Blog Post

Barnes & Noble plans to spin off ailing Nook as a separate public company

Stay on Top of Emerging Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Just when you think that Nook can’t perform any worse, it does. Now Barnes & Noble is taking steps to remedy the problem: It company wants to split its retail and Nook businesses up as two separate, publicly traded companies by the first quarter of 2015, it announced in its fiscal year-end earnings report Wednesday morning. The bookseller also reported another quarter of weak earnings, with Nook revenues down 35.2 percent for the full year ended May 3, 2014.

Barnes & Noble(s BKS) shares were up around 9 percent Wednesday morning.

“We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately,” Michael P. Huseby, B&N CEO, said in a statement. “We fully expect that our retail and Nook Media businesses will continue to have long-term, successful business relationships with each other after separation.”

In addition to the digital business, Barnes & Noble’s Nook Media division also includes Barnes & Noble College stores. Nook Media was created as a Barnes & Noble subsidiary in 2012 with a $300 million strategic investment from Microsoft.

Barnes & Noble’s board authorized the company to “take steps” to separate the business, but Barnes & Noble noted that “there can be no assurances regarding the ultimate timing of the proposed separation or that such separation will be completed.”

The company’s revenues were $1.3 billion for the quarter, up 3.5 percent over this time last year, and $6.4 billion for the full year, down 6.7 percent.

The Nook business, which includes devices, accessories and digital content sales, once again performed particularly badly. Its revenues were $87 million for the quarter, down 22.3 percent over this time last year, and $506 million for the year, down 35.2 percent. Barnes & Noble specifically broke out device and accessories sales, which it doesn’t always do: They were $25 million for the quarter and $260 million for the year, down 30.1 percent and 44.8 percent, respectively. And digital content sales were $62 million for the quarter and $246 million for the year, declines of 18.7 percent and 20.6 percent respectively. Barnes & Noble attributed those losses to “lower device unit sales.”

Retail sales were roughly flat for the quarter, increasing by 0.8 percent to $956 million, and $4.3 billion for the full year, down 6 percent.

Barnes & Noble has wanted to offload Nook Media for awhile but couldn’t find a buyer. It first floated the idea of splitting Nook off as a completely separate company in 2012. We then heard a few rumors that Microsoft(s MSFT) might buy Nook Media, since after all it already had an investment in it, but that never happened. After then-CEO William Lynch departed in 2013, the company said it was still considering separating the businesses but that the time wasn’t right (read between the lines: No buyer had come forward). And B&N chairman and founder Leonard Riggio briefly considered a plan to buy up the company’s retail stores — which analysts see as the strongest part of the company — and take them private, but decided not to do so.

Barnes & Noble is no longer making tablets in-house; instead, it’s partnering with third parties on hardware. Its first such partnership is with Samsung, with a co-branded Galaxy Tab expected this fall. In an investor call following the earnings report, retail CEO Mitch Klipper said the Samsung tablets “will drive traffic to [Barnes & Noble] stores.”

This story was updated several times on Wednesday.

2 Responses to “Barnes & Noble plans to spin off ailing Nook as a separate public company”

  1. Jack Decker

    It is about time! Seriously, this is like tying a sailing ship to a steam boat, trying to have both operate as the driving force, and expecting great results. Wind changes and the sailing ship goes this way and the steam boat doesn’t. Disaster.

    Boy, I wish I could buy Nook. It has HUGE potential in the right hands. The publishing industry is about to die and be reborn as the e-publishing industry. Nook could be at the top if it just accepted the death of the old business model and introduced a new business model that fits this day and age.

  2. By Separating and Streamlining the business ; prioritising or otherwise subsidising the each other wings of business need in-depth evaluation ! Must offload extra dead loads from both the framework ! Must find new and vibrant leadership ; needless to say squatters in the top echelon be vacated !