Barnes & Noble Nook, e-book sales fall 26 percent in quarter

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By Phil Wahba | March 1, 2013 1:49 AM EST

Barnes & Noble Inc reported a net loss for the holiday quarter, hurt by a sharp decline in sales in its Nook device and e-books business as well as lower sales at its bookstores and college bookstore chain.

The company's shares were down nearly 2 percent in early trading on Thursday.

Revenue at its Nook business, including e-books and devices, fell 25.9 percent to $316 million in the fiscal third quarter ended January 26, as it sold fewer e-readers and tablets and had to cut prices. The loss on the Nook business more than doubled to $190.4 million.

The poor results put into question Nook's long-term viability.

"It simply doesn't have the assets to make its tablet a useful productivity tool the way Apple and Google do," Forrester Research analyst James McQuivey said in a note.

Barnes & Noble, the largest U.S. bookstore chain, launched the first iteration of the Nook e-reader in 2009. At first the device was a hit, winning the retailer as much as 27 percent of the U.S. e-books market.

But more recently, the tablet version of Nook has struggled against rival devices from Amazon.com Inc and Google Inc, which offer far more apps and content and have improved their e-reading functions.

Last year Barnes & Noble carved out Nook and its college bookstore business into a new unit called Nook Media. That has attracted investments from Microsoft Corp and Pearson LLC, but Barnes & Noble still owns 78 percent.

The disastrous holiday performance puts additional pressure to find other investors for Nook.

"The window of opportunity to sell Nook is closing," Morningstar analyst Peter Wahlstrom told Reuters.

Still, Barnes & Noble Chief Executive William Lynch said on Thursday the company "remains committed" to the Nook devices.

The company announced earlier this week that Chairman Leonard Riggio, the company's top shareholder, plans to make an offer for its bookstores.

In the holiday quarter, the struggling bookstore chain scarcely got relief from its shrinking though still profitable bookstore business. At its namesake super-bookstores, sales at stores open at least 15 months, excluding Nook products, slipped 2.2 percent.

At its college bookstores, same-store sales fell 5.2 percent in the holiday quarter.

The company posted a net loss of $6.1 million, or 18 cents per share, compared with a profit of $52 million, or 71 cents, a year earlier.

Companywide, revenue was down 10.3 percent to $2.23 billion, below the $2.4 billion Wall Street was projecting, according to Thomson Reuters I/B/E/S.

(Reporting by Phil Wahba in Toronto; editing by John Wallace)

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