November 27, 1996 1:00 PM ET
Former Software Etc. chairman bails retail chain out of bankruptcy
By Margaret Kane

  A group of investors led by the former owner of Software Etc. has purchased the NeoStar Retail Group Inc. chain for $58.5 million, saving the chain from bankruptcy.

NeoStar was formed in 1994 with the merger of the Babbage's and Software Etc. retail chains and is the largest software-only retailer in the United States. The company filed for bankruptcy in September and announced it would auction off its stores.

Leonard Riggio, who had been the principal owner and chairman of Software Etc. before the merger and currently the chairman of Barnes & Noble Inc., has agreed to buy the Dallas-based chain and will keep the stores open through the coming holidays.

"Going into this process, we had two objectives in mind," said Riggio. "The first was to save the jobs of 3,000 good people; the second was to save a company with a proud and accomplished history."

NeoStar had operated software departments within Barnes & Noble book superstores but ended the agreement and bought the software inventory in those stores from Barnes & Noble in July.

The new company, which will be privately held, will be called Babbage's Etc. and will be based in Dallas. Riggio has purchased about 460 of the software stores in the chain and may purchase some of the remaining 200 stores, subject to negotiations with landlords.

The stores will keep their names and will be restocked in anticipation of the coming holiday season, according to company spokeswoman Mary Lilja.

"The stores are now going to be opened and replenished with stock very rapidly. That's something that could not have happened in bankruptcy," said Lilja.

Riggio said he is optimistic about the stores' prospects.

"I believe that the software business, despite its title-driven sales fluctuations, remains a very viable retail concept, especially in the major American shopping malls," Riggio said. "Shortages in supplies of hot new titles, especially video games, are just one indicator of what we believe will be a promising future."

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