July 20 (Bloomberg) -- After the final adventures of Harry, Hermione and Ron, Scholastic Corp. may face an exodus of shareholders if the company doesn't consider selling itself.

Investors including Mark Boyar of Boyar Asset Management Inc. say the New York-based publisher should be sold because Chief Executive Officer Richard Robinson, who has run Scholastic since 1975, hasn't used the windfall from ``Harry Potter,'' the biggest hit in books in the past decade, to build successful new businesses. Robinson said today he has no intention of selling.

As the seventh title in J.K. Rowling's series about the boy wizard makes its debut tomorrow, shares of Scholastic, the book's U.S. publisher, are trading at 0.66 times annual sales, compared with 1.04 times sales for rival U.S. book publishers. The shares would be worth more than $50 each, or 48 percent above their current price, if the company were to sell itself, Boyar and Stifel Nicolaus & Co. analyst Drew Crum said.

``This is a very, very valuable business, and it would be worth a lot more to a potential buyer,'' said Boyar, president of his New York-based firm, which owned 200,000 Scholastic shares as of March.

Scholastic shares have returned an average of 7.5 percent a year over the past 10 years through June 30, versus 13 percent for the S&P MidCap Index. They fell 41 cents to $33.80 at 4 p.m. New York time in Nasdaq Stock Market trading.

`Too Much Fun'

Robinson, whose father Maurice founded the company in 1920, ``is not a seller,'' Chief Financial Officer Maureen O'Connell said in an interview. Through its ownership of Class A shares, the Robinson family controls four-fifths of Scholastic's board.

``I don't think Dick's going anywhere,'' O'Connell said. ``He's having too much fun right now.''

Scholastic's latest stumble is in its direct-mail business, where subscriber delinquencies are rising. Yesterday, the company reported fourth-quarter profit of $40.4 million, or 93 cents a share, missing analysts' average estimate.

Robinson, 70, said yesterday he has a plan to cut the direct-mail unit's losses by about $20 million this fiscal year or exit the business.

``We have no intention of selling the company, and we don't believe our investors need us to sell the company to realize value,'' Robinson said today in an interview.

Scholastic had already cut its profit forecast in March. A year ago, the company said it would cut expenses by $40 million annually, including reducing promotional costs at its school book-club order program, where revenue growth had slowed.

``This company has a portfolio of assets that when they fix one, it seems like another one falls apart,'' said Cleveland- based Crum, who lowered his rating on Scholastic shares to ``hold'' from ``buy'' on July 16 and doesn't own any.

Higher Value

Scholastic's steady cash streams and opportunities to improve profit margins make the company attractive to private equity firms, Crum said.

Publishers typically sell for 1 to 1 1/2 times revenue, Crum said. ``Clearly, the private equity value of Scholastic is much greater than the public value.''

Crum declined to speculate on potential buyers. He said he doesn't think Robinson is willing to sell.

Scholastic wouldn't fit in as part of another publishing company because it is ``a real hybrid,'' said Jim Milliot, business and news director at Publishers Weekly in New York. ``They do a lot of publishing but they're also a really big distributing company.''

``Harry Potter,'' the biggest children's book series ever, has sold more than 325 million copies worldwide since 1997. It holds three slots among the 10 best-selling books in the U.S. since 2001, the year the first movie was released, according to Nielsen Co.

Family Run

Scholastic bought the U.S. rights from London-based Bloomsbury Publishing Plc in 1997. Both companies, among the few publicly held book publishers that remain independent, are family run. Each is faulted by investors for failing to use the revenue from Harry Potter books to develop new franchises.

The series, which has been translated into 63 languages, follows the life of student Harry Potter, a British boy and wizard, who attends the Hogwarts School of Witchcraft and Wizardry. He and his friends, Ron Weasley and Hermione Granger, use their magical powers to fight enemy Lord Voldemort, also known as ``He-Who-Must-Not-Be-Named,'' who killed Harry's parents.

The series brought in $800 million in revenue for Scholastic from the first title's U.S. publication in September 1998 through the fiscal year that ended this May, Crum said. That amounts to 4.7 percent of sales over nine fiscal years.

Crum predicts Scholastic will reap another $225 million this fiscal year, or 9.4 percent of $2.4 billion in sales, and 62 cents a share out of $2.79 in profit.

Sales Growth

``Most people think they can be more profitable,'' Milliot said. ``The CEO needs to get the different operations operating well at the same time.''

Sales at Scholastic rose from $1.06 billion in fiscal 1998 to $2.18 billion in fiscal 2007, an average of 8.4 percent a year, according to Bloomberg data. Without the $800 million Crum says the series contributed, sales would have grown 8.2 percent annually.

Scholastic plans to print a record 12 million copies of the final entry in the series, ``Harry Potter and the Deathly Hallows.''

While sales will decrease over time, Scholastic will still get about $10 million to $15 million annually from ``Harry Potter'' for the next three years, driven by special editions, the publicity of two more movies and paperback copies, Crum said.

Bloomsbury Expansion

Children's publishing provided 53 percent of Scholastic's sales last year. Robinson has expanded elsewhere, with programs that help children read and book fairs. A $200 million share buyback plan, aimed at repurchasing about 14 percent of the stock, boosted the price in June.

Publishing companies typically have lulls following hits, said Kara Cheseby, a Baltimore-based analyst with T. Rowe Price Associates Inc., Scholastic's largest shareholder with 3.84 million shares as of March.

``At times you have big hits and they supplement your business,'' Cheseby said. ``Harry Potter is just one part of the business.''

Finding another hit won't be easy. Scholastic's U.K. counterpart, Bloomsbury, saw 29 percent of its stock value vanish in December after a gamble on celebrity biographies and cookbooks for the Christmas season failed to pay off. The shares have dropped an additional 27 percent year-to-date.

``The future for the company without Harry Potter is looking dark,'' said Henk Potts, an equity strategist at Barclays Wealth in London who helps manage $185 billion. ``Bloomsbury looks set to return to being a small and rather boring publishing company.''

Scholastic faces similar challenges.

``What they should really be doing is putting the company up for sale,'' Boyar said.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net.; Katie Hoffmann in New York at Khoffmann2@bloomberg.net.

Last Updated: July 20, 2007 16:30 EDT