In a brief but informative conference call following the release of its third quarter results, Barnes & Noble executives talked about the downsizing of the Nook division, the need for the company to maintain a presence in the digital reading device market as well to reverse the slide in digital content sales, and acknowledged the possibility that the company may yet be broken up.
B&N has eliminated 190 positions in its Nook division since the fiscal year began last May, leaving that group with about 500 positions. But the likelihood is more cuts are coming and those cuts could be deep. CEO Mike Huseby noted that B&N estimates that future Nook restructuring charges could cost the company another $40 million. He also said B&N was considering closing its existing Palo Alto Nook office and relocating employees to another office, possible back in New York. Huseby reiterated that the company is close to reaching an agreement with a third party manufacturer to release a color tablet this fall. He said the goal for B&N is to find the right balance in developing hardware that Huseby acknowledged is crucial to driving digital content sales, while still controlling costs. To that end, he noted, B&N’s plan is to produce reading-centric devices with more of an emphasis on leveraging collaboration with hardware patterns. Huseby said he is hopeful that as B&N works with technology companies, including Microsoft, that it can put its “content catalog” of about 3 million titles plus magazines and newspapers on their platforms.
As he has done in the past, Huseby said he knows that maintaining a hardware presence is key to turning around the decline in digital content sales. The CEO acknowledged that “content revenues really are our toughest challenge at the moment given the competitive landscape and the domestic trends in e-books.” Huseby hinted that B&N is finally about to get ready to bundle print books and e-books, saying that they are “actively considering and testing” ways to package physical and digital content.
Huseby quickly dismissed the proposal made by G Asset Management last week, pointing out that even in its letter GAM said it did not have the financing in place to make an offer. B&N has no plans to take any action on the proposal. But that doesn’t mean the company has stopped talking about maximizing shareholder value. Observing that over the last 18 months the board has considered separating various parts of the company from each other(“retail from the digital business or the college business from the other businesses”), Huseby said that the company will continue to examine some sort of separation: “We are still studying the possibility of seat the companies, although we have nothing to announce,” Huseby said.