Let's call the whole thing off

Barnes & Noble and Microsoft call off their Nook partnership

In the middle of yet another disappointing earnings report Thursday, Barnes & Noble announced that it’s terminating the strategic partnership it formed with Microsoft in 2012. That partnership had combined Barnes & Noble’s Nook and college businesses into a division called Nook Media, into which Microsoft invested $300 million.

According to the company:

Such termination will allow the Company to continue its rationalization of the NOOK Digital business and enhances Barnes & Noble’s operational and strategic flexibility.  The termination also relieves Microsoft of any obligation to continue to fund support and other payments set forth in the commercial agreement between the partners.

Barnes & Noble is also buying out Microsoft’s stake in Nook Media.

When the partnership was formed in 2012, the idea was that [company]Microsoft[/company] would help finance Nook’s international expansion and that Nook apps and content would be loaded onto Windows devices, thus ridding Microsoft of the need to create its own digital content stores. There were even rumors that Microsoft might be interested in buying [company]Barnes & Noble[/company]. Fast forward a couple years: Nook’s international expansion never took off (though it made it to the UK) and Barnes & Noble is struggling with its own tablet strategy.

Now for those bad earnings: Barnes & Noble revenues were down 2.7 percent for the quarter ended November 1, 2014, to $1.7 billion. Nook revenues — including devices, accessories and digital content sales — were down a whopping 41.3 percent for the quarter, to $64 million. Retail sales, including bookstores and BN.com, were $888 million, down 3.6 percent compared to last year — a decrease “primarily attributable to lower sales of Nook products [they are sold in Barnes & Noble stores, as the picture illustrating this post shows], leading to a comparable store sales decline of 1.5 percent for the quarter, as well as store closures.”

Barnes & Noble is holding an investor call at 10 a.m. ET and I will be on the call.

2 Responses to “Barnes & Noble and Microsoft call off their Nook partnership”

  1. Jack Decker

    As long as Nook holds onto their current business model, they will continue to decline and are doomed. As they are a sinking ship and they know it (as everyone else does … anyone here disagree?), maybe it is finally ready for a turnaround specialist. I am one. I think I can turn them around. Anyone have the email address of Nook’s CEO?