A deal from nowhere, which went nowhere, Microsoft’s partnership with Barnes & Noble’s Nook came to an ignominious conclusion today with the bookseller kicking the software firm a chunk of cash and shares.
The official verbiage indicates that Microsoft will sell “all of its $300 million convertible Series A preferred limited liability company interest” in exchange for “an aggregate purchase price equal to (i) $62,425,006.63 in cash and (ii) 2,737,290 shares of common stock.”
How much does that sum to? Shares in Barnes & Noble were down sharply today, at current tip off just over 6 percent to $20.88. At that price, the total cash and stock that Microsoft will pick up adds to $119.6 million. That’s a nice piece of dollar, but far less than its original $300 million investment.
$180.4 million less.
But that doesn’t include potential further Microsoft expenditures as part of the agreement, or revenue that might have come its way as part of its partial ownership of the joint venture.
Given that the Nook deal is returning cash, I would not expect that Microsoft had to further inject money into the project — if it can eject cash, it wasn’t out of the stuff, in other words. On the revenue side of things, it wouldn’t surprise me if Microsoft did pick up some money in revenue share, but the relevant filing doesn’t supply that piece of information.
Microsoft declined to comment on whether it did accrete revenue from the partnership that would, in theory, lower its total loss on the deal.
That aside, the deal was announced 977 days ago, and an un-adjusted $180.4 million loss over that period works out to $188,331 per day. That is both a lot of money, and not much money at all. In real terms, burning nearly $200,000 per day is quite expensive. For Microsoft, however, the total loss amounts to a minute percentage of its ready cash, not to mention its quarterly net income, making the figure inconsequential.
Given the scale of the loss, even if we accounted for, say, $50 million in revenue for Microsoft, the firm still lost more than $100,000 per day on the deal. That’s less than Fab at its prime, for reference.
And the Nook loss pales in comparison to the infamous Surface writedown. Place that event next to the recent Amazon loss on inventory of its Fire smartphone, and the Nook deal and it almost seems like making hardware is hard.