Barnes & Noble To Spin Off Nook By 2015

By Christine Kern, contributing writer

Barnes & Noble has announced its board of directors had approved a proposal to spin off its Nook e-reader business into a publicly traded company.

Both its print and e-book divisions have been struggling financially for several quarters; it has become conventional wisdom that one way B&N could stop floundering might be to spin off its Nook product line or sell it to a private company.

The spinoff will take effect by the end of Barnes & Noble's first fiscal quarter of 2015.

The company reported that fourth-quarter results saw a drop in comparable sales at Barnes & Noble stores, in addition to continuing losses with the Nook. Revenue in the Nook unit sagged 22 percent to $87 million while digital content sales dropped 19 percent to $62 million.

Barnes & Noble posted a fourth-quarter net loss of $36.7 million, or 72 cents a share, compared with a loss of $114.8 million, or $2.04, a year earlier. Revenue rose 3.5% to $1.32 billion, helped by the company's college business.  

Analysts estimated a loss of 59 cents a share and revenue of $1.19 billion.

“We believe we are now in a better position to begin in earnest those steps necessary to accomplish a separation of Nook Media and Barnes & Noble Retail,” Michael P. Huseby, the company’s chief executive, said in a statement. “We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately.”

For Barnes & Noble, the decision must have come down to the hard reasoning that its assets — its retail, textbook and Nook divisions — were worth more separately than united in one entity, Barry Randall, a technology portfolio manager on Covestor, told the E-Commerce Times.

"In theory, it will make it easier to analyze each segment, and it will also make it easier for a suitor to purchase one of the segments without having to disentangle the latter from the other businesses," he said.

However, as the Nook goes to market, the segment's middling valuation soon will become clear if it hasn't already, Randall continued.

The Nook was launched in an attempt to compete with Amazon’s popular Kindle electronic reading device, but the company has continued to struggle to boost electronic book sales along with its tablets and e-readers, despite joining with Microsoft and Pearson publishers to help sales.

The company's shares on Wall Street rose 5.6% to $21.71 shortly after the spinoff announcement.