Brideshead Visited

An interesting article on the background to Waugh's Marchmain House.

The mind of Waugh the writer was stimulated at Madresfield. He not only drank in the medievalism of the house, but also savoured his encounters with the aristocracy, studying their habits and developing 'perfect pitch' in describing their jargon. He was fascinated to learn that his friend's father, the 7th Earl, considered it middle class not to decant champagne into jugs; how effectively nicknames and idiosyncratic jargon could exclude an outsider; how scruffily dressed the aristocrat could be at home. With his ear for dialogue and his eye for mannerisms, Waugh absorbed them well enough to be able to reproduce them faultlessly - even reverentially - in his novels.

Barnes & Noble Post Loss

The WSJ has a blog post on the muted combination between B&N and Borders. It is really an interview with Politics and Prose owner Carla Cohen. From the interview:

Carla Cohen: We kept one step ahead of the competition. We opened a coffeehouse before Starbucks was on the scene. The model for us was Kramer Books. We’re a much better venue for authors so we’ve never competed with Barnes & Noble on that. We can always do a better job keeping in touch with our customers and keeping publicity out about the events, so we’ve never had to compete. I think our biggest competition is with Amazon.com. Amazon makes it easy when people are sitting at their desks — which most of us are during the day — and you read something and go online and order it. You have to be an old-fashioned book-lover to say ‘I’ll wait until the weekend.’ We do get a fair amount of Internet ordering on our Web site with people who are going to pick it up later.

I had to comment on the post which you can read if you follow the link above.

In other B&N news, the company saw a small increase in revenues to $1.16 billion in the first quarter, from $1.15 billion in the year-ago period. Earnings were significantly impacted by an $8mm pretax charge related to sales tax withholding. The company said it lost $2.22 million, or 4 cents per share, in the quarter ended May 3. That compares with a loss of $1.67 million, or 3 cents per share, in the year-ago period. Excluding the charge, the bookseller would have earned 5 cents per share. Same store sales declined slightly in the period.

B&N Conference Transcript: SeekingAlpha

Books A Million 1Q Profit Off 57%

From the Books A Million earnings call yesterday, (Seeking Alpha)

Net sales for the 13-week period decreased 0.7% to $115.5 million from sales of $116.3 million in the year earlier period. Comparable store sales for the quarter decreased 3.4% when compared to the 13-week period for the prior year. At quarter end we were operating 207 total stores. During the quarter we opened one new superstore and closed two Booklands. Gross margin as a percent of sales was 29.3% compared to 29.0% last year. The increase as a percent of sales was partially due to lower discounts and markdowns versus last year. Operating expenses as a percent of sales increased to 24.6% for the quarter from 23.2% in fiscal 2008. The increase as a percent of tax is primarily due to a one-time charge of $406,000 ($241,000 net of taxes) for severance related to staff reduction at the company’s headquarters. Depreciation expense increased $114,000 to $3.5 million from $3.3 million.

Shares in BAM trade around $8 close to its 12mth low and the company has a market cap of $126mm. Their 52 week high is $20.70. There are 16mm shares outstanding and in recent months insiders have purchased 2.5mm shares (16%). Primary among this group are CEO Cochran and Chairman Anderson.

Indigo (Canada) Reports

Speaking of parties potentially interested in Borders, Indigo Books and Music reported their full fiscal 2008 results after the close of the TSE yesterday. In a challenging year the company reported earnings of $52.8 million or $2.08 per diluted share on $922.9 million in revenue. This performance compares with a profit of $30 million or $1.19 per diluted share on $875 million in sales a year earlier. Company CEO Heather Reisman commented the following:

"It was a demanding year for many retailers as a result of the significant increase in the Canadian dollar. Booksellers in particular saw a meaningful decrease in book prices. Despite this downward pressure on our top line we are pleased with our
results."

At the end of 2007, Indigo operated 249 stores including 88 superstores under the banners Indigo, Chapters and the World's Biggest Bookstore, and 161 small format stores under the banners Coles, Indigo, Indigospirit, SmithBooks and The Book Company. Over the past year the company's share price has fallen from a high of $16 to its current $13. It had been below $12, but the company announced a buy-back program that may have aided its recent up tick.

