Barnes & Noble: Ramping production of the nook isn't cheap

Barnes & Noble: Ramping production of the nook isn't cheap

Summary: Barnes & Noble will invest heavily on boosting production of its nook e-reader and that move will hurt future earnings.

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TOPICS: Banking
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Barnes & Noble said Tuesday that it will invest heavily on boosting production of its nook e-reader and that move will hurt future earnings.

Barnes & Noble cut its outlook for the fiscal year ending April 30, 2010. The bookseller said that retail traffic "will remain challenged during the holiday season." But we knew that already. The big reason for Barnes & Noble's new outlook is investment in the nook, which is sold out.

In a statement, Barnes & Noble said:

The company is ramping up its production schedule, incurring higher production costs than originally anticipated and increasing future investments related to its digital strategy, including additional people, technology and in-store marketing support.

How much higher are these costs? Enough to result in a serious earnings hair cut for fiscal 2010. The company now expects fiscal year earnings to be 33 cents a share to 63 cents a share, down from a previous forecast of 59 cents a share to 89 cents a share.

Also: All nook posts.

Topic: Banking

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3 comments
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  • Sounds like they're betting the farm...

    While the nook is interesting, I don't think it's going to blow everyone out of the water. Pumping so much into the nook is a brave gesture on their part. And they say "brave" is one tick away from "foolish."
    BillDem
    • but they sold out of what they had.

      And they do make some money on every nook sold, but the idea is to get you to buy the ebooks from them.

      The costs of storage, transportation, and staff for the ebooks is next to nothing, but they are selling the books at close to the same price as the hard copy. The results is a huge increase in profit margins.

      Me? Until they allow me to legally resell the
      e-books so I can lend/trade them I have zero
      interest in getting the device. Even then, I
      weigh the risks of losing a $200 device with
      all my licenses tied to it vs losing a $1 book
      at a time. The $1 being the price I pay for a
      used copy, and then, only because its more
      convenient than going to the library and getting it for free.


      richard233
  • You've got to spend money to make money

    I don't get it. They're selling out quicker than they
    can build them and this is bad for profits? I know that
    there is a lag time on making a profit when you hire new
    people and invest in new equipment but it seems to me
    that they are shedding crocodile tears. Then again if it
    turns out that the deluge of orders is just due to
    Christmas and they spend a lot of money setting up new
    lines it very well might hurt their profits.
    terryc2