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What Happens to Barnes & Noble Now That it Won Shareholder Fight

It's over â€"- that being Barnes & Noble's (BKS) proxy election results held at its annual shareholders' meeting this morning. And you can bet that upon hearing he's still chairman, Len Riggio is exhaling deeply. The company's other nominees also won election to the board, and Ron Burkle's Yucaipa Companies bid to amend Barnes & Noble's poison pill was defeated. But for Riggio et al. the toughest work is yet to come.

Burkle wasn't at the meeting, but he noted in a statement that although Riggio had a substantial voting advantage, preliminary tallies showed that less than 50 percent of the outstanding stock voted for him and his slate.


It is nearly impossible for any stockholder to do something Leonard Riggio doesn't want to do because of his built-in voting advantage. Nevertheless, we hope the Board heard today's message loud and clear and that the strategic alternatives review will be prompt, fair, transparent, and conducted on a level playing field for all bidders.

Burkle's referring to Barnes & Noble's recent bid to put itself up for sale which I reported on in August. And while a move to take the company private would give Riggio the freedom to run the company without having to answer to Burkle or a board, Burkle's already alerted the shareholders to the possibility that Riggio could make a low-ball offer and carry away the company while the stock is still cheap.

But Riggio doesn't seem to want to absorb the ownership -- at least that's what he told Bloomberg after the meeting. "Our job is to get a lot of bidders interested," and added that he's not part of a group that plans to bid on the company.

This might actually be a savvy strategy on Riggio's part as the company struggles with positioning itself as a direct competitor to Amazon (AMZN) with various digital initiatives including the Nook e-reader and its e-book marketplace. However, Riggio's fought tooth and nail to topple Burkle's proxy fight, and it isn't likely that he'll let go soon.

Yet while Burkle is pressuring for better returns for shareholders, he's not offering much in the way of solutions to restore the retailer to the heady days of the 1990s (or even the not-so-flush times before Kindle). Focusing on Riggio's self-serving management style doesn't help the company figure out how to convert revenues from paper books to digital downloads -- a strategy that the world's largest retailer needs desperately to keep from selling teddy bears and toys in order to turn a profit.

E-books are here to stay, and retailers must act accordingly. Evan Schnittman, managing director, Group Sales and Marketing, Print and Digital for Bloomsbury Publishing, rightly points out:


E-books aren't cannibalizing print books -- consumers with e-book reading devices are, as a rule, no longer buying print books. They invest in a device and platform to read books and therefore become dependent on those channels of e-book distribution for their content. They don't go into stores and are not very likely to shop in online environments that feature ebooks and print books. E-bookstores on ebook reading devices sell only e-books. Print is not part of the experience.

Barnes & Noble's future leader -- Riggio, Burkle, or whomever it may be -- just needs to come to the table ready to furnish a sustainable alternative for selling them.

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Image via Flickr user Mostly Muppet CC 2.0

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