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Three reasons to invest in the Alibaba IPO

Now that Yahoo Inc.’s (NASDAQ:YHOO) freeing up 20 percent of Alibaba’s shares, the Chinese tech giant Alibaba can begin preparing for its IPO. Expect a lot of fireworks as Alibaba’s one of the most exciting tech companies behind the Great Firewall. Here are three reasons to consider investing in the Alibaba IPO:

1) Fingers in a lot of pots. Summing up Alibaba’s internet operations is a bit like trying to describe Microsoft’s software offerings. They both do a hell of a lot. Alibaba’s most promising properties, though, are Alibaba.com (a business-to-business commerce site), Taobao.com (an eBay-like auction and Buy It Now site), eTao.com (a shopping search engine similar to Google Products), a cloud computing division, and Alipay (a PayPal-like payment processor for online transactions in China).

2) Rapid growth. One of the easiest ways to see how fast Alibaba’s growing is to look at Yahoo’s returns. In 2005, Yahoo invested $1 billion for a 40 percent stake in Alibaba. Now, they’re selling half that stake for $7.1 billion. Their full stake is worth some $14 billion, and that means they’ve made 14 times their money in seven short years.

3) The fat part of the curve. For most Westerners, buying and selling products online is second nature. That’s not the case in China. The country’s still in the fat part of the growth curve for e-commerce. Indeed, China’s online shopping industry is expected to grow by 42 percent this year (per Bloomberg). Contrast that with the U.S. where Q1 2012 e-commerce growth stood at 17 percent (per comScore). As China’s largest e-commerce provider, Alibaba stands to rake in a big part of that 42 percent growth.

Already, Alibaba’s pulling in substantial profits. The company generated $2.3 billion in the year ended Sept. 30 ($1 billion more than the previous year) and posted a profit of $268 million.

While we don’t know Alibaba’s IPO date yet, it is expected to come by the end of 2015 at the latest.

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Groupon stock forecasts for 2012: Deal or no deal?

One of the best ways to make money off “hot” tech IPOs is by ignoring them for a year or so. By then, the market will have devoured all those overly-hyped novices who eagerly bought shares during the first week of trading, then sold them when they saw the value of their holdings crumble. That’s what appears to be happening to Groupon Inc. (NASDAQ:GRPN) right now.

And it’s a pattern that gets repeated a lot. I like to use one of the stocks I lost a lot of money on as an example: E-Commerce China Dangdang Inc. (NYSE:DANG) – the so-called “Amazon of China” (even though Amazon operates in China, too). The stock had its IPO on Dec. 10, 2010. It debuted around $32 an ounce. A year later, shares were bloodied. They plunged more than 80 percent to less than $5 a share.

If you would have bought at the start of 2011, though, you’d be quite happy with your returns. Since then, DangDang has shot up nearly 70 percent from $4.40 to $7.45. I think we’re on the verge of something similar happening with Groupon.

Shares in the daily deals site are in the long, painful process of shaking out the weak hands. The question is, when will the real institutional buyers start moving in? I would argue that the tipping point could be coming soon – particularly as a number of investment firms have started moving to upgrade the stock. Here are just a handful of the Groupon stock forecasts for 2012 that we’ve seen over the past month or so:

B. Riley & Co.: Upgrade from sell to neutral. Price target of $10.60 (per Barrons).

Evercore Partners: Upgrade from to equal weight to overweight. Price target of $15 (per Forbes).

FactSet Research: Seven buy ratings and 12 hold ratings. An aggregate price target of $21.44 (per the Wall Street Journal).

Reuters: The average price target of 25 analysts covering Groupon stands at $22.53 (per Seeking Alpha).

Even after an accounting error forced Groupon to revise revenue down $14 million last quarter, it’s hard to ignore the company’s growth profile – and the stock’s subsequently low valuation.

Indeed, Groupon’s valued at “roughly half the multiple that was reportedly offered by Google in which time Groupon tripled its quarterly revenue,” writes Ken Sena, an analyst with Evercore Partners, wrote in a recent research report. It doesn’t make sense then that the company’s more than twice the size it was at the time of offer but somehow worth just half the price.

That’s got me looking for the right time to start accumulating Groupon shares. In the words of hedge fund manager James Altucher, Groupon’s an “easy double” (per Seeking Alpha). I’d like to be there when that double happens.

