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Barnes & Noble CEO Huseby Sees Value in Nook Spinoff

Stocks in this article: BKS MSFT

NEW YORK (TheStreet) -- After a multi-year wait, Barnes & Noble (BKS) said on Wednesday it is preparing to spin off its Nook Media division into a new publicly traded company, separating its tablet and e-book unit from its retail and college bookstores. While Barnes & Noble characterized the move as a way to optimize shareholder value, investors have expressed disappointment in recent years that the bookseller didn't move faster to either separate or sell its Nook division.

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Barnes & Noble created Nook Media, its tablet and e-book division, in response to Amazon's (AMZN) success in the e-book market with the creation of the Amazon Kindle. For years, Amazon cut into Barnes & Noble sales with both online and book purchases within its Kindle e-reader and tablet ecosystem. The Nook was Barnes & Noble's effort to fight back.

While early models of the Nook tablet drew a strong positive reception from the tech community, it didn't have much commercial success.


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In April 2012, Barnes & Noble entered a partnership with Microsoft (MSFT - Get Report) to spin its Nook business to a separate subsidiary and take on the tech giant as a minority investor in the business. Microsoft invested $300 million for a 17.6% stake in Nook Media that valued the unit at about $1.8 billion. Media conglomerate Pearson also took a 5% stake in Nook Media at a similar valuation.

At the time, many investors said Barnes & Noble should move quickly to fully separate Nook from the company's struggling retail outlets. Instead, Barnes & Noble and Chairman Leonard Riggio entered into a confusing set of strategies to unlock value at the company.

In April 2013, Riggio attempted to buy Barnes & Noble retail outlets and the company's Web site, Barnesandnoble.com, leaving investors with the money-losing Nook business. Analysts and investors questioned whether Nook could stand on its own without the support of a declining but profitable retail business. For many, selling the bookstores to Riggio appeared to be the opposite of what the company had promised.

In July 2013, CEO William Lynch retired. Lynch had conceived of Barnes & Noble's Nook strategy and was seen as a turnaround artist who might have the savvy to move the company squarely into the digital age. Just a month later, Riggio suspended his efforts to buy Barnes & Noble retail outlets, leaving the company strategically adrift.

Shares in the company tumbled.

Barnes & Noble then appointed Michael Huseby, an executive in the Nook Media division, to become the company's next CEO. Huseby now appears to be pursuing some of the strategies that investors had long expected of Barnes & Noble.

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