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Barnes & Noble News, Part IV

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In the wake of this announcement, the Associated Press reported on Thursday, June 26, 2014, “The largest U.S. brick-and-mortar bookseller, beset by tough competition from online retailers like Amazon and discount stores like Wal-Mart, said Wednesday that it plans to split off its Nook e-reader division as it looks to boost shareholder value.”

Investors applauded the news, sending shares up more than 6 percent in midday trading.

The company's retail business, which has been outperforming its Nook unit, includes its bookstores and BN.com businesses. Nook Media, which counts software company Microsoft Corp. and educational book publisher Pearson Inc. among its investors, houses the digital and college businesses of Barnes & Noble.

On June 25th, Jeremy Greenfield wrote, in part, “Shares of B&N stock jumped on the news that the solvent retail store network would be separated from the albatross that is the Nook Media device, ebook and college bookstores division — up near 10% at one point in early trading. Speculation among insiders in the industry is that because no private buyer has already emerged for Nook that it becoming a public company is the most likely outcome in the next year. My question is, why would any retail or institutional investor want a piece of the albatross?”

I cannot speak to what potential a hardware, software, or retail company may see in NOOK software (or NOOK Media’s alliance with Samsung), but as for college bookstores, I imagine there will always be some textbooks (and other books professors require students to read0 that students would rather have as physical volumes rather than as digital texts and even if there comes a day when 100% of students want 100% of the books they are assigned to read as eBooks, the college bookstore would likely be the medium through which students purchase and download to devices the texts they need. Further, college bookstores sell students (and faculty members, administrators, visitors, etc.) more than books.

Besides pencils, pens, writing paper, all of which may admittedly be replaced at some future point with computer tablets and styluses, college bookstores also sell books and magazines for pleasure reading (which, again, could be replaced by digital versions), but also folders, report covers, three-ring binders, art supplies, furniture, garbage cans, clothes, fraternity and sorority merchandise, college rings, backpacks, personal computers, cameras, stuffed animals and other gifts, and snack food. An enterprising retailer willing to be flexible about adapting to changes wrought on the publishing industry by technology could successfully leverage Barnes & Noble College Booksellers, LLC as a platform for selling college and university students, faculty, administrators, etc. additional goods and services.

Greenfield wrote that Mr. Huseby told him over the phone, “We do believe the Nook business has value if it’s managed the way that we’re intending to manage it, which we’ve been very public about, which is pivoting that business away from a hardware-centric focus to a content platform business.”

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