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3 reasons to invest in the 360Buy.com IPO (Jingdong Mall)

In what’s shaping up to be the largest U.S. Internet IPO since Google, Inc. (NASDAQ:GOOG), the Amazon of China, Jingdong Mall has announced plans to go public. Jingdong publishes 360Buy.com, the 120th most-visited Web site in the world. That’s a far cry from Amazon.com (NASDAQ:AMZN), which is ranked by stats-tracking company Alexa.com as the 15th most-visited Web site in the world. 360Buy’s got momentum on its side, though, and that makes me bullish on the stock. Here are three reasons you should consider investing in 360Buy.com when the company IPOs next year:

1) Growth potential. China’s internet population (at 485 million+) exceeds the entire population of the U.S., and that number is expected to triple to 1.5 billion by 2015. That will make the leading e-commerce site in Asia an international powerhouse. Amazon.com currently gets 6.8 times as much traffic as 360Buy.com. But I wouldn’t be surprised to see 360Buy.com overtake Amazon. Not only will the China’s internet population dwarf that of the United States, but the country’s still in the early stages of e-commerce adoption. Last year, online sales in China rose 77 percent (per FT.com).

2) Not to be confused with Taobao.com. Taobao may get significantly more traffic than 360Buy.com, but it’s important to note that they have different business models. Taobao’s a consumer-to-consumer e-commerce site that’s more akin to eBay than Amazon. While eBay garnered more traffic than Amazon in the early years of the Web, that trend has since reversed itself. Expect the same pattern to unfold in China as consumers turn to the Web not just for hard-to-find items and collectibles but for everything from jackets to diapers and laptops (all of which 360Buy.com offers).

JingDong is, indisputably, the largest business-to-consumer e-commerce site. And it’s purest competition comes in the form of E-Commerce China Dangdang, Inc. (NYSE:DANG). DangDang, which IPO’d to much fanfare in December, has since lost nearly 75 percent of its share price amid a rash of accounting scandals at several Chinese firms.

3) Revenue giant. Revenue at 360Buy.com is expected to hit $4.4 billion in 2011 (per RenaissanceCapital). That’s not much when compared with Amazon’s $40 billion, but it blows away DangDang.com, which will likely do somewhere in the neighborhood of $400 million.

Already, 360Buy.com processes some 300,000 orders per day from 25 million registered users. If the site can maintain its handhold at the top of China’s retail market, it should reward investors nicely in the years to come.

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Is Lyric Jeans Inc. (PINK:LYJN) stock a buy?

Within three hours of the publication of a press release yesterday, shares in penny stock Lyric Jeans Inc. (PINK:LYJN) rocketed up more than 300 percent from $0.006 to $0.0237. That pushed up the company’s market cap nearly $15 million in just 180 minutes. The move came on the announcement that Lyric will soon launch a new jewelry collection under the brand name Lyric Nation at nearly 1,500 Wal-Mart (NYSE:WMT) stores.

Does that make shares in Lyric Jeans a buy? As is the case with most penny stocks – no one really knows for sure. Financial terms of the deal were not disclosed, and the company hasn’t released any financial data since the quarter ended March 31, 2010. Still, here’s what we do know: As of March 31, 2010, Lyric Jeans had sales of $170,317 and expenses of $237,693. Total net loss for the period was $164,410.

Since March 31, 2010, we haven’t gotten any financial data from Lyric Jeans, which makes it difficult to determine the effect of the Wal-Mart deal. If the jewelry line will be sold in 1,500 outlets, each Wal-Mart location will need to buy more than $11,000 in merchandise in order for the deal to be worth more than $17 million in sales. Of course, that’s not a good measurement when trying to determine whether the stock still has room to run as market caps almost always outstrip annual sales. Investors, after all, buy shares in a company to capitalize on future growth.

The question now is, how sustainable is Lyric’s growth? Is the Wal-Mart deal a one-off or could it lead to more deals moving forward? There are more than 2,500 Wal-Mart locations in the U.S. Should the retailer see encouraging sales of the Lyric Nation jewelry line, more orders will almost certainly flow in.

