Barnes & Noble splits in two; Nook becomes stand-alone

The Nook has struggled to gain a foothold, and now it's do or die time for the tablet division

Barnes & Noble has struggled mightily with its Nook tablet division over the past few years. In fact, the devices have performed so badly against competition, in the form of the Kindle and the iPad, that it  took down one of the company's CEOs in the process.

Now, finally, the company seems ready to get out of the tablet business for good.

While releasing its fourth quarter 2014 financial results, the company also announced Wednesday that it will be splitting itself into two separate companies: one for Barnes & Noble Retail and the other for Nook Media businesses. Barnes & Noble said it would like the separation to be complete by the end of the next quarter.

“We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately,” Michael P. Huseby, CEO of Barnes & Noble, said in a statement. “We fully expect that our Retail and NOOK Media businesses will continue to have long-term, successful business relationships with each other after separation.”

In January, when Huseby was announced as the company's new CEO, it seemed to be a signal that Barnes & Noble would actually be doubling down on the Nook business. Following the resignation of William Lynch as CEO back in July of last year, Huseby had been named CEO of Nook Media, while also being promoted to the Barnes & Noble presidency.

Given Huseby's experience with the Nook division, it looked like he might be the person to finally turn it around. But now it looks more like the company is ready to cut its loses. Ok, yeah, Barnes & Noble is talking a good game about improving the performance of the Nook business, and perhaps that is true, but to what end?

To my mind, there seems to be only two outcomes for that side of the business: either it continues to do poorly, which would allow the company to simply let it die. Or it actually does start to do better, so Barnes & Noble can then sell it off.

Either way, the company had to do something, because the Nook division is sinking fast.

In its fourth quarter, Barnes and Noble reported that the Nook segment, which includes digital content, devices and accessories, made only $87 million in the quarter, a year-to-year loss of 22.3%. It was even worse for the full year: the division made $506 million, down 35.2% from 2013.

The Retail segment, which includes the Barnes & Noble Bookstores and BN.com businesses, also saw loses, though nowhere near as bad. It took in revenue of $956 million for the quarter, a decrease of 0.8% from the same quarter the year before, and $4.3 billion for the full year, a decrease of 6% from 2013.

In all, Barnes and Noble reported fourth quarter revenue of $1.3 billion, a 3.5% increase year-to-year. For the full year, however, revenue decreased 6.7% year-to-year to $6.4 billion.

As you can see the company is losing money on both sides of its business, but cutting out the losses from the Nook division will definitely help make the company look stronger overall. 

(Image source: kushalashok.wordpress.com)