Observers in the technology industry suggested that Microsoft Corporation (NASDAQ:MSFT) might be one of the potential buyers of the Nook business of Barnes & Noble, Inc. (NYSE:BKS), according toa report from The New York Times.
Microsoft Invested in Nook
Last year, the two companies signed a partnership agreement. Microsoft Corporation (NASDAQ:MSFT) invested $300 million to acquire a 17.6% stake in Nook Media, a subsidiary composed of the digital and college businesses of Barnes & Noble, Inc. (NYSE:BKS).
The bookseller announced in its fourth quarter and full year earnings result last month that it would abandon manufacturing color tablets, but it would continue to support the black-and-white version of the Nook device. Barnes & Noble, Inc. (NYSE:BKS) said it would seek partnerships with third parties to manufacture the color tablets to significantly reduce its losses from its Nook business. The unit incurred $177 million losses in earnings before interest, taxes, depreciation, and amortization (EBITDA). Its revenue declined by 34 percent to $108 million during the fourth quarter.
Barnes & Noble Reported Poor Financial Performance
Two weeks after Barnes & Noble reported poor financial performance, its chief executive officer, William Lynch Jr. tendered his resignation as part of the company’s restructuring efforts.
According to Barnes & Noble, Inc. (NYSE:BKS), its chief financial officer, Michael P. Huseby, was appointed to lead the Nook business and to serve as president of the company. Max J. Roberts, head of the college business will report to Huseby.
Huseby and Mitchell S. Klipper, the head of the bookseller’s retail stores will report directly to Leonard Riggio, chairman of the Barnes & Noble. In a statement, Riggio said, “We thank William Lynch for helping transform Barnes & Noble into a leading digital content provider and for leading in the development of our award-winning line of Nook products. As the bookselling industry continues to undergo significant transformation, we believe that Michael, Mitchell and Max are the right executives to lead us into the future.”
Barnes & Noble’s spokesperson Mary Ellen Keating said the company has no immediate plans to appoint a new CEO because the company is currently in a transition period.
Mike Shatzkin, the founder and chief executive of the Idea Logical Company, suggested that Barnes & Noble, Inc. (NYSE:BKS) should separate its Nook business to reduce its losses. According to him, “The Nook business clearly is going to need some global investment to have any kind of chance at all, and it certainly looks possible that they will be better off separate than together. There’s a glide path to oblivion, and you can affect the speed of the decline. Nobody’s going to bring back a robust brick-and-mortar book business.”