Lyric also claims its products have long lined the shelves at other well-known retailers including Bloomingdale’s, Nordstrom and Target, and in March the company announced it was unveiling a LYRIX brand jewelry line targeted at girls ages 13 to 17 at nearly 800 Claire’s Stores, Inc. Should the jewelry line do well, Claire’s has more than 3,000 locations worldwide Lyric might be able to tap. Both deals are signs the company’s moving in the right direction. And it just might breath some longer-term life into a stock many investors had written off.

Until we start getting actual financial reports from Lyric, though, the announcements probably won’t lead to a long-term uptrend in shares. They might, however, convince Lyric to start publishing regular financial results, and – pending the numbers in those reports – that might turn Lyric into a long-term buy.

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How can American Apparel avoid bankruptcy? (AMEX:APP)

Icebergs are looming for the cotton T-shirt shipwreck otherwise known as American Apparel Inc. (AMEX:APP). The company warned on Friday that it may need to file voluntary Chapter 11 bankruptcy. Things look so bad, in fact, American Apparel may be forced to liquidate its assets if it can’t find bankruptcy financing or put together a Hail Mary reorganization plan.

It all comes down to cash, of course, and American Apparel has gotten very good at losing it. During the company’s Q4 earnings report out Friday, APP reported a loss of $19.3 million ($0.27 per share). A year ago, they actually made $3 million during the same quarter.

Revenues have been plummeting alongside profits for the retailer. They were down 9 percent from $158.1 million to $144 million for the three months ended Dec. 31, according to ABC.

Just when things look like they can’t get any worse, American Apparel is also getting squeezed by surging cotton prices. Costs for the key ingredient in APP’s soft tees has doubled in six months. The vultures are circling, and there don’t appear to be many bullets left in the corporate gun.

How can American Apparel save itself from bankruptcy?

It might be too late. Shares in American Apparel are down 45 percent since the start of the year. Over the past 12 months, shares are down more than 70 percent, and they now trade at a mere $0.90. If there is a pool of capital out there looking for a home, you can bet it won’t land in American Apparel’s hands without a lot of cotton strings attached.

Here are three key things American Apparel could do to move toward profitability:

1) Hog-tie the CEO. CEO Dov Charney runs American Apparel like he’s at the helm of a tech company in 1999. He’s most definitely not. He’s in one of the most cut-throat retail markets known to man: t-shirts. Negative press from a string of female employees alleging Charney of inappropriate sexual conduct just doesn’t engender confidence with Wall Street bankers – and those bankers are the ones with checkbooks. If Charney’s out of the picture, the company looks a little less ugly.

2) Trim the fat. When an individual’s having trouble paying off their mortgage, they stop buying those triple-pump caramel macchiatos at Starbucks (in theory, anyway). American Apparel is unable or unwilling to do the same. The company’s spending madly on new stores, administration and marketing even as revenues are sagging. “Selling and admin costs were all up (last year),” writes Jim Edwards at BNET. “Even advertising costs — at $18 million — returned to the level they had been in 2008, up from $11 million in 2009. Ask yourself: Who increases their marketing costs when they know their revenues are declining?”

3) Close the ugly ducklings. The time for hard decisions has come and gone. Now, the company needs to make the gut-wrenching decisions: mass layoffs, mass closings of unprofitable retail outlets and wage freezes would be a good start. Last year, American Apparel closed 14 stores and opened six new ones. And the CEO seems to think opening more new stores is the answer. That’s the last thing they need to do. If an outlet’s sales are suffering, that outlet needs shuttered and every effort from here on out should focus on making the profitable stores even more profitable.

The only saving grace in all this is I don’t feel like the public’s soured on American Apparel’s brand. The company makes the most comfortable t-shirts known to man, and their brand name has the power to bestow cachet on any run of the mill mall. If American Apparel does go bankrupt, I expect a lot of holding companies might be game for gobbling up the brand, re-working it under new, untainted management and – who knows – signing paperwork for a brand new IPO in 2015.

