Barnes & Noble explores spinning off Nook e-reader unit


Bookseller Barnes & Noble said it is exploring options to spin off its Nook e-reader business in the wake of record holiday sales.

According to Barnes & Noble, Nook unit sales increased 70 percent year-over-year during the nine-week holiday period ending Dec. 31. Digital content sales--including e-books, digital magazines and applications--grew 113 percent during the same period. Barnes & Noble forecasts fiscal 2012 digital content sales will reach approximately $450 million--based upon anticipated device sales, the company expects annualized U.S. digital content sales will achieve a run-rate of approximately $700 million to $750 million by the end of the current fiscal year.

Barnes & Noble adds that the consolidated Nook business across all of its segments, including sales of digital content, device hardware and related accessories, increased 43 percent during the holiday period to $448 million. That growth is prompting Barnes & Noble to evaluate its reporting segments, which the retailer said may result in reporting Nook as a separate operating unit.

"We have a Nook business that's growing rapidly year-over-year and should be approximately $1.5 billion in comparable sales this fiscal year," said Barnes & Noble CEO William Lynch in a prepared statement. "Between continued projected growth in the U.S., and the opportunity for Nook internationally in the next 12 months, we expect the business to continue to scale rapidly for the foreseeable future."

Not all segments of the Nook business are flourishing, however. While sales of the new Nook Tablet "exceeded expectations," Barnes & Noble admits it "over-anticipated" consumer demand for single purpose black-and-white Nook devices over the holiday season. B&N expects full-year losses per share between a range of $1.40 and $1.10, a change in guidance resulting from a shortfall in expected sales of the Nook Simple Touch as well as additional investments into the Nook business like advertising and international expansion.

Barnes & Noble introduced the Android-based Nook Tablet in early November, touting a wealth of e-books, mobile applications and HD video content in its bid to rival's Kindle Fire as well as Apple's (NASDAQ:AAPL) market-leading iPad. Priced at $249, which is $50 more than the Kindle Fire, the Nook Tablet boasts twice the RAM of its competitor and double the storage, offering consumers access to millions of books as well as more than 250 periodicals, many with interactive features. Corresponding with the Nook Tablet launch, Barnes & Noble dropped the price of the Simple Touch device from $139 to $99.

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