With the objective of optimizing shareholder value, the Company’s Board of Directors has authorized management of the Company to take steps to separate the Barnes & Noble Retail and NOOK Media businesses into two separate public companies. The Company’s objective is to take the steps necessary to complete the separation by the end of the first quarter of next calendar year.
Nook Media currently consists of both the Nook unit and B&N College, the chain of college bookstores which B&N operates under contracts.
It's not clear why both parts are being included in the spun off Nook Media rather than combining the financial viable B&N college with the retail stores, but when CEO Michael Huseby was asked about this on the conference call he hinted at the possibility of just such a reorganization, saying vaguely, "we'll see what happens with the final separation." He went on to explain that "the reason it was done originally was that the college business was headed towards the digital transition and there was strong interest in that business from Microsoft and Pearson."
There's no information yet on how this will affect B&N's plans to launch a Nook-branded Samsung tablet, but I don't expect that to be canceled. Both that deal and the decision to spin off Nook Media took months of preparation, so there's a near certainty that Samsung new about the spin off and partnered with B&N anyway.
Given B&N's current financial report, today's news should really come as no surprise. The retailer reported that revenues were up slightly for the quarter (3.5%) but down for the year (6.7%). The Nook division continues to hemorrhage money, but on the plus side the EBITDA for the retail division, college bookstores, and for the company as a whole were all net positive.
In short, B&N turned a slight profit last year.
But it's not all good news; the Nook division saw slipping sales last quarter, which was to be expected:
The NOOK segment (including digital content, devices and accessories) had revenues of $87 million for the quarter and $506 million for the full year, decreasing 22.3% for the quarter and 35.2% for the year. The inclusion of the 53rd week contributed $9 million in additional sales in fiscal 2014, including $1 million in additional device and accessories sales and $8 million of additional content sales.
Device and accessories sales were $25 million for the quarter and $260 million for the full year, declining 30.1% and 44.8%, respectively, due to lower selling volume and lower average selling prices. Digital content sales were $62 million for the quarter and $246 million for the full year, declining 18.7% and 20.6%, respectively, due primarily to lower device unit sales.
To be honest, the spinoff is a move that many thought would happen as much as two years ago. B&N spun off their ebook division and college bookstores in April 2012, creating the company now known as Nook Media. After taking on Microsoft as an investor, B&N sold a share to Pearson in December 2012.
There were also rumors that this split would happen in 2013 as well. Shortly after B&N's disastrous 2012 holiday season, rumors circulated that Len Riggio wanted to split B&N and take the retail stores as a separate company. The split did not happen at that time, but the rumor did turn out to be true. Riggio wanted to get rid of Nook Media and rescue the retail stores, but later cancelled his plans after Bill Lynch left his position as CEO and Riggio took control of B&N in his position as chairman of the board.
And now it is finally going to happen. This might not be good news for Nook Media (they need a sugar daddy) but for B&N it's great news. They are finally getting the albatross off their neck.