For a company better known for its box stores than computing boxes, Barnes & Noble has done an impressive job of carving a technological place for itself in the burgeoning e-reader and tablet hardware market. Now it seems the company wants to cash in on all that hard work and take a back seat to companies like Amazon and Apple by spinning off its Nook hardware business, or possibly selling it entirely. Is it a good idea? Is it a dumb idea? Here are some pros and cons.
Getting into the technology business has cost the company a lot of money. While the payoff for that spending has been relatively fast, B&N's stock hasn't performed as many investors would like to see it perform. A Nook sale would probably be looked on favorably by investors interested in the short-term rewards they could reap from the move.
Even if the Nook business isn't sold outright, it could be spun into a separate business controlled by B&N. Investors have shown a liking to these kinds of arrangements recently so chances are B&N stock could get a bump from such a move.
If B&N is to continue to play with big boys like Amazon and Apple, it's going to have to continue to invest in its Nook business. If that business was separated from B&N, the company might be able to attract "deep pocket" investors more inclined to pony up cash to a tech concern than a big box retailer with more than 700 outlets.
By segregating Nook from its main business, B&N may be able to insulate it from the bumps and jolts of that business and allow it to operate more smoothly.
B&N may be selling short the role of its stores in the Nook story. Granted, much of the 70 percent increase the company saw in holiday sales of its Nook products came from third-party sellers, but the ability of technology neophytes to touch and play with a Nook contributed in no small way to sales, too. That store-Nook bond could be broken with a selloff or spinoff.
B&N has a unique relationship with publishers that has contributed to the Nook's success. That relationship won't necessarily be transferred to a Nook spinoff.
International expansion will be important for the Nook's future survival. The power of the B&N brand in international circles would do more to pave Nook's overseas sales than a spinoff brand would do.
Content sales for electronic devices jumped over 113 percent for B&N last year. This year, the company could rake in anywhere from $450 million to $750 million from content sales. Those sales can be leveraged to sell more Nooks, Nook sales that will go directly to B&N's bottom line and not a spinoff's or someone else's entirely.
This week B&N made a bold statement on where it sees its future by announcing it was getting out of the book publishing business, a business it has been in for 40 years. It said that it's recasting itself as a technology company. What kind of message will the company be sending to the public if the "technology company" sells off the golden goose of its technology?