From the press release:

Total revenue for the quarter increased 2.1% to $206.2 million. On a comparable store basis,Indigo and Chapters superstores posted 3.4% growth, while Coles small format stores were up 2.4%. Sales from Indigo's online channel, Chapters.indigo.ca,grew 1.0% to $24.7 million. The Company's net earnings for the fourth quarter were $3.1 million, up$7.3 million from the same quarter last year. Pre-tax earnings rose$6.1 million to $1.9 million. For the full year, total revenue increased 5.5% to $922.9 million while net earnings were up 76.0% to $52.8 million. Included in this year's results was a $8.8 million non-cash tax recovery. Pre-tax earnings rose $14.1 million to $44.1 million.

Borders Update

Borders held its annual meeting yesterday and CEO George Jones refused to be drawn on where the company was in its strategic review. Later the company released a press release saying as much (or little):

In response to recent inquiries, Borders Group, Inc. (NYSE: BGP) today reported that the company is in the midst of the strategic alternatives process and has not engaged in substantive discussions regarding any specific transaction to date. The company does not intend to make any further comment while the process is ongoing.

There has also been an inordinate amount of interest in the reports of B&N taking a look at the Borders business. Few reports seem to offer any kind of analysis on the merits of any type of combination and even fewer seem interested in a wondering who the 40 or so other companies/entities are that have indicated some level of interest.

At the meeting, Jones was quoted as saying: "The investments that we've made during the past year ... certainly affected our financial performance in 2007... We feel that this is the year when we'll start reaping some of those benefits." (FreePress) It has always been a wonder to me that this company continues to invest in an expensive 'bet the company' revamp of its retail presence (off and on-line) while management is claiming they are cash strapped. As an investor, you would expect to reap all those benefits but not only could their timing not be worse but management don't appear to know when to both change course or ratchet back on the spending throttle.

In the UK, high street retailer WH Smiths have been linked with a bid for Paperchase. Reports suggest a value of $100mm (some say higher some say lower). The best thing that could happen for Borders is for PE to buy the whole thing. Only months ago, Paperchase was viewed as a key component of the company's future business strategy but having needlessly mortgaged the business, Jones and co have backed themselves into a corner where selling assets that should be supporting them in a downturn is considered as viable solution to their problems. Rest in peace.

Cramer Hates Media

Jim Cramer comments on the media business in the Hollywood Reporter:

"I hate media stocks."...."The world got changed by two companies," he says. "Apple is taking away the profitability of TV, and Google is taking it away in print. And it's never going to reverse." In the near term, Google is the bigger villain."It's just a parasite," he says. "It doesn't create content, it steals it, borrows it, shares it. It's no secret that print media is in trouble. It's why Gannett has gone from $80 a share in 2001 to less than $30 nowadays and why the New York Times has gone from $50 to less than $19 in the same time frame.Time Warner, too, is saddled with print by way of a huge magazine business. Time Warner is a content company for old people," Cramer says. "I try to get my kids to read magazines and newspapers, but no kids do. It's a tragedy."

He doesn't care too much for book retail either.

Patent Approved: Is This A Joke?

Under the title "Can the Publishing Industry Be Saved" was a press release describing a "Method and System for Customized Print Publication and Management." I was curious. I read the press release and it immediately made me wonder how anyone could get a patent for what was described. So I searched for the patent description. This looks to me like custom publishing which has been going on for forever but perhaps I am missing something: Like some thing patentable.

The following is a description of the patent application which has apparently been approved by the US Patent Office.

A method (Figure 3) for creating and managing customized print media through an enhanced content management process is disclosed. A print media customer, which may be an individual or organization, is profiled to determine content preferences (step 122). Profiling may be based on face-to-face or electronic surveys, Internet usage patterns, buying patterns, or other criteria. Content associated with the preferences is obtained and analyzed (step 124). Content affinities, or relationships between the content and other content in a content network, are determined, and may influence the print media produced (steps 128 and 130). A history of the content is maintained, to ensure content is not duplicated (step 126). Both substantive and non-substantive content, such as advertising content, is used. Both the content and layout of the print media can be customized (step 132).

The "steps" refer to a diagram. Further details of the above appear here. The description of the patent includes the following:

This invention provides a comprehensive method for effectively creating and managing customized print media through an enhanced content management process.

Summary of the Invention: In accordance with the embodiments described herein, method comprises customizing print media for organizations and individuals. The information for customization may derive from computer-based applications, internet-based sources, or more traditional, non-electronic survey techniques.

