Barnes & Noble Considers Losing the Nook
Barnes & Noble saw strong sales of its Nook eReader over the nine-week holiday shopping period. Sales for the Nook were so strong that the bookseller may sell off the entire Nook division.
Sure, that sounds a bit big-business-backward at first, but it makes perfect sense to Barnes & Noble, which announced that it is considering spinning off the costly Nook unit of its business in order to give it room to thrive in an increasingly competitive market.
“We see substantial value in what we’ve built with our NOOK business in only two years and we believe it’s the right time to investigate our options to unlock that value,” said Barnes & Noble CEO William Lynch in a statement.
While Nook holiday sales increased this year by 43 percent, the Nook still sits firmly in the shadow of Amazon’s Kindle—the clear leader in eReader sales. In order to continue to compete with the Kindle, Barnes & Noble will need to invest heavily in new software, hardware and advertisements—a venture that may prove to be unfavorable with investors.
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“The Nook business has been a growth business for Barnes & Noble,” said Forrester Research Senior Analyst Sarah Rotman Epps. “But there’s no doubt that continued growth and international expansion will take sustained investment that Barnes & Noble shareholders will not have the patience for.”
According to the New York Times, another analyst estimates that Barnes & Noble spends $200 million to $250 million a year on the Nook.
So who will scoop up the Nook business if and when Barnes & Noble sets it free? Analysts have thrown out a variety of names, from Google to Liberty Media. Maxim Group senior media analyst John Tinker thinks the Nook would be served well by a traditional retailer.
“Companies such as Wal-Mart no longer have DVDs as a loss leader to create foot traffic,” Tinker said. “[They] are losing on the customer loyalty front to Amazon.”
At any rate, we’ll have to sit tight and wait to see what Barnes & Noble actually decides to do with Nook. The company is reviewing its options and said that it will not comment further on the matter until a final decision is made.