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Amazon stock analysis: 5 reasons to buy and hold in 2011 (AMZN)

Since the start of 2011, shares in Amazon.com, Inc. (NASDAQ:AMZN) have fallen nearly 3 percent, but the company’s prospects still look strong thanks to a growing product pipeline. Here are five reasons to consider adding Amazon stock to your portfolio today:

1) Welcome to the Cloud Drive. Amazon has a history of forging into new tech niches long before they’re popular. The best example of this is Amazon Web Services (AWS): Amazon’s paid cloud computing service wherein other companies pay Amazon for server space and computing infrastructure. AWS has attracted some impressive clients since it launched in 2006 including Nasdaq (NASDAQ:NDAQ) and The New York Times Co. (NYSE:NYT). Now, Amazon’s looking to take its cloud services to the common man. This week the company launched Amazon Cloud Drive. With Cloud Drive, anyone who wants it can get 5 GB of online storage for free. They can then use that server space to store music, videos and files online and access them from Web-enabled devices anywhere. If users end up needing more than 5 GB of storage, they’ll have to open up their wallets to Amazon.

2) It’s “Appstore” not “App Store”. Much to the chagrin of Google Inc. (NASDAQ:GOOG), Amazon launched its Android Appstore last week. Now, consumers can un-tether themselves from Google’s official Android Market, and download free and paid apps directly from an online retailer they’re already familiar with. Amazon stands to get a 30 percent cut of every paid app they sell. For the record, Google’s not the only one upset about the launch of Amazon’s Appstore. Apple Inc. (NASDAQ:AAPL), which has the name “App Store” trademarked, sued Amazon over its use of the word “Appstore.” Apparently, there are times when branding trumps the threat of litigation.

3) One nation under Kindle. The success of Amazon’s e-reader, the Kindle, has been remarkable. Amazon hasn’t released exact sales figures on the device, but it already sells more e-books than it does traditional paperbacks. “Since the start of the year, Amazon has sold 115 Kindle books for every 100 paperbacks,” PCWorld reported in January. The good times are rolling. In February, AT&T Inc. (NYSE:ATT) announced it would start carrying Kindles, and now there’s speculation that a new Kindle in the works will run on Google’s open-source Android operating system. That would have the power to transform the Kindle from an e-reader into a full-blown tablet computer that just might compete with Apple’s iPad.

4) For your fulfillment. Amazon’s shares took a tumble after the company reported weak revenue growth in its Q4 earnings report on Jan. 28. The numbers weren’t all that surprising to analysts, though, as the quarter’s traditionally weak for the online retailer, and Amazon’s in the process of expanding its fulfillment centers. “1Q margins are likely to disappoint but reflect the higher spend on fulfillment centers/IT needed to extend AMZN’s above-industry growth well into the future,” Youssef H. Squali, an analyst at Jefferies & Co., wrote in a note to clients. “We recommend purchase of AMZN especially on any dip.” Bigger fulfillment centers means better margins moving ahead, and – after the costs are absorbed – that should boost the company’s bottom line.

5) Growth in the People’s Republic. Amazon’s quietly been building its brand in China since acquiring the Chinese online bookseller Joyo.com in 2004. In 2007, Amazon changed the site’s name to Amazon.cn, and it’s now the 74th most-visited site in China, according to Alexa.com. That puts it just one slot behind one of its main competitors: the online bookseller and retailer E-Commerce China Dangdang Inc. (NYSE:DANG), which recently IPO’d in the U.S. and operates Dangdang.com. Even if Amazon doesn’t ultimately overtake DangDang.com, there’s more than enough e-commerce growth in China to grow Amazon’s coffers for years to come.

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3 reasons why Amazon’s Android Appstore makes the stock a buy (AMZN)

Already stocked with 3,800 apps, Amazon’s (NASDAQ:AMZN) launch of the Android Appstore is planting the seeds for a lot of new revenue at the online retailer. Here are three reasons why the move will likely be successful and – in the process – give Amazon’s stock a jolt:

1) Developers do the work, Amazon reaps the profits. Amazon will get at least a 30 percent cut of the cost of every paid app they sell. That’s part of what’s driving record profits at Apple Inc. (NASDAQ:AAPL). Developers make the apps, and Apple provides the ecommerce platform where users go to buy those apps. Apple, of course, has to administer and approve hundreds of thousands of apps, but once they’re online, sales – for the most part – take care of themselves.

