bookseller in April. Microsoft Corp. (NASDAQ: MSFT) formed a joint venture with B&N later in April to develop the Nook e-reader. Nook sales trail far behind the iPad from Apple Inc. (NASDAQ: AAPL) and other e-readers like Amazon.com Inc.’s (NASDAQ: AMZN) Kindle family that use the Android operating system from Google Inc. (NASDAQ: GOOG).

Microsoft’s stake in the joint venture values the e-reader portion of B&N’s business at about $1.7 billion, well above the bookseller’s $937 million market cap based on today’s share price. After the Microsoft deal was announced, B&N’s shares jumped to a 52-week high of $26, but shares are trading below $16 today.

The investments by Jana and Microsoft won’t do much to increase B&N’s value to shareholders. Jana’s only play has to be for the company’s real estate, while Microsoft is probably biding its time now that it has a stake in the ground for the company’s e-reader. B&N itself resembles nothing so much as another “bridge to nowhere” — a poorly managed business with value only to scavengers.

Shares of B&N are down -1.8% at $15.84 in a 52-week range of $9.35-$26.00.

Paul Ausick