Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Barnes & Noble (BKS) -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (1154)	5/13/1999 1:51:00 AM
From: Glenn Petersen	Respond to of 1691

I use BGP as a comparison only as it relates to the bricks and mortars part of BKS' business. I would suggest that BGP has not actually "stumbled", that the implosion of their stock price is more related to the perception that they do not have a successfully thought out strategy for the Internet. Check their results for the last five years: Operating profits for the years ending January 31, 1999: $167.3 MM 1998: $138.0 MM 1997: $103.1 MM 1996: $ 64.5 MM 1995: $ 50.2 MM During that period, their sales rose from $1.511 billion to $2.595 billion. As for Ingram, it is a wholesale distributor and like all distributors, particularly those dealing in commodity type products like books, it suffers from low margins. Ingram's sister company, Ingram Micro (IM), the premier computer based technology products and services wholesale distributor, is surviving on gross margins of approximately 6.0%. While the Ingram acquisition was a well thought out strategic move on the part of BKS, it is not going to add significantly to the bottom line. If anything, the acquisition might make it more difficult to adequately value BKS as distributors are generally not accorded high valuations. IM had 1998 sales of over $22 billion and has a market cap of only $3.9 billion. Regardless, the acquisition of Ingram is not going to give BKS any cost advantages. If the deal survives the anti-trust review, BKS is going to have to agree to provide everyone with a level playing field. My portfolio is 95% Internet so I do understand the irrationality of Internet valuations. The standard 40% discount will apply in this case as it does to most of the other back door plays. Look at MALL/UBID and the others. CMGI is a special case as it has a steady stream of IPOs in the hopper. I certainly hope BKS spikes to $50, but I do not think that it will happen, Regards.