Barnes & Noble Gets Closer to Breakup as CEO Resigns
Barnes & Noble Inc. (BKS) moved closer to breaking up the largest U.S. bookstore chain after its chief executive officer resigned and it named a manager with a history of spinning off units to its most senior position.
William Lynch stepped down yesterday, effective immediately, and Barnes & Noble promoted Chief Financial Officer Michael Huseby, 57, to be president of the company and CEO of Nook Media. It isn’t looking for a new CEO and Huseby will report to Leonard Riggio, the chain’s chairman, founder and largest shareholder, the New York-based company said.
Barnes & Noble is considering splitting up its businesses after Riggio said in February that he planned to make an offer for its 680 stores and website. The company also created a digital-media division last year with the possible goal of spinning it off.
“This should bring this to a head,” said John Tinker, a New York-based analyst at Maxim Group, referring to the company’s review. “Lynch was always the champion of the Nook and it didn’t work,” said Tinker, who has a buy rating on the stock.
Huseby joined Barnes & Noble in March 2012 after holding the chief financial officer position at Cablevision Systems Corp. (CVC), where he helped spin off two divisions. He is now Barnes & Noble’s most senior executive and the company isn’t looking for a replacement for Lynch as it weighs options for selling and separating its businesses, Mary Ellen Keating, a spokeswoman, said in an interview yesterday.
In May, TechCrunch reported that Microsoft Corp. (MSFT) was planning to make a bid for Nook Media. The shares surged 24 percent to $22.08 on May 9 after the report. Keating declined to comment on the progress of the company’s possible breakup and declined to make an executive available for an interview yesterday.
The shares rose 5.4 percent to $18.61 at the close in New York. The stock has gained 23 percent this year, compared with a 16 percent rise for the Standard & Poor’s 500 Index.
Barnes & Noble named Lynch CEO in March 2010 after he joined the company the previous year to lead its Web unit. As CEO, he oversaw its foray into making e-readers and tablets as a way to tap into the growing popularity of digital books and offset slowing sales at its chain of big-box bookstores.
After some initial success in building the Nook business, sales of the devices plunged during the last holiday shopping season amid increased competition from technology heavyweights such as Apple Inc. and Amazon.com Inc.
Then last month, Barnes & Noble announced it would stop making tablets, and instead partner with a device manufacturer. It will continue making the black-and-white e-readers and selling digital books through its mobile applications.
Lynch’s resignation comes less than two weeks after the company posted a loss in the quarter ended April 30 that was twice as wide as analysts estimated. Revenue from the Nook unit sank 34 percent and its loss before interest, taxes, depreciation and amortization increased to $177 million from $77 million a year earlier.
The retailer initially pursued separating its digital and retail divisions because it said investors had undervalued the success of the Nook. Last year, it created the subsidiary Nook Media, which includes the Nook and college bookstore units, and received investments from Microsoft and Pearson Plc. (PSON)
With the decline in Nook sales last year, the strategy of spinning off Nook Media into its own company shifted to how and if the business could be revived, Tinker said. Then in February Riggio announced that he wanted to buy the chain’s retail stores and website.
If that plan goes through it would leave Nook Media as a public company, which would raise more unanswered questions, Tinker said. The answer may be Microsoft because it’s already invested $300 million, Tinker said. Microsoft’s spending goes further than that as it also pledged $305 million in additional payments over five years to help Nook expand overseas.
“It all comes down to what Microsoft’s real intentions are,” Tinker said.
Under the changes yesterday, Mitchell Klipper, head of the company’s retail unit, will also report to Riggio. Allen Lindstrom was promoted from corporate controller to chief financial officer and Kanuj Malhotra, vice president of corporate development, is now CFO of Nook Media.
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