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Should Barnes & Noble spin-off the Nook?
With its promising but costly e-reader business dragging down its bottom line, the bookstore chain is considering a separation
 
Barnes & Noble has captured one-quarter of the e-reader market with its Nook, but associated costs have left the company in the red.
Barnes & Noble has captured one-quarter of the e-reader market with its Nook, but associated costs have left the company in the red.
Thomas Cordy/ZUMA Press/Corbis

On Thursday, Barnes & Noble said that its losses for this fiscal year would be twice as much as forecast. The largest bookstore chain in the country has managed to adapt to changing times and technologies better than the late Borders, but that's come at a price. With its Nook e-reader, it's estimated that Barnes & Noble has more than a quarter of the digital-books market, but all those sales have required costly development, manufacturing, and promotions and pushed the company into the red. Now, the company says it's considering spinning off its Nook e-reader business. "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," Barnes & Noble CEO William Lynch said in a statement. Would splitting up be a good thing for B&N and the Nook?

No, it'd be a bad move: "The Nook is undeniably Barnes & Noble's star product," and I'm not sure spinning off its e-reader biz is a good idea, says Martha C. White at MSNBC. Analysts note that the Nook has been a success, in part, because Barnes & Noble has more than 700 brick-and-mortar stores where customers can learn about the Nook, try it out, and buy it. That's a key advantage over Amazon and the Kindle. Barnes & Noble also has important publishing deals and relationships that helped the Nook succeed, and those could be lost in a spinoff. It seems like it'd be better for both entities to stay together.
"Barnes & Noble could struggle without the Nook"

Maybe yes, maybe no: There are pros and cons to spinning-off the Nook, says John P. Mello at PC World. Selling off the Nook entirely or just running it as a separate business would likely attract investors in both companies and give Barnes & Noble's stock a boost. On the flip side, the in-store experience has been important to the Nook's success, and being part of the Barnes & Noble brand would be key to its international expansion. And, earlier this week, B&N said "it's recasting itself as a technology company," but now it's considering selling off the "golden goose of its technology." That doesn't make much sense.
"Barnes & Noble: Pros, cons of selling off Nook"

Yes, it'd be good for both entities: "Being released from B&N is the best thing for the Nook itself" and for B&N, says Dan Mitchell at CNN Money. While the Nook is selling well, Barnes & Noble investors don't want to let the company bleed money for years on e-reader development. Meanwhile, independence could help the Nook "unlock" its value and attract less risk-adverse investors that "could give the Nook not only the money it needs, but also the focus that B&N can't give it." On its own, the Nook could be "the future of the book business," but tied to B&N, it's just "a giant sinkhole of losses."
"Barnes & Noble look better apart"

 

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