As per media reports, bookstore giant,
Barnes & Noble, Inc.
) is lowering the headcount from its distressed NOOK division to
contain costs. Investors reacted positively to the approach,
sending the shares up 8.8%
NOOK division handles the company's digital business including
digital content, devices and accessories. It was developed to
expand Barnes & Nobles' digital business and to enable the
company to compete better with behemoths like
The company had invested heavily for the development of NOOK and
had collaborated with technology giant
). In Apr 2012, the latter invested $300 million for a 17.6%
However, at present, the division seems to have failed to deliver
as per desired expectations.
NOOK has been in the doldrums for quite some time. The company
reported a massive fall of over 60.5% in revenues generated from
the division during the holiday season (nine weeks ended Dec 28,
2013). Management blamed the lack of new products and severe
competition as the primary reasons. Earlier too, the company had
reported a 32.2% year-over-year revenue decline in the division
in the second quarter fiscal 2014 (ended Oct 26, 2013).
The layoff is part of the company's efforts to streamline the
operations of the division in order to keep itself afloat amid
the competitive environment. We believe that Barnes & Noble
will not stop with this measure alone. Given the increasing
competition from e-Commerce bellwethers, Barnes & Noble has
to cut costs aggressively to improve upon its margins. Therefore,
we can anticipate many such restructuring initiatives at Barnes
Currently, Barnes & Noble carries a Zacks Rank #3 (Hold).
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