Less than two months after launching a new suite of Nook tablets and e-readers, Barnes & Noble CEO William Lynch said Thursday that the company is exploring a spinoff of its e-book business as it forecasts major losses for the fiscal year.
Though Lynch told the Wall Street Journal that the potential deal was an effort to boost its share price, its shares have plummeted 21 percent since the news was revealed.
"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," Lynch told the Journal.
Barnes & Noble cautioned that its year-end results would show higher losses than previously forecasted – between $1.40 and $1.10 per share as opposed to the $0.63 Wall Street was predicting. The company blames disappointing sales of the Nook Simple Touch and investments in advertising while insisting other e-reader and e-book sales were strong.
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Holiday sales for the Nook business were 43 percent higher than a year before, but the costs rose as well. Its physical book business boosted sales 2.5 percent.
The Nook business is now expected to account for $1.5 billion in sales for the year, rather than $1.8 billion.
Some analysts have interpreted this as a major step back for Barnes & Noble in its competition with Amazon, though Lynch said the move would be to realize the true value of the Nook business.
Amazon has already eaten away at the profits for many physical book retailers, leading to the closure of bookstores across the country (and the bankruptcy of companies like Borders).
In the world of e-books its Kindle has been a game changer, but Barnes & Noble has been a primary competitor with its Nook.
Both companies released a new series of products in November – including their first tablet computers – but this news suggests Amazon’s products have fared better than Barnes & Noble’s.
Amazon does not release its sales figures, but did recently say it was shipping off more than 1 million Kindle products a week.
Barnes & Noble also cut the prices of its tablets for the November launch, which some interpreted as an effort to compete with Amazon’s bargain pricing.
Lynch has disputed the notion that it is falling behind in a competition with Jeff Bezos' company. Meanwhile, he said Apple's iPad is not a direct competitor since Barnes & Noble — like Amazon — is more focused on selling e-books and e-readers than tablets.