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Barnes & Noble (BKS) plunges 29.1% premarket after announcing it will explore plans to...

Barnes & Noble (BKS) plunges 29.1% premarket after announcing it will explore plans to spin off its Nook digital business after its sales grew 70% Y/Y. The company also cuts its FY12 outlook: Sales are now projected at $7B-$7.2B vs. $7.33B consensus, and EPS loss is moved to $1.10-$1.40 vs. $0.63 consensus.
Comments (7)
  • Moon Kil Woong
    , contributor
    Comments (11161) | Send Message
     
    They are closing stores as well. They may be the next to fall in the bookstore brick and mortar die-off.
    5 Jan 2012, 01:07 PM Reply Like
  • David Urban
    , contributor
    Comments (1036) | Send Message
     
    This is the absolute worst idea possible.
    5 Jan 2012, 01:54 PM Reply Like
  • superpatrol
    , contributor
    Comments (616) | Send Message
     
    this is a fantastic idea, because their brick and mortar stores are actually profitable. A friend of mine suggested to me *months ago* that BKS needs to spin off the nook ASAP. Are the synergies between nook and the stores really that big?
    5 Jan 2012, 02:27 PM Reply Like
  • David Urban
    , contributor
    Comments (1036) | Send Message
     
    This cycle for tech is all about content. While the stores may be profitable the future is in the Nook as evidenced by the Kindle and iPad.

     

    Why spin off the area that is the future? If anything they should be allocating more resources towards the Nook and partnering with someone like Samsung to create a content outlet countering the momentum of Amazon and Apple.
    5 Jan 2012, 02:34 PM Reply Like
  • superpatrol
    , contributor
    Comments (616) | Send Message
     
    As an investor you only need to ask whether the two pieces are worth more together or apart. I think they are worth more apart for simple risk-management reasons: if either the physical stores, or the Nook totally bomb, it'll take the whole thing down and shareholders are left with nothing. If the nook and the bookstores were separate, then the failure of one of them will not take down the other. If you really think the nook has a great future and that the brick and mortar stores are a liability, then this spin-off would seem to be a great idea (you can always hold onto the new Nook division shares that are created).
    To me it's really simple: the liabilities of having the two divisions together far outweigh any synergies that exist. I just don't think the synergies are that important.
    5 Jan 2012, 03:16 PM Reply Like
  • David Urban
    , contributor
    Comments (1036) | Send Message
     
    The problem is the brand ties both together.

     

    Remember when Barnes and Noble spun off their website? How did that go?

     

    The value in the brick and mortar business is its attachments to college bookstores.

     

    Tie in the Nook to e-textbooks for tablets and you create even more value.
    5 Jan 2012, 03:52 PM Reply Like
  • Spencer Knight
    , contributor
    Comments (398) | Send Message
     
    This is surprising but only time will tell where the company goes with it. Remember, HPQ announced a slew of changes but in the end it was all for not.
    5 Jan 2012, 03:14 PM Reply Like
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