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Nook Spin-Off Cuts Losses For Barnes & Noble

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Barnes & Noble (NYSE: BKS) on Wednesday unveiled plans to spin off its struggling Nook digital unit in a move that sent shares up nearly 10 percent in pre-market trading.

Nook has proven a drag on Barnes & Noble's results and it expects to complete the deal by the first calendar quarter of 2015.

Although only a fraction of the company's core business, Nook's revenue fell more than 32 percent in fiscal 2015 to $507 billion. Its EBITDA loss was cut roughly in half to $217.6 million from a year earlier.

Barnes & Noble posted total revenue Tuesday of $6.38 billion for fiscal 2014, down nearly seven percent. Nook device sales fell 44.8 percent for the year to $260 million, while digital content fell more than 20 percent to $246 million.

Regarding the spin-off, CEO Michael Huseby said he expects the company to have a "long-term relationship" with Nook. "[But] we have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately," Huseby added.

Nook launched its e-reader device in 2009 and has since sold about 10 million of the devices. But Amazon.com and others appeared to out-compete.

Barnes & Noble opted against introducing a new model of the e-reader for the 2013 Holiday season and earlier this month it signed a co-branding agreement for the devices with electronics manufacturer Samsung.

"We're pivoting away from being a hardware-centric business,” Huseby said at the time. “Our objective is to sell content.”

Microsoft has a 17.6 percent stake in Nook Media, although its shares appeared unaffected by the announcement.

Barnes & Noble traded recently at $22.35 up 8.7 percent.

 

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