2) Brilliant recommendations. One of my favorite ways to discover new musicians is by going to Amazon and typing in an artist I like. Amazon’s recommendation engine then shows me similar albums that other customers bought, and the site makes it easy to listen to songs by those artists before I click the buy button. Those built-in recommendations will be a key part of Amazon’s Android Appstore, too. By showing you real-world reviews, and apps that other customers downloaded, potential buyers could end up buying more apps than they otherwise would have. Amazon’s recommendation system has more than 15 years of trial-and-error testing behind it. That could give it a big leg up over Google Inc.’s (NASDAQ:GOOG) own Android Marketplace.

3) Positioning for the future. Despite Amazon’s silence on the issue, rumors are swirling that the company could be working on a Kindle that runs on the Android operating system. That would make the device good for more than just reading books: it would transform it into a tablet computer. The Amazon Appstore would integrate seamlessly with the device, no doubt, and Amazon could then use the Kindle as a distribution point for its online movie sales and movie rental services.

Every time I start to worry that Amazon’s losing relevancy with shoppers, the company does something that makes me feel daft. We should have all seen the Appstore coming. Now that it’s here, though, I’m convinced it’s just the beginning of bigger and better things.

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Groupon CEO is a weird guy with good advice

Deal-of-the-day web site Groupon.com vaulted from obscurity to multi-billion dollar company in two years. Indeed, it’s predicted to “make $1 billion in sales faster than any other business, ever,” according to Forbes. Now, we’ve gotten a peek behind the curtain with the so-called “Frodo Memo” that ended up in the hands of the Wall Street Journal.

The memo, which was sent late last month, shows just how unusual Groupon’s CEO Andrew Mason is. In it, the CEO holds back little of his enthusiasm, pride and ambition, and he offers a few nuggets of wisdom that entrepreneurs everywhere should heed:

1) You’re your own worst enemy. Mason argues sites like MySpace, Friendster, AOL and Yahoo! didn’t lose to competitors, but rather lost the battle on their own. “MySpace essentially handed Facebook the keys to the castle by devolving into a service that wasn’t delighting its customers,” he writes. How did they do that? By digging a rut and being unable or unwilling to innovate.

2) Enjoy the ride you’re on. When you’re overwhelmed with the day-to-day operations of your business or job, you can lose sight of what you’ve accomplished so far. It’s OK to revel in your success. Use it to feed your desire to make your business even better. “The earth is super old – thousands of years, some say – and no one has ever done anything like this,” Mason writes. “You should all exude a borderline-annoying sense of pride in what you’ve achieved. You should be wearing a big, toothy grin – the kind that makes people want to punch you in the face.” If you take pride in your business, you’ll make the decisions that will lead your customers back to your trough.

3) Give your customers a reason to pick you. Mason’s well aware that just about every programmer and multi-national tech company in the world is working on a way to poach clients from Groupon. “They are coming HARD,” he writes. “If you feel a little like Frodo climbing Mount Doom, you can’t be blamed.” But Mason argues that Groupon can stay ahead of its competitors by surprising the company’s clients. “Life is too short to be part of another cookie cutter company,” he writes. “Surprise reminds people that they are alive, that they haven’t seen it all.”

Take heed. Mason graduated from Northwestern University in 2003 with a degree in music. That makes him, what, 31? A thirty-something with a music degree has built a rapidly-growing Internet marketing juggernaut the likes of which the world has never seen. He’s proof that we can all accomplish great things by ignoring the naysayers and forging ahead … just like little Frodo on Mount Doom.

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How to invest in ISIS

Online mobile shopping could command as much as 12 percent of total global e-commerce by 2015, according to a report ABI Research. It’s a sign of just how comfortable consumers are getting using their phones to make purchases. The next logical step is to use mobile phones as payment mechanisms in stores, restaurants and small businesses – doing away with plastic once and for all.

The transition from credit cards to phone swiping could completely change the way with interact with businesses. No longer would we use a simple plastic card with a magnetic strip on the back, we’d be paying with a computer that could track purchases, offer discounts, tick off rewards points and offer incentives to come back.

ISIS is leading the charge into the pay-by-phone marketplace through a partnership with AT&T, Inc. (NYSE:ATT), Verizon Communications Inc. (NYSE:VZ) and T-Mobile USA. The national mobile commerce network will use near-field communication (NFC) technology to allow phones to wirelessly communicate with checkout terminals.

