US book giant to spin off e-reader business

Shares in Barnes & Noble tumbled last week Thursday after the US retailer said it may spin-off its popular e-reader business and warned of ballooning losses as it expands its electronic platform, Thestar.com reveals.

The stock fell by 21% to close at $10.70 after New York-based Barnes & Noble revealed a review that could lead to separation of the Nook e-book and e-catalogue unit from its core brick-and-mortar book-selling operations.

The company did not indicate if it would consider an outright sale, though analysts speculated that Sony could be interested in the unit and its vast library of e-books and electronic content catalogues.

Barnes & Noble is facing tough competition from Amazon.com, which offered its Kindle Fire for $199 and its Kindle e-reader for $79 over the holidays, USA Today reports.

Barnes & Noble sold its Nook Tablet for $249 and its black and white Simple Touch e-reader for $99. Demand for the Simple Touch reader lagged expectations during the holidays, Barnes & Noble said.

Still, combined sales of Nook products were brisk, up 70% compared with a year ago during the nine-week period ended 31 December. Digital content sales more than doubled. The company expects those sales to total $450 million in fiscal 2012.

As long as Barnes & Noble maintains its e-book market share in the US in the high range of 20%, the company will draw value either from its Nook platform or its retail business, depending on how fast e-books grow, Janney analysts David Strasser, Sarang Vora and Darren Bassman said in a research note, CBS News states.

They see competitive advantages for the company in its store network to sell Nooks and in its strong relationship with publishers.

Given its technology platform and e-reader customer base, “we believe there is significant value in this business that can be unlocked”, the analysts wrote.