B&N to buy out Microsoft’s interest in Nook Media for $120 million
Barnes & Noble released their quarterly statement . Mixed in with the usual dry statistics was a bombshell: B&N is buying out Microsoft’s share of Nook Media. After almost two years of co-owning a moneypit, MS is selling off their interest and walking away.
In financial news, B&N reported that total revenues dropped 2.7%, to $1.7 billion, as compared to the same quarter last year. Second quarter EBITDA also decreased slightly, from $76 million a year ago to $68 million. The press release mentions that retail was down, college bookstore sales were up, and of course Nook revenues were down.
B&N’s nook segment had sales of $64 million for the quarter, down 41% from a year ago. Hardware sales decreased 63% to $18.7 million for the quarter, a new low for Nook Media, Digital content sales totaled $45.2 million for the quarter, a decline of 21.2% from a year ago, largely due to customers fleeing a sinking ship.
And in the important news, Microsoft and B&N have decided to go their separate ways. They’ve filed divorce papers today with the SEC stating that the two companies have terminated their commercial agreement.
Microsoft paid $300 million for a one sixth interest in Nook Media when it was spun out of B&N in early 2012, and they also committed to paying $300 million in operating expenses should Nook Media hit certain goals (expanding internationally, for example). According to the form 8-K, B&N will buy out MS for $63 million in cash and 2.7 million shares of B&N stock.
B&N is trading for around $20 right now, so the total purchase price will be around $120 million (plus or minus $5 million). In other words, Microsoft’s interest in Nook Media lost about 60% of its value in the time since Nook Media launched.
While that’s bad news for MS, it’s great news for Nook Media. While the company is losing out on a source of revenue, it’s also free from the constraints MS imposed. For example, the international Nook store was effectively confined to Windows 8 (the Nook iOS and Android apps were limited to only US and UK). Now there is a chance that B&N will expand the platform to also let its international customers use the other Nook apps.
Nook Media is still going to be spun out into a separate publicly traded company, but the launch day has been pushed back from spring 2015 to August 2015.