Barnes & Noble CEO William Lynch resigned from the struggling bookseller this week, two weeks after a disastrous annual earnings report that highlighted declining Nook tablet sales in the midst of a boom market for similar, competing devices. Lynch’s exit has onlookers wondering whether Barnes & Noble will move more aggressively to shed itself of the Nook business unit. And Microsoft has emerged as a potential suitor.
“I appreciate the opportunity to serve as CEO of this terrific company over the last three years,” Mr. Lynch said in a prepared statement. “There is a great executive team and Board in place at Barnes & Noble, and I look forward to the many innovations the company will be bringing to its millions of physical and digital media customers in the future.”
Barnes & Noble also expressed its appreciation for Lynch’s work, but said it was in a transition phase and would not name a new CEO. Instead, