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Barnes & Noble Lays Off Employees, Refocuses on Content

By Andrew Marder – Feb 10, 2014 at 4:45PM

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Barnes & Noble has laid off its Nook engineers in a bid to spend less on devices, a business it was ill-suited to from the start.

Barnes & Noble (BKS) is trimming the fat, Business Insider reported. In this case, the fat is represented by the company's Nook hardware engineers, who have reportedly been laid off. For the book retailer, the move is just one more step on the road to lowered costs and higher profits, now that the Nook has become a secondary interest.

Last year, Barnes & Noble killed, then revived the Nook, but future plans for the device are still unclear at best. The Nook GlowLight was released in the company's fiscal third quarter last year. In its fiscal 2014 second-quarter earnings call, management said "there's opportunity in all aspects of the products at NOOK, depending upon how [it] elect[s] to go to market." That's a strategy as clear as lead.

Cost management at Barnes & Noble
One of the big focuses for Barnes & Noble has been cutting down on the costs associated with the Nook division. In its last quarter, digital content and Nook device sales plummeted, while the division's costs dropped just 2%. When the Nook was seen as the bold new face of the business, Barnes & Noble may have been happy to pump the cash into the device. But those days are gone.

Now the Nook is a brand and a platform that Barnes & Noble is trying to squeeze for as much value as it can. Like an old man with an under-ripe lemon, the company is applying all the pressure it can muster for a few drips of return. In the future, that's going to see the company working with more third parties to get the Nook platform onto other devices.

Already, Barnes & Noble has struck deals to place Nook reader software onto Microsoft and Samsung tablets. The hope is that those partnerships and similar deals will drive digital content sales without requiring the intense hardware development that Barnes & Noble can no longer afford.

Wiping the slate clean
Dropping its engineering team is a big blow for the company, and it's symbolic of Barnes & Noble's separation from idea of the Nook as a cutting-edge piece of hardware. Over the past every-year-ever, Amazon.com has shown it's not shy about spending cash, and Barnes & Noble simply doesn't generate enough to keep up.

Barnes & Noble's bold new future is focusing on content -- which is what we're calling books, now. That might not seem revelatory, but for the business it's a very big deal. Today we're learning that Barnes & Noble layoffs simply "aligned NOOK's cost structure with business realities," and the reality is that Barnes & Noble isn't a devices company.

Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com, Barnes & Noble, and Microsoft. 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.

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