Barnes & Noble is the Netflix of 2012

The bookseller's latest move comes straight from the Reed Hastings playbook. You remember Hastings, don't you? He's the guy who famously ran his business – the once-all-mighty Netflix NFLX – into the ground, turning the growing enterprise into a wad of spoiled cookie dough. With every executive decision Hastings made, Netflix's shares repeatedly declined. Not even a round of standup comedy could save his video rental service from certain doom. Ultimately, Netflix proved that its corporate team had no idea what to do next. Rather than enjoy the success of its enormous business – which threatened the future of cable providers like Comcast CMCSA and Time Warner TWC – Netflix couldn't resist the temptation to screw things up. Now it seems that Barnes & Noble BKS wishes to follow in the footsteps of Netflix. According to the Wall Street Journal, Barnes & Noble is planning to sell Sterling Publishing, the company's in-house publishing arm. Sterling Publishing has been in business since the ‘70s, but it wasn't until 2003 that the publishing company was acquired by Barnes & Noble for roughly $115 million. But the Journal said that, due to “intense competition” from Amazon AMZN, Barnes & Noble is attempting to recast itself as a “technology company with emphasis on its Nook e-reading devices and its Nook tablet.” The Journal said that by selling Sterling Publishing, the retailer could focus on its core businesses. But what, exactly, are Barnes & Noble's “core” businesses? Contrary to the Journal's report, Barnes & Noble may not intend to become a technology enterprise. Early this morning, the company announced that, due to the “increased significance of the Nook business platform,” Barnes & Noble is evaluating its “reporting segments” and may decide to report Nook as a “separate operating segment.” Barnes & Noble has tried to put a spin on this announcement, saying that in order to capitalize on the “rapid growth of the Nook digital business, and its favorable leadership position in the expanding market for digital content, the company has decided to pursue strategic exploratory work to separate the Nook business.” William Lynch, Barnes & Noble's chief exec, had a few things to say on the matter. “We see substantial value in what we've built with our Nook business in only two years, and we believe it's the right time to investigate our options to unlock that value,” he said in a company release. “In Nook, we've established one of the world's best retail platforms for the sale of digital copyright content. We have a large and growing installed base of millions of satisfied customers buying digital content from us, and 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. 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.” But if Nook distances itself from Barnes & Noble, what will the company have left? It seems unlikely that both this official announcement and the Wall Street Journal report could be true. Barnes & Noble can't sell Sterling Publishing to focus on its digital business if it plans to spin-off the Nook as well. If both reports are true, however, then the company clearly has no idea what it wants, and will ultimately become the Netflix of 2012. Without Nook and without Sterling Publishing, what does Barnes & Noble have? CNBC reporters joked that the company would turn into another Borders Books. They're not too far off. But it's not the potential sale (“separation”) of key entities that worries investors. Despite the growth of Nook, Barnes & Noble has once again reduced its guidance. In the hours since, BKS shares have plummeted, leaving the retailer with little hope going forward.
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