Another Twist In 'The Perils Of Barnes & Noble'

The saga of Barnes & Noble -– a plodding melodrama in which a blockbuster of 20th century retailing struggles to embrace the rapidly evolving realities of 21st century ebook technology -– took a melodramatic, if somewhat predictable, twist yesterday with the resignation of CEO William Lynch. 

No successor was named “because the company is in a transition period,” a spokeswoman says. Instead, current B&N CFO Michael Huseby was named CEO of B&N’s Nook Media. Mitchell Klipper retains his position as CEO of the retail operation. Both report to executive chairman Leonard Riggio.

Lynch, a technologist who had been EVP for marketing at, CEO and president of and GM of web marketing and eCommerce at Palm, joined B&N in 2009 to run its website. He was never really comfortable with the retail operation, as we re-reported in February, but had, by all reports, been doing his darnedest to carve a viable niche for Nook hardware and software against formidable competition. 



But “as Apple's iPad and Amazon's Kindle Fire tablets grabbed larger market shares, the Nook unit lost money,” writes USA Today’s Roger Yu. “In the fiscal fourth quarter ended April 27, Nook unit revenue fell 34% to $108 million, and losses before interest, taxes and other items widened to $177 million from $77 million a year earlier. The retail unit's revenue fell 10% to $948 million in the fiscal fourth quarter.”

Barnes & Noble did not offer an explanation for Lynch’s departure, Abram Brown writes for Forbes, but “it’s not difficult to read between the lines.” Despite his best efforts, the “one-time Palm executive was unable to push Barnes & Noble into the tablet business, a market heavily dominated by Apple’s iPad, and to a far lesser extent, Amazon’s Kindle.” 

Not to mention Google and Samsung, as the New York Times’ Julie Bosman does. Idea Logical Co. founder and CEO Mike Shatzkin tells Bosman that splitting the businesses could be better than keeping them whole. 

“The Nook business clearly is going to need some global investment to have any kind of chance at all, and it certainly looks possible that they will be better off separate than together,” Shatzkin says. “There’s a glide path to oblivion, and you can affect the speed of the decline. Nobody’s going to bring back a robust brick-and-mortar book business.”

Indeed, many observers see yesterday’s moves as a further step in separating the two businesses. 

“It was just a few months ago that Mr. Lynch signed a new two-year contract to stay in the top job, which included a bonus for getting two outside investors to buy into Nook Media,” the Wall Street Journal’s Tom Gara points out.

Microsoft bought a 17.6% stake in Nook Media last year and Pearson, owner of the Financial Times, spent $89.5 million for a 5% slice of the pie. In February, Riggio stated in a regulatory filing that he had notified B&N’s board he was ready to buy “all of the assets of the retail business” at a price that would be negotiated with the board and paid primarily in cash, Barney Jopson reports in Financial Times.

The company also announced that Max J. Roberts, CEO of Barnes & Noble College, will continue to lead the digital education strategy, reporting to Huseby. Allen Lindstrom, VP and corporate controller, will be CFO of B&N and also reports to Huseby. Kanuj Malhotra, VP of corporate development, becomes CFO of Nook Media. 

“We thank William Lynch for helping transform Barnes & Noble into a leading digital content provider and for leading in the development of our award-winning line of Nook products,” Riggio said yesterday in a statement. “As the book-selling industry continues to undergo significant transformation, we believe that Michael, Mitchell and Max are the right executives to lead us into the future.”

“The question is what will Barnes & Noble do with the Nook business,” Maxim Group analyst John Tinker tells the Wall Street Journal’sJeffrey A. Trachtenberg. “There is some value in the Nook ebooks library. The real question is whether Microsoft will step up, buy the Nook business, and put their own people in charge. Barnes & Noble was too small to compete in the tablet business in a world of giants.”

“The Nook division has been hemorrhaging money, was under review, and yet the company still came to its last earnings release with no definitive plan,” says Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors, reports Huffington Post’s Kim Bhasin.

Beyond the announcement, B&N and its executives were mum yesterday. That seems fitting, as the plot line more and more seems to resemble that silent-film classic, “The Perils of Pauline.”

4 comments about "Another Twist In 'The Perils Of Barnes & Noble'".
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  1. Laura Riemer from Valpak of Greater Houston, July 9, 2013 at 10:33 a.m.

    Reference from article above: "Nobody’s going to bring back a robust brick-and-mortar book business.”
    ...... this is a very sad statement on our time right now in history, albeit but mostly likely true.

  2. Zachary Cochran from CPXi, July 9, 2013 at 12:04 p.m.

    Hopefully, B&N execs are reading this. The thing that would get me to consider a Nook (which as an Apple fan and an Amazon regular, I never have before) is if buying a physical book earned me a digital copy. Or vise versa.

  3. Zachary Cochran from CPXi, July 9, 2013 at 12:08 p.m.

    Also, I got to the coffee shop at a B&N semi-regularly but I don't feel like I'm a part of the club. If anything, I feel like an outsider, because they always ask me when I order a drink, "are you a member?" And I never am. I don't read books voraciously (though I should) and I do read books on my iPhone using the Kindle app, so maybe that's another way Nook could keep up (come to think of it, they probably do have an app) or cross-sell.

  4. Jim Thompson from Temple University, July 9, 2013 at 1:38 p.m.

    Building on Zachary's comment about the B&N club ...
    When Border's went out of business, B&N bought their loyalty card member list. But instead of offering a welcome to the club, B&N instead communicated that there would be a $25 fee to join their loyalty card club.
    Of course we didn't join and, I suppose no surprise, B&N never again sought us out despite being a medium-to-heavy book buying household (hard copy and e-books).

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