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Barnes & Noble: Stage Set For Proxy Battle

Barnes & Noble's earnings results could determine the outcome of the ongoing proxy battle.



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Barnes & Noble

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is expected to report a loss for its first quarter on Tuesday, but the size of that loss is likely to have a significant impact on how shareholders will vote in the retailer's brewing proxy battle.

Billionaire investor

Ron Burkle is waging a proxy contest against Barnes & Noble

, trying to place himself, and two other directors, onto the company's board.

Burkle's 19% stake in the company makes him the second-largest shareholder behind Barnes & Noble Chairman Leonard Riggio. Burkle has been a proverbial thorn in Barnes & Noble's side since he attempted to get control of the company by upping his ownership stake to 37%. However, that effort triggered the company's poison pill provision, which sets a cap of 20% ownership in order to prevent such a hostile takeover. Burkle took his battle over the poison pill provision to court, but was ruled against.

Riggio is seeking re-election to the board and backing two outside directors. Shareholders will get a chance to vote on Sept. 28, during the company's annual meeting. Awarding any power to Burkle and his Yucaipa firm could drastically change the dynamic of the company.

Either way, investors are hoping to end this war as soon as possible, as the battle could affect the sale of the company. Barnes & Noble announced it was putting itself up for sale last month as it searches for strategic alternatives amid crumbling book sales.

Riggio has said that he would consider making a bid for the book seller along with a group of investors.

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Barnes & Noble already warned investors that it would lose between 85 cents and $1.15 per share in its first quarter, with expenses related to the development of the Nook e-reader weighing on results. Analysts are calling for a smaller loss of 80 cents a share.

The main focus will be on Barnes & Noble's digital strategy and the success of the Nook, as rivals like


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and its Kindle have put pressure on the bookseller.

Amazon said in its second quarter that sales of the Kindle tripled and sales of e-books outpaced that of hardcovers for the first time ever.

Of course, the bigger the loss, the better it is for Burkle's argument. On the other hand, if results beat expectations, shareholders could view this as a turn for the company and Riggio's regime.

-- Reported by Jeanine Poggi in New York.


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