When it saw itself as a digital retailer rather than just a bookseller, Barnes & Noble (NYSE:BKS) poured a huge investment—both capital and mental energy—into its Nook tablets. And although that direction is not being abandoned, Barnes & Noble took a huge step back on Tuesday (June 25) and said it would halt production of its color tablets.
Those devices, the Nook HD and the Nook HD+, had been positioned to try and compete with Apple's iPad and various tablets running Google's Android. The chain will continue to sell those color tablets but as co-branded devices. The black-and-white readers, though, the chain said, will still be sold by Barnes & Noble directly.
What prompted the change was another round of bad earnings news from the chain. Barnes & Noble has been trying to navigate readers' shift away from paper books with its Nook brand of tablets and e-readers, Bloomberg reported. After some success, growth stalled during the holidays, and the drop continued last quarter with revenue from the unit sinking 34 percent to $108 million. The division's loss before interest, taxes, depreciation and amortization widened to $177 million from $77 million a year ago.
"We've been very focused here for the last three years on devices, and we realize we have to shift our focus to distributing the content more aggressively" through other platforms, Chief Financial Officer Michael Huseby told Bloomberg.
A Barnes & Noble statement clearly linked the financials with the Nook pullback. "The company plans to significantly reduce losses in the Nook segment by limiting risks associated with manufacturing. Going forward, the company intends to continue to design eReading devices and reading platforms, while creating a partnership model for manufacturing in the competitive color tablet market," the statement said. "Thus, the widely popular lines of Simple Touch and Glowlight products will continue to be developed in house, and the company's tablet line will be co-branded with yet to be announced third party manufacturers of consumer electronics products."
The chain reported that the full Nook segment, which consists of the company's digital business (including devices, digital content and accessories), had revenues of $108 million for the quarter and $776 million for the full year, decreasing 34.0 percent for the quarter and 16.8 percent for the year, as compared to the year ago periods.
Added the statement: "Device sales declined during the fourth quarter due to lower selling volume," which pretty much means "we sold fewer because people bought fewer."
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