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Thursday, January 31, 2013

Barnes & Noble Should Spin Off the Nook Before It Sucks the Company Dry

The Fool Brothers, David and Tom
Now, courtesy of a couple guys in the financial world I have followed for years, here's a potential solution to the Barnes & Noble problem that makes perfect sense.  The following is a small part of an article on the Motley Fool website of January 29:
Across the company's close to 700 stores, comparable sales fell 3% last quarter. That's an indication that some, but not all, of the stores are failing to live up to their expectations. Adding to that picture, comparable sales actually increased about 2% if you strip out the underperformance of the Nook from the quarter . Once the weaker stores are closed, the company should be able to generate more income through the higher-performing locations. Now the caveat: Unless the company gets its act together, the extra income from retail is just going to get swallowed by the Nook division.

[...]
The Nook needs to be spun off, posthaste. Right now, Barnes & Noble is running two companies. One of them sells books and makes money. One of them makes e-readers and loses money. The Nook is an excellent product, and it probably has a bright future, but right now it's just sucking up resources.
I, like most casual observers, have been guilty of assuming that the Nook might actually save Barnes & Noble from extinction.  It appears that Barnes & Noble strategic planners believe (or wishfully hope) that the same thing will happen.  But maybe, as the Fools point out in this article, it's exactly the other way around and the Nook needs to be spun off as a whole separate company - possibly giving both businesses a better chance of survival.

(The Motley Fools are brothers David and Tom Gardner.)
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