The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies. Here are some tickers to consider if you’d like to invest in ISIS and NFC:

Discover Financial Services (NYSE:DFS). Payments made through the ISIS network will be processed by Discover. The Discover network is currently accepted at more than seven million merchant locations nationwide. DFS will, no doubt, get a percentage of all the sales the company processes.

Barclays, PLC (NYSE:BCS) Barclaycard US is expected to be the first issuer on the ISIS network thanks to the company’s experience processing NFC payments using standard credit cards. Eventually the ISIS network will be expanded to other banks.

While it’s unclear exactly how AT&T, Verizon and T-Mobile will profit off ISIS, I suspect they’ll also receive a cut of the payments processed over the network. They’ll likely ramp up efforts to partner with retailers to offer expanded services, too – things like rewards points, customer tracking and coupons.

It’s important to remember, though, that ISIS is just one of the many networks and companies working to dominate the pay-by-phone market. Visa, Inc. (NYSE:V), MasterCard, Inc. (NYSE:MA), eBay Inc.’s PayPal (NASDAQ:EBAY), Google Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are just a few of the heavyweights with skin in the game. It’ll be interesting to see which companies come out on top.

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After Borders’ demise is Barnes and Noble stock a buy? (BKS)

With the bankruptcy of Borders Group, Inc. (NYSE:BGP), Barnes & Noble, Inc. (NYSE:BKS) stands alone as the clear market leader in the brick-and-mortar bookstore business. That’s not without good reason. Barnes and Noble has simply proven nimbler in a rapidly-changing market.

When Amazon.com, Inc. (NASDAQ:AMZN) released its Kindle e-reader in 2007, the device was a phenomenal success selling out in five and a half hours. Barnes and Noble began work on their answer immediately: an e-reader called the Nook that runs on Google’s Android operating system. The Nook hit shelves almost two years to the day after the release of the Kindle.

Still, it’s not clear that the Nook and the demise of a major competitor is enough to keep Barnes and Noble afloat in an industry with declining sales. Here are some key facts to consider when thinking about buying Barnes and Noble shares:

Market share: The Nook currently controls 22 percent of the e-reader market, according to Goldman Sachs Group, Inc. (NYSE:GS). That’s a distant second to the Kindle’s 67 percent market share.

No more dividend: Shares in Barnes and Noble tumbled more than 14 percent yesterday on news that the company is suspending its annual $1 dividend. BKS will also suspend forecasting profits as it negotiates the fallout from Borders’ bankruptcy. The good news? Withholding that dividend will give the company an extra $60 million to use for investments or changes in strategy.

Sales: Barnes and Noble has underperformed analyst expectations for the past four quarters. Investments in the company’s digital platform led to a loss of $14.5 million in the nine months through January, according to Bloomberg.

For sale sign in the parking lot: Barnes & Noble put itself up for sale in August. When the news leaked, shares shot up some 25 percent, but a suitor was never found. “We assign a 30 percent probability to a transaction, recognizing potential challenges in financing a transaction and the potential lack of other bidders,” Goldman Sachs analyst Matthew Fassler told MarketWatch at the time. “We don’t see compelling value in the business.”

Don’t mess with my Nook: At the moment, digital book sales don’t add much to Barnes and Nobles’ bottom line. The company predicts it’ll generate $400 million in revenue this fiscal year from the Nook, and that will amount to 5.6 percent of the company’s $7.1 billion in annual sales expected by analysts, Bloomberg reports. Still, the growth in e-book sales has been phenomenal, shooting up more than 100 percent from $169.5 million to $441.3 million last year. The Nook also has an advantages over the Kindle with its color display and the ability to market its products in the store’s more than 700 locations and college campus bookstores.

The future: It’s clear that Barnes and Nobles’ future remains tied to the company’s success in the digital space. If the Nook can steal more market share from Amazon’s Kindle, it might be enough to keep the chain afloat. Whether Barnes and Noble can do that while still maintaining healthy relationships with publishers, writers and distribution platforms like Apple’s iTunes remains to be seen, though. Not to mention, the company will soon be competing with a leaner and meaner Borders Books. Predicting the outcome is a bit like trying to guess which character dies in a Harry Potter novel, but I do know that the road ahead is going to be bumpy and steep.

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