Barnes & Noble eyes Nook spin-off amid sales shortfall

Barnes & Noble eyes Nook spin-off amid sales shortfall

Summary: Barnes & Noble may have no choice but to spin off its Nook unit amid a sales miss.

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Barnes & Noble said it is exploring a spin-off of its Nook e-reader unit so it can continue to scale the business.

In a statement, Barnes & Noble said that it is looking to "unlock" the value of the Nook unit. That's shorthand to acknowledge that the brick and mortar retail unit overshadows Barnes & Noble's digital content business. The move may also mean that Barnes & Noble doesn't have the resources to scale the Nook business.

Indeed, Barnes & Noble cut its sales forecast for fiscal 2012, which ends April 30. The company projected fiscal 2012 revenue of $7 billion and $7.2 billion. Wall Street was expecting $7.33 billion. The company will also lose $1.40 to $1.10 a share for the year. Barnes & Noble said sales of the Nook Simple Touch and investments in the Nook business led to the losses. Wall Street was expecting a loss of 63 cents a share.

Barnes & Noble shares were crushed in early trading.

William Lynch, CEO of Barnes & Noble, said:

In Nook, we’ve established one of the world’s best retail platforms for the sale of digital copyright content. We have a large and growing installed base of millions of satisfied customers buying digital content from us, and we have a NOOK business that’s growing rapidly year-over-year and should be approximately $1.5 billion in comparable sales this fiscal year. Between continued projected growth in the U.S., and the opportunity for Nook internationally in the next 12 months, we expect the business to continue to scale rapidly for the foreseeable future.

There are no guarantees that the Nook unit will be spun off. The company said it is looking into international expansion with partners.

Barnes & Noble also provided some sales data, but actual unit data wasn't given. Barnes & Noble said Nook unit sales were up 70 percent from a year ago. Nook Tablet sales exceeded expectations and Nook Simple Touch lagged. Digital content sales were up 113 percent from a year ago. Nook sales were driven by third party retailers.

Analysts noted that Nook sales were disappointing overall. Barclays Capital analyst Alan Rifkin said:

Nook unit sales increased 70% year over year. Management noted that sales of Nook Tablet beat expectations while sales of Nook Simple Touch missed expectations. This is a concern to us in that, absent the launch period, demand for Nook products appears to be decelerating faster than original expectations. The company I s now forecasting total Nook revenues of $1.5B in 2012, a 17% reduction from its earlier $1.8B forecast, which management reiterated on December 1, 2011. All in, results suggest that not only did holiday sales come in below plan, but the Nook business collectively was also below plan.

For fiscal 2012, Barnes & Noble projected digital content sales of $450 million. By the end of 2012, digital content sales will be at a run rate of $700 million to $750 million.

It remains to be seen how far the Nook franchise can go as an independent entity. For now the unit is overshadowed. Barnes & Noble's nine-week holiday retail sales were up 2.5 percent from a year ago to $1.2 billion. BN.com sales were up 43 percent to $327 million for the same period.

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13 comments
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  • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

    This is the main reason I went with Amazon and Kindle. B&N is on shaky ground and I want to be sure that whatever I buy into will stay around.
    codecrackx15
    • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

      @codecrackx15 - Meh. Root the thing. Then you can install the Kindle software as well...You just have to be aware that OS 1.41 takes those privileges away and take steps to stay on the older build (for now).
      chipbeef
    • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

      @codecrackx15 If shaky ground means sales up 70%-113%, with only 1 product "lagging", then I want me some!
      radleym
  • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

    I have a Nook Color, it is a nice mid-size unit. But I don't use it to buy books from B&N or Amazon for that matter. E-books are still priced ridiculously high for something that has no physical permanence and can't be sold, traded or given away like a real book can be.
    terry flores
    • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

      @terry flores So if you bought an ereader and do not buy books, then what do you use it for ???
      mrlinux
      • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

        @mrlinux Cracking walnuts.

        "E-books are still priced ridiculously high for something that has no physical permanence"

        e-books don't evaporate like morning frost and printing is hardly the greatest cost in producing a book.

        " and can't be sold, traded or given away like a real book can be. "

        You're suggesting most of the value you obtain from books is their ability to be traded or given away? For most of us, we ascribe most of the value to the content.
        jgm@...
      • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

        @mrlinux
        Just like physical books, it isn't necessary to buy them in order to read them.
        I use my Nook touch for reading books that I borrow from my local library - overdrive.com enables that (and you can search there to find libraries that support this).
        I have only bought a couple of books for it.
        jcosham
  • Losing strategy ...

    ... sellling the digital part for a bricks and mortar operation ... in an increasingly digital world.

    Of course AMAZON is a formidable opponent and has probably already out-flanked B&N.
    jacksonjohn
  • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

    Funny... I think e-books are priced pretty good. Especially when you get into new writers and older works. Having gone digital I can't see going back. I think it is just that hurdle people have to overcome. I used to say I would never go digital because I want the physical copy with me. Well, I'm not going to sell even if I have the physical copy and when we moved houses last year I didn't like having to pack up all of my books, cd's, and movies and lug them around so digital just made sense. I own it but it is stored elsewhere and I can always get to it... works for me.
    codecrackx15
  • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

    I like e-books. The problem is pricing is all over the map. The only e-book I ever actually bought was half the price of the paper-bound copy and I was about to leave on a trip so the quick download was very handy. But, most of the time I still buy the physical book as the e-book edition (if available at all) cost as much or even more than the physical book!
    ckantack@...
  • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

    If they do spin off the Nook, buying a Nook or Nook ebook might be a pretty risky bet. If they go under, you might not be able to read the books you've paid for, when your Nook breaks. <br>Amazon can afford to subsidize the Kindle for ever, of course. Both Amazon and BN are losing money on the physical hardware, and maybe on ebooks too, right now.
    jofallon
  • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

    I was always told the bigest cost in printing (other than textbooks which are a whole other racket) was in the printing and distribution/stockage. I agree that the cost of a digital book should be cheaper than the physical. As it stands now, I still prefer a physical book to a digital, but when it comes time to move, my thumb drive with hundreds of digitals is easier to carry then the three bookshelves of technical books. Just saying...
    seymour01
    • RE: Barnes & Noble eyes Nook spin-off amid sales shortfall

      @seymour01 I was never told what constituted the greatest cost for books but always assumed that paper, printing, binding and distribution must contribute to a great deal of the cost [all that labour]. With the ebooks retailing for the same or greater cost than paper the indication is that all of the physical handling has no real value in a book. A premise I just don't buy.
      carlson1@...