Barnes & Noble Finally Splits Off Nook

After years of trying to figure out what to do with Nook, Barnes & Noble has finally decided that it's time for real change.

Jun 25, 2014 at 1:04PM

It's surprising, but Barnes & Noble (NYSE:BKS) is actually a lot like my neighbor Francis. Francis has had a myriad of car parts strewn across his lawn for -- this is just an estimate, mind you -- 45 years. Every time you talk to Francis, he talks about how he's "fixin' 'er up." The thing is, he finally did fix 'er up. Now he's got a semifunctional 1977 Plymouth Volare -- and Barnes & Noble has the green light to spin off the Nook.

After more than a year of back and forth, falling sales, and cash destruction, Barnes & Noble's board got its act together and cleaned up its lawn, voting today to "take the steps necessary to complete the separation by the end of the first quarter of next calendar year." I feel the same way about both the car and the Nook -- shocked yet happy.

The Nook as the anchor dragging on the seabed
Let's start out at the top. Barnes & Noble's biggest asset is that it sells physical books in a physical store all across the U.S. and no one else does that. It's effectively the only name in the game. How does the Nook play into that strength? It doesn't.

Barnes & Noble jumped with both feet into the tablet world, but it just got steamrolled by better businesses and better products. As a result, the Nook had a 35% drop in revenue over the 2014 fiscal year. Comparable-store sales were 2.7 percentage points worse with the Nook's failure included.

Apparently, the Barnes & Noble board finally had enough and decided to get rid of the Nook once and for all. It's certainly not a new idea, as the Nook has been weighing on the business for years. Last year, founder Leo Riggio offered to buy the physical retail business, effectively splitting the Nook by leaving it behind. In August, the company finally rejected the idea.

Where the Nook goes from here
The Nook is not a cleanly defined portion of the business, in many ways. For starters, the Nook isn't wholly owned by Barnes & Noble. Over the last two years, Pearson and Microsoft have invested heavily in the division, with Microsoft owning 18% of the Nook. That means that Barnes & Noble won't be the sole voice in the Nook's separation.

The process is just now getting under way, so investors have a long time to wait until this breakup is finalized. Even so, the stock has surged on the Nook news, up around 9% by midday. The board has said that the Nook will become its own publicly traded business, which means that hopefully investors won't have to tread the tedious waters of a sale to an acquirer.

Instead, Barnes & Noble should have a straightforward path to get Nook to the market, and then it can buckle down and focus on its stronger businesses. Over the last quarter, for instance, comparable core retail sales -- sales excluding the Nook -- only fell 1.9%. Barnes & Noble has an excellent potential business, but the parts are still strewn across the yard. I can't wait to see if it can pull it all together, and it looks like now I won't have to wait long.

It's not the Nook, but this device has every company salivating
The best investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we buy goods, but potentially how we interact with the companies we love on a daily basis. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multibagger returns, you will need The Motley Fool's new free report on the dream team responsible for this game-changing blockbuster. CLICK HERE NOW.

Andrew Marder has no position in any stocks mentioned. The Motley Fool owns shares of Barnes & Noble and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers