Barnes & Noble posted its latest quarterly earnings statement today, and the results were even worse than expected, with the company posting an $87 million cumulative loss compared to a $40 million loss a year ago. But the bigger news came in the form of the bookstore chain's future business moves: the company's chairman, Leonard Riggio, said he was "suspending" his bid to buy the company's physical retail stores and separate them from its Nook Media digital devices and content. And the company sought to clarify a June announcement that it was giving up on making its own Nook tablets, saying it had been widely "misinterpreted."
"we'll move to a strategy of lower cost units and higher volume."
In an earnings call this morning Barnes & Noble executives reiterated that the company would continue to make its own black-and-white e-readers in house, while looking to third-party companies to help it create new color Nook devices. But executives also wanted to be clear that Barnes & Noble isn't getting out of the color devices business entirely, either, just shrinking its role.
"When we discussed our fiscal year 2013 results this past June, the company announced its plans to stay in the device business, and continue to make black and white e-readers, while exploring and transitioning to a partnership model for manufacturing color tablets," said Barnes & Noble president Mike Huseby, also the CEO of the company's Nook Media joint venture with Microsoft. He continued:
"Unfortunately many people interpreted these comments incorrectly, and concluded that we were getting out of the device business. I'd like to be very clear about this today: we want consumers to know that the company intends to continue to design and develop innovative Nook black and white and color devices. At least one Nook device will be released for the coming holiday, and further products are in development."
Later in the question and answer period, Huseby said that "eventually we'll move to a strategy of lower cost units and higher volume to drive more content" when it came to devices. And in terms of outsourcing development of color devices entirely, Huseby was adamant the company wouldn't be ceding total control. "Some kind of wholesale outsourcing of our color device business is neither appropriate, nor is it smart for the company," adding "If we want to be in the content business, we need to be in the device business, no matter how they're produced. We think our people can produce better devices than anyone else."
"If we want to be in the content business, we need to be in the device business."
However, Huseby also openly acknowledged that Barnes & Noble management failed to correctly gauge demand for the last round of new Nook products — including the Nook Simple Touch and Touch with Glowlight e-readers, and Nook HD and HD+ tablets. Sales of Nook devices and accessories were down a staggering 23.1 percent from a year ago. And they admitted the latest round of Nook firesales — lowering the price of the Nook Simple Touch to $99 and offering free Nook video apps — were undertaken in large part to clear out its overfull inventory. This estimation failure seems like it didn't help the case for keeping around former CEO William Lynch, who resigned from the company in June.
"The problem is not the devices," Huseby said in an unusually candid indictment of management. "The problem was that the decisions that were made by management quite frankly, in terms of the demand forecast, in terms of what was thought to be good information." Barnes & Noble executives didn't elaborate much on any future expansion of the partnership with Microsoft, which invested $300 million for a minority stake in Nook back in 2012, nor on any rumored prospects for Microsoft to buy out entire Nook business. Instead, they simply said that the Microsoft partnership was about expanding Nook digital content availability internationally, and that it was on track. Still, shareholders were openly disgruntled about the arrangement, with some estimating Barnes & Noble had lost over a billion on the Nook since it was first launched in 2009.