And then lastly,

While the invention has been described with respect to a limited number of embodiments, those skilled in the art will appreciate numerous modifications and variations therefrom. It is intended that the appended claims cover all such modifications and variations as fall within the true spirit and scope of the invention.

Is this yet another example of the USPO inability to guage real innovation versus patenting "processes." Or is PND over reacting?

Champions Again (Of Europe)

Only wish I was there. BBC Report.

B&N In Competitive Benchmarking

According to the WSJ via Reuters, B&N is interested in checking out Borders books. From the report:

Barnes and Noble has put together a team of executives and advisers to look
into the possible acquisition, the Journal said, citing a person familiar with the situation. Borders said in March that it might sell itself as it has struggled with liquidity and economic issues that have cut into customers' discretionary spending.

Time will tell if this amounts to much.

Twitter

Mike Hyatt, CEO of Thomas Nelson has a great how to for setting up and using Twitter. For those of you like me this is the guide to use. Mike's philosophy on social networking is you have to use it and experience it in order to pontificate on it. Obviously, understanding all social media tools is also critical to understanding how customer may/could/do interact with your content.

Link Here.

And while you are there, check out his "what I have learned in four years of blogging"

Dohle to Head Random House: UPDATE

The search term 'Marcus Dohle' sat highest on the list of queries to hit the blog site yesterday, so it was apparent to me that the word had leaked out that Dohle was about to be announced as the new head of Random House. No official announcement has been made yet but Reuters and IHT are reporting that a statement will be made later today.

(Also, looks like his name is spelled with a K and not a c: Markus).

UPDATE FROM BERTELSMANN CORPORATE:

Hartmut Ostrowski, Chairman and CEO of Bertelsmann AG, announced today that Peter Olson, 58, will step down at his own initiative from his positions as Chairman and Chief Executive Officer of Random House and as a member of the Executive Board of Bertelsmann AG, effective May 31. Olson will pursue an academic career. Markus Dohle, 39, will become the new Chairman and CEO of Random House. He was appointed by the Supervisory Board of Bertelsmann AG and will succeed Mr. Olson on the Bertelsmann Executive Board as of June 1. Mr. Dohle is presently member of the Arvato AG Executive Board and CEO of Arvato Print. Dohle’s successor at Arvato will be announced shortly. The Direct Group North America reporting line will shift from Peter Olson to Bertelsmann’s Chief Financial Officer Thomas Rabe.

In addition to the above announcement, Ostrowski also announced that

Richard Sarnoff, President of Bertelsmann Digital Media Investments and a member of the Supervisory Board of Bertelsmann AG, will take on the additional role of Co-Chairman of Bertelsmann, Inc., reporting to Bertelsmann CFO Thomas Rabe, effective immediately. In this new position, Mr. Sarnoff will play a key role in Bertelsmann's strategic and corporate development activities in the US, where he will work in close cooperation with executives from the divisions and the Corporate Center. Hartmut Ostrowski stated: “The US market is the world's largest and most dynamic in media as well as services, and as Bertelsmann both refines and expands our portfolio of activities in the US, we are fortunate to have an executive of Richard Sarnoff's caliber, profile, expertise, and background to take on the Co-Chairman role at Bertelsmann, Inc.”

Cengage Reports Continued Improved Performance

Cengage Learning posted third quarter results last week which showed continued improvement over their 2007 performance. For the quarter, revenues of $286.2mm were 7.4% higher than prior and EBITDA of $21.8mm was significantly higher than the $0.4mm they posted in 2007. YTD revenues for the nine months were $1,432.7mm a gain of 3.3% and EBITDA of $509.0mm represented a 6.7% improvement over the performance a year earlier.

Segments:

Academic and Professional:
Revenues for the quarter up 17.3% to $157.6mm with EBITDA up sharply to $13.6mm
YTD Revenues up 6.8% to $948.9mm with EBITDA up 6.2% to $414.2mm

Gale:
Revenues for the quarter were down 5.5% to $61.9mm with EBITDA down 11.7% to $21.1mm
YTD Revenues down 4.4% to $229.3mm with EBITDA up 4.8% to $102.6mm

International
Revenues for the quarter were up 9.4% to $67.3mm with EBITDA up 87.9% to $(0.7)mm
YTD Revenues were up 7.7% to $259.3mm with EBITDA up 18% to $35.4mm

Presentation