Nook sales increase by 70%; Nook business may be spun off into separate unit
January 5, 2012 | 9:02 am
By Paul Biba
From the press release:
Barnes & Noble, Inc. (NYSE: BKS),the leading retailer of content, digital media and educational products, today reported record holiday sales for its NOOK business, including devices and digital content. During the nine-week holiday period ending December 31, 2011, NOOK unit sales, including NOOK Simple Touch™, NOOK Color™ and the new NOOK Tablet™, increased 70% over the same period last year. Sales of NOOK Tablet exceeded expectations, while sales of NOOK Simple Touch lagged expectations, indicating a stronger customer preference for color devices.
Digital content sales also grew briskly during the same nine-week period, increasing 113% on a comparable basis. Content sales are defined to include digital books, digital newsstand, and the rapidly growing apps business.
The entire line of NOOK products have been acclaimed widely as the best in the marketplace, and validate the Company’s first-class digital organization. While the Company has invested heavily in developing its new platform, including recruiting world-class talent and increasing its advertising and marketing spend, its customer Life-Time-Value (LTV) models continue to indicate these up-front investments will create significant value.
The Company expects fiscal 2012 digital content sales to be approximately $450 million. By fiscal 2012 year-end, based upon forecasted device sales, the Company expects annualized U.S. digital content sales will achieve a run-rate of approximately $700-$750 million.
Due to the increased significance of the NOOK business platform, the Company is evaluating its reporting segments. The evaluation is expected to be complete by the end of this fiscal year, which may result in reporting NOOK as a separate operating segment.
STRATEGIC EXPLORATION OF NOOK DIGITAL BUSINESS
In order to capitalize on the rapid growth of the NOOK digital business, and its favorable leadership position in the expanding market for digital content, the Company has decided to pursue strategic exploratory work to separate the NOOK business.
“We see substantial value in what we’ve built with our NOOK business in only two years, and we believe it’s the right time to investigate our options to unlock that value,” said William Lynch, Chief Executive Officer of Barnes & Noble. “In NOOK, we’ve established one of the world’s best retail platforms for the sale of digital copyright content. We have a large and growing installed base of millions of satisfied customers buying digital content from us, and we have a NOOK business that’s growing rapidly year-over-year and should be approximately $1.5 billion in comparable sales this fiscal year. Between continued projected growth in the U.S., and the opportunity for NOOK internationally in the next 12 months, we expect the business to continue to scale rapidly for the foreseeable future.”
The Company also said that it is in discussions with strategic partners including publishers, retailers, and technology companies in international markets that may lead to expansion of the NOOK business abroad.
There can be no assurance that the review of a potential separation of the NOOK digital business will result in a separation. There is no timetable for the review, and the Company does not intend to comment further regarding the review, unless and until a decision is made.