Why Barnes & Noble, Inc. (BKS) Needs to Spin Off the Nook

Those losses have been offset, largely, by the company’s college bookstore business. Last quarter, management said that the Nook business was “financing itself,” which it turns out meant that the college business was providing a huge chunk of cash. That’s where the value of a spinoff really makes sense.

The Nook needs a nice big cash injection — the kind of injection that it could get by being spun out on its own. That would give it the capital it desperately needs to build its digital content business up to the scale that’s required to use the Amazon.com, Inc. (NASDAQ:AMZN) model. It would also cut the cord between the retail businesses and the Nook business.

Microsoft’s role in the future of Nook should be as big as possible. To help Windows 8 in the tablet world, Microsoft should be investing in the next Nook device. This one is tied to Android, sure — but the next tablet could bring a choice of operating systems. By separating the business out, the Nook division can use some of that fresh cash to develop a new, more flexible piece of hardware that would work better with Windows.

In short, dividing the Nook from the rest of Barnes & Noble seems like a win for everyone. The cash would be a huge windfall for the device, the business, and investors. The freedom from the Nook anchor would help the retail business pick up speed. And investors would unlock the combined value of the separate businesses.

The article Why Barnes & Noble Needs to Spin Off the Nook originally appeared on Fool.com is written by Andrew Marder.

Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Google. The Motley Fool owns shares of Amazon.com, Google, and Microsoft.

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