Barnes & Noble, Inc. (BKS)’s Nook Business Is Struggling, But Can it Recover?

Page 1 of 2

The shift to digital technology is affecting nearly all the industries across the board. Few would have thought that even the book-selling business could become a culprit of the advances in technology. Nonetheless, this is what is happening to Barnes & Noble, Inc. (NYSE:BKS).

Barnes & Noble, Inc. (NYSE:BKS)The company has been trying to position itself for the future with its investment in Nook Media and in partnership with Microsoft Corporation (NASDAQ:MSFT) and Pearson PLC (ADR) (NYSE:PSO), a London-based bookseller. However, Barnes & Noble, Inc. (NYSE:BKS)’s Nook business has struggled to keep up with competition from Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) , which are setting the standards in the tablet business.

Last year, Microsoft Corporation (NASDAQ:MSFT) and Pearson PLC (ADR) (NYSE:PSO) invested in Nook Media, prompting the media to suggest that Barnes & Noble, Inc. (NYSE:BKS)’s Nook business was the future of the bookseller’s digital book sales. However, based on the most recent quarter results, it seems as though that dream is all but dead.

What happened?

In the company’s most recent results, sales from Barnes & Noble, Inc. (NYSE:BKS)’s Nook business plunged 34% year-over-year, while revenue from Barnes & Noble Retail, including BN.Com, declined 10% from the same period a year ago. The 34% decline in Nook sales follows the 26% fall reported in the company’s FQ3, ended January 31.

The decline in B&N retail sales is attributable to the massive fall in the Nook business, which should have boosted digital book sales. This comes at a time after the digital book industry grew 43% in 2012. This indicates that Barnes & Noble, Inc. (NYSE:BKS) failed to rally along with the industry, as the paradigm shift to digital technology in the reading business continues to advance.

The results from the Nook business also affected the overall performance of the company as the company’s loss from continuing operations increased to $122 million, the largest in its history. However, the 8.8% decline in same store sales depicts how the unit once thought to be the savior isn’t doing well.

So what happens now?

The Nook HD+ tablets have no place in the tablet industry. Apple Inc. (NASDAQ:AAPL)’s iPad mini and Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle Fire HD are definitely miles ahead of the Nook. Despite being the cheapest among the trio, the Nook has lost business to these industry giants, which already operate under a strong brand.

This is perhaps the reason why Barnes & Noble has sought to offer its Nook devices to an unnamed third party, which begs the question whether the company would be able to sustain its digital book business going forward. This move also signals that the company has admitted defeat in the tablet battlefield.

Barnes & Noble’s strategic positioning for the future seems to have failed with the fall of Nook Media. There is no short-cut to this, as digital readership forms the future of learning. Soon, even libraries may switch completely to digital reading.

It seems as though Barnes & Noble might have to rely on third-party tablets in its e-reading business. Microsoft, already a strategic partner in the company’s Nook business, seems to be a good candidate with its Surface RT tablets. However, its minute market share may not offer a lot in terms of addressable market. Apple on the other hand, holds the lion’s share of the market in the tablet business with its iPads accounting for approximately 40%.

Amazon, the world’s largest online retailer, began as an online bookstore, but later diversified to DVDs, CDs, Video, and MP3. Its Kindle Fire business came to life as part of a strategic plan to spur growth in its reading business. The company continues to struggle for reporting good margins from the unit, as it dwells on competitive pricing to try to capture some market share from Apple and Samsung. Amazon currently has a market share of 3.7% according to IDC’s Q1, 2013 data.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!