“Struggling amid increasing competition in the tablet market, bookseller Barnes & Noble (BKS) said it might spin off its Nook e-reader business to reduce losses as it warned of lower 2012 earnings,” Gillian Rich reports for Investor’s Business Daily.
“Barnes & Noble now expects 2012 consolidated sales of $7 billion to $7.2 billion, below views of $7.3 billion,” Rich reports. “It expects annual EPS losses to be $1.10 to $1.40. Analysts were expecting a 63 cent loss.”
Rich reports, “Nook sales were up 70% from a year ago for the 9-week period ending Dec. 31, but holiday sales for its $99 Nook Simple Touch reader were weaker than expected. Potential Nook customers may have been lured away by Amazon’s entry-level Kindle, which was priced at $79 ahead of the holidays. In addition, Amazon launched its $199 color Kindle Fire on Nov. 15. The Fire was priced $50 less than the Nook’s comparable Nook Tablet… Barnes & Noble CEO William Lynch told the AP that he is looking at a ‘range of options’ for the Nook business, including selling the tablet overseas or completely spinning off the company.”
Read more in the full article here.
MacDailyNews Note: BKS dropped 17.05% in trading today.
I like the nook a lot better than the kindle
If they spin it off, it’s dead. The only reason people buy it is because if you walk into a B&N, the Nook rep accosts you like some crazed Greenpeace solicitor outside of Whole Foods who won’t take no for an answer.
Spin the nook out of B&N, and NO ONE will ever buy another one.
Where you in the D.C. store. That was exactly what happened to me. Guy would not take no and followed me around. I finally said I had a iPad…. I actually don’t, but it worked. He just walked away.
Wow… It’s the anti- Apple Store customer experience.
Guy tryed to sell me a nook when I walked in once, I told him I own an iPad 2, wtf would I want a piece of shit nook for?
He walked away.
Have the stupid counter, keep the selling of the nook to those that walk up to you…
Agreed. The Nook is pretty awesome when compared to the Kindle… at least in my opinion.
The Fire was priced $50 less than the Nook’s comparable Nook Tablet
*DING* This is what the journalist/pundits/analysts should have been considering. NOT comparing the Kindle Fire to the Apple iPad. DUH! Get it now?
What Amazon is doing to the tablet business (defined as all those devices with touch-screen and some form of an OS, which excludes the iPad) is essentially killing every chance of it succeeding.
It is going to be interesting to see how much longer Amazon will be able to continue selling a piece of hardware that costs $230 to make, for $200 (retail price; wholesale even less). The essence of that question is, how likely is it that each such device will eventually generate (at least) $30 in profits in order to make up for the hardware loss?
Apple does similar thing, but in reverse: it sells hardware, marks it up heavily, but then puts free software on that hardware. We all know how this model works for them. Obviously, Amazon (and Microsoft, with their X-box cash burner) got it backwards…
Wholesale? Who sells the Kindle besides Amazon?
Staples…
Target, Staples, Best Buy, Office Depot… there are others too.
Walmart had it for $128 around Christmas.
I thought about it.
“Apple…it sells hardware, marks it up heavily,”
Are you out of your mind?
No one has been able to produce a tablet equal in quality to the iPad and price it for less.
Anyone that gets close, the price is the same or more.
I think “heavily” may have been meant comparatively, not in a negative sense.
Apple has a significant cost advantage versus the competition, because there are only two iPad models (one WiFi-only and one with 3G), and Apple makes tens of millions of iPads. That reduces the cost (per unit) for designing and manufacturing as well as acquiring components and distribution.
Compared to the competition, Apple has a reasonable profit margin. As you said, the competitors find it difficult to match Apple’s iPad specifications and price. If Apple dropped iPad 2’s price to $399 today (or when the next iPad is released), I’ll bet it would still be profitable. If a competitor had to drop the price of its $499 tablet to $399 (or lower for the eventual fire sale), it is no longer profitable.
Therefore, Apple is (in fact) “marking up” the retail price for iPad so that it has a reasonable profit margin.
Spin off to whom?
B&N is making a huge mistake if it sells its Nook business unit. Paper-based media is dying, and so are DVDs. If B&N drops the Nook, it will cut off its own legs and will die within 10 years.
It has been argued that Borders died because it didn’t jump on the digital bandwagon the way Amazon with Kindle (and, to certain extent, B&N with Nook) did. Their “Kobo” effort was totally lame.
It seems to be that B&N had thought they were going to survive, once their Nook devices started selling reasonably well (compared to Kindle) and showing potential. Then, in comes Amazon with their massive loss-leader…
I believe that EVERY Kindle has been a loss leader.
Amazon Prime @ $80/year makes up for it.
