Is This the End for Barnes & Noble’s Nook?
The Nook is in some serious trouble. Once at the forefront of eReader technology, the tablet-sized device is dragging down Barnes & Noble’s (NYSE:BKS) business. The company’s solution is to separate the Nook division into its own company to prevent the troubled tablet line from causing further damage to the company.
The announcement came out as a part of Barnes & Noble’s fourth-quarter 2014 report. The company’s board voted to separate the Nook Division into its own business. The split will be finalized next year said the company in a statement from Barnes & Noble CEO Michael P. Huseby. “Our fiscal 2014 results and solid financial position at year-end reflect the positive impact of those actions. We believe we are now in a better position to begin in earnest those steps necessary to accomplish a separation of NOOK Media and Barnes & Noble Retail,” said Huseby.
Barnes & Noble has been in financial trouble in recent years, due in part to poor sales in the Nook division. It has been speculated for years that the bookstore chain would eventually spin-off the Nook into its own business when possible.
On paper, the reasoning for this split makes sense. While the company made less money than last year in both the retail and college divisions, the 35 percent drop in the Nook division is pretty damaging. When a portion of a business is doing that badly, it makes sense to minimize its impact on the rest of the company. Just how long the Nook can last is questionable. It is not the most popular tablet out there.
When the Nook first launched in 2009, the Barnes & Noble branded Android-based eReaders were popular. At one point, the Nook made up about 25 percent of the eReader market. It had its rivals, but the Nook was a solid product with a following. But soon the tablet market exploded into the large market it is today, starting with the release of the first iPad, a device that could do all an eReader could and more.
Soon other products got into the market, making it tough for the Nook to compete. Amazon released the Kindle, an eReader that would both overtake the Nook and earn a tiny wedge in the tablet market once the Kindle Fire crossed into regular tablet territory. The Nook also began releasing tablets too, including the Nook HD, but that brought it into more direct competition with other Android tablets and the iPad. The Nook’s sales continued to flounder. Now its parent company is splitting off the Nook business in an attempt to minimize the damage to the bookstore chain.
What this means is that the Nook products currently for sale will remain available until they sell out reported The Verge. This news comes shortly after the announcement that Barnes & Noble would be working with Samsung to create a co-branded Nook tablet. So far news is that project is still ongoing.