Barnes & Noble Suddenly Changes Nook Strategy
After Barnes & Noble's stock dropped 16 percent this morning, the company's executives called investors to chat about their plan going forward. As reported by GigaOm, however, that plan involves sticking with tablets — the complete opposite of what the company has said so far.
.After Barnes & Noble's stock dropped 16 percent this morning, the company's executives called investors to chat about their plan going forward. As reported by GigaOm, that plan involves sticking with the Nook — the complete opposite of what the company has said so far.
As reported by several sites, Barnes & Noble said it would halt the production of its Nook color tablets and work with third party manufacturers this June, after Nook sales dropped 34 percent. The company said it would only continue with its black and white e-readers.
Though Barnes & Noble chief Bill Lynch departed last month, it was not assumed that the company would deviate from this strategy, especially since Lynch's love for the Nook was believed to be among the factors responsible for his downfall.
Yet in today's call, CFO Michael Huseby changed course, arguing that “some kind of wholesale outsourcing of our color device business is neither appropriate, nor is it smart for the company.” He said the company's earlier comments have been misinterpreted,and that:
“[W]hen we discussed our results this past June, the company announced its plans to stay in the device business while exploring [third-party manufacturing relationships]. Unfortunately, many people interpreted these comments incorrectly and determined that we were getting out of the device business…The company intends to continue to design and develop black and white and color devices.”
Huseby went on to say that poor Nook sales were the result of too many Nooks. “We overestimated demand for the products that we put out. As a result of that, we had to discount those products and we’re selling them now," Huseby said. It's not clear what he means by that — today's earning report shows that Nook sales are down and Nook revenues are down 20 percent.
Another option being explored by the company was the possible sale of the Nook business, possibly to Microsoft. Microsoft, after all, already owns a 17 percent stake in the company and offered $1 billion for the Nook business in May. That's not going to happen now, but the Huseby said Barnes & Noble open to a split when the time is right.
“Eventually, it makes sense to have these businesses separate. Right now is not the right time," Huseby said. "If somebody presents us with an offer that changes our mind, then we would be willing to listen to it.” Meanwhile, the bookstore side isn't selling, either. Barnes & Noble's chairman Leonard Riggio announced today that he's dropped his plans to buy the company's bookstores.