You seem to be assuming that every kindle fire buyer will subscribe to Amazon Prime. You Think? You also seem to think that the $80 is pure profit? What about cost of content and cost of operations, etc.?
I don’t think Amazon is making much off Prime. $80/year for free two-day shipping on anything I buy? I have a feeling most the people springing for this option are regular Amazon shoppers (like me) buying at least four things a month from Amazon. That’s about 50 packages a year, each with free two-day shipping. I can’t imagine Amazon comes out ahead in that scenario. Especially considering the bandwidth they have to keep up for streaming videos… and the free e-books they give out every month… $80/year is a steal…
I’m waiting for Amazon to follow Borders to the grave. Next up, $500 million of losses racked up selling the Kindle Fire for less than the cost of making it. To Bozo’s thinking, he’ll make it up on volume.
Ain’t gonna happen. No way, no how.
See comment above on making it up in amazon Prime subscriptions.
Considering that Prime comes with free two-day shipping all year, how profitable is it? It seems to me to be another low profit item to lock in customers. I think it’s a great idea for them, but I don’t it’s very profitable in and of itself.
Apple dominates because no other tablet product (except iPad) has been profitable. The tablets that try to match iPad (on specs and price) fail because no one wants to pay iPad’s price for a fake iPad. It takes a money-losing “fire sale” to sell off the inventory.
And no one can make a profit by selling a lesser tablet for a lower price, because Amazon has set that price at $199 with Kindle Fire, which is a “by-design” money-losing proposition. Amazon will try to make up for the “negative” profit per unit by selling content, but that’s basically an Amazon-only strategy (maybe Google could also attempt it using ads to make money through a money-losing “Nexus” tablet). It remains to be seen if this strategy is ultimately profitable.
Everyone else has to make a profit on selling the hardware, and they are caught between not being able to match iPad and undersell Kindle Fire. Apple should thank Amazon for creating a “rock” to Apple’s “hard place.”
Another commenter who doesn’t understand the profitability of subscriptions.
No, I don’t have a Kindle, of any model. I don’t AMZN stock. I do buy stuff from them on occasion. I have used Macs since 1984. But I’m not blindly pro-Apple. I do believe that there are other ways to succeed in the market besides Apple’s.
Once again folks, Amazon is using the time tested razor and blades business model.
http://en.wikipedia.org/wiki/Razor_and_blades
Read my comment. I did not say Amazon would not be successful. I said that the existence of Kindle Fire at $199 and iPad’s obvious dominance as the “full featured” tablet make it very difficult anyone else to sell tablet product that makes a profit. They can’t beat Amazon on price, because they can’t use the “razor and blades business model.” And they obviously can’t beat Apple by going head-to-head with iPad.
If they can’t make a profit (and lose money trying), they will ultimately give up. Apple dominates, and Amazon is helping.
I don’t think you’re correct.
How many of those Kindle Fire owners are actually going to sign up for that Amazon Prime? There is a significant percentage of Fire buyers who are only interested in getting a cheap Android tablet — the cheaper, the better, as they have very little money for such things. They fall into the usual Android user stereotype category: people who get free content and apps. Do you really believe Amazon will rake in their Prime subscription, year after year, from a meaningful number of Kindle Fire owners? I seriously doubt this.
Yes, I think you are correct in correcting qka.
Additionally, razor makers can “give away” the razor because they make the blade refills and sell them at a good profit margin. Printer makers sell really cheap printers, because they make the ink refills and sell them at a good profit margin.
Plus razors and printers are useless without blades and ink. The customer MUST continually buy those things.
Amazon does not produce the content for Kindle Fire. It only sells the content. And the profit margin (for Amazon) on most of that content is very slim. How many ebooks does Amazon need to sell, to break even on a Kindle Fire sold at a loss? Plus, Amazon content is not even required to use a Kindle Fire; it’s the customer’s option to buy it or not buy it.
So as I said, “it remains to be seen if this strategy is ultimately profitable.”
This sounds a lot like the netbook buildup, which ended up largely collapsing a couple of years ago.
“it might spin off its Nook e-reader business to reduce losses as it warned of lower 2012 earnings.”
“It expects annual EPS losses to be $1.10 to $1.40. Analysts were expecting a 63 cent loss.”
Only on Wall Street would a bigger than expected loss be described as “lower 2012 earnings.” Must have used a PC to calculate that . . . .
This is a bad headline. As someone close to this subject, the spinoff does not mean a sell off. B&N is looking to separate the costs involved in running their brick and mortar and the Nook.
B&Ns problem is their policy towards price matching and returns. It is NOT a consumer friendly place to buy a book. If they would think of their stores as warehouses they would be better served. B&N has become the place where I decide what to order from Amazon.