Barnes & Noble may spin off Nook business

Bookseller Barnes & Noble is considering spinning off its Nook digital business to help it grow, following strong growth in sales of the Nook reader and tablet and digital content in the nine-week holiday period ending Dec. 31.

The likes of Amazon

Competition from the likes of Amazon.com, and investments in advertising and international business for the Nook may nevertheless be putting pressure on the company's margins.

Barnes & Noble said Thursday it has decided to "pursue strategic exploratory work" to separate its Nook digital business, to capitalize on its rapid growth and its favorable position in the expanding market for digital content.

"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," Barnes & Noble CEO William Lynch said in a statement.

Barnes & Noble expects its Nook business will be about US$1.5 billion this fiscal year. It expects the business to continue to grow rapidly backed by continued growth in the U.S., and the possibility to grow the Nook business internationally in the then and there 12 months. The company is already in discussions with strategic partners including publishers, retailers, and innovation companies in international markets to expand the Nook business abroad.

The consolidated Nook business across all of the company's segments, including sales of digital content, device hardware and related accessories, increased 43 percent while the holiday period to $448 million, on a comparable sales basis.

The company said its change in guidance is due primarily to a shortfall in sales of Nook Simple Touch, its black-and-white reader, as then as additional investments in growing the Nook business, just as in advertising to support new products and for international expansion in the back half of the year. It said it over-anticipated the growth in consumer demand for single purpose, black-and-white reading devices in the holiday.

John Ribeiro covers outsourcing and general research breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com