NEW YORK (TheStreet) -- Microsoft (MSFT - Get Report) will stop offering Barnes and Noble's (BKS) Nook software on Windows systems. According to SEC filings, the two companies will instead work together on transitioning Nook users over to Microsoft's nascent Consumer Reader app.
Microsoft and Barnes and Noble have had a close relationship since Microsoft invested $300 million in the company in 2012. Barnes and Nobles is the worlds largest book dealer and is planning to launch a color version its Nook e-readers and tablets later this year.
While this is a minor hiccup in the relationship between the two companies, falling sales of the Nook are reason for concern. Microsoft's Consumer Reader app will replace the Nook Windows app but it is unclear what function it will have as it has not been revealed to the public yet. The two companies have also updated their revenue sharing agreement, though the terms of that agreement have not been made public either.
Microsoft was down 1.2% in late afternoon trading to $37.82, While Barnes and Noble's stock was down 0.6% to $21.50.
TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate MICROSOFT CORP (MSFT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MSFT's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 14.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although MSFT's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.96, which clearly demonstrates the ability to cover short-term cash needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, MICROSOFT CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 35.81% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MSFT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full analysis from the report here: MSFT Ratings Report