Report: Microsoft Mulls Buyout of Barnes & Noble's Nook

posted on by Lynzee Loveridge

The website TechCrunch reported on Wednesday that Microsoft is considering a purchase of Barnes & Noble's Nook segment for US$1 billion. The company would phase out the Nook electronic book device by the end of next year and move to marketing a Nook app for other devices.

Barnes & Noble CEO William Lynch stated in February that the company is taking “significant actions to begin to right size our cost structure in the Nook segment” and will take a large markdown on Nook devices to expedite sales of existing inventory. Lynch stated that multifunctional devices built by larger companies than B&N have greater consumer awareness.

Microsoft already owns a 17% share in the Nook division with Barnes & Noble owning 78% and publisher Pearson owning the rest. Barnes & Noble founder Leonard Riggio is looking to buy the bookstore and e-commerce portion of the company, leaving the bookstore's share of the Nook and the college bookstores in the public company.

Nook profits have been lower than expected, leading to stocks dropping 7.3% and expectations of fiscal year revenues to be below US$3 billion. Barnes and Noble's Nook segment suffered an earnings before interest, taxes, depreciation and amortization (EBITDA) loss of US$107.6 million at the end of the 3rd quarter on January 31, for a total loss of US$190.4 million. The company contributes the loss to sales shortfall, inventory charges, and higher operating expenses. The Nook segment is expected to have a EBITDA loss of $375 million in fiscal 2013.

The brick-and-mortar portion of Barnes & Noble is still profitable despite poor holiday sales last year and store closures.

Source: TechCrunch via Publishers Weekly

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