Amazon to buy Audible.com for $300 mn

Amazon said it agreed to buy Newark, New Jersey-based Audible for $11.50 per share, a 23% premium over Wednesday’s closing price.

Audible’s catalog includes about 80,000 audio books, radio programs, spoken word selections and other digital content for download.

Amazon and Audible have been partners since 2000, when the companies, with Microsoft Corp., launched an e-book and audio-book store on Amazon.com. Company executives would not comment Thursday on whether the partnership, which adds links to Audible on some Amazon book pages, has been financially successful. The executives did not detail any future plans, and said Audible’s brand and Web sites will continue to operate.

In the last year, Amazon has bulked up its own digital content offerings, which include the Unbox movie download service, an MP3 music store and Kindle, the retailer’s e-book reader and accompanying store, which stocks 90,000 books, newspapers and other content and can play Audible files.

Increasing the amount of digital content Amazon sells will help the company improve margins, the weak spot in Wednesday’s earnings report that spooked Wall Street into an after-hours sell-off of the company’s shares.

In late trading Thursday, Amazon’s shares posted a nearly 4% gain in the wake of the acquisition news, even though analysts said the Audible deal itself isn’t likely to make much of a dent in the margin woes in the near term.

“I don’t think it makes a big difference any time soon, just based on Audible’s size," Global Crown Capital analyst Martin Pyykkonen said in an interview. “This business of digital audio books has grown, certainly, but it hasn’t taken off."

Audible hasn’t seen a profitable quarter for more than a year, despite its role as exclusive provider of audio book and other spoken-word content to Apple Inc.’s iTunes store, which accounted for nearly a third of its revenue in the third quarter of 2007. The buyout won’t affect Audible’s agreement with Apple, which is set to expire in late 2010, according to Audible Chief Executive Donald Katz.

Scott Kessler, an equity analyst with Standard & Poor’s, said Audible may have been attractive to Amazon since it has upgraded its technology infrastructure, and focused more on long-term members instead of shoppers who make only occasional purchases.

For its part, Amazon has offered little insight into how its digital content businesses are faring. In its quarterly report Wednesday, executives did not update investors on its Unbox or MP3 stores, and said only that they were having a hard time making enough of the $399 Kindles to meet demand, the device is currently out of stock on Amazon.com.

The company said late Wednesday that its fourth-quarter profit more than doubled and forecast strong sales growth for the coming year, but a flat operating margin outlook dismayed analysts. Operating margin is an indicator of how much a company makes on each dollar of revenue.

“I have no issue that they’re not doing the right thing," Pyykkonen said. “But in my view, at the end of the day, this is still a bloody competitive retail business."

Amazon said the deal, expected to close by the second quarter, includes Audible’s cash and short-term investments and outstanding stock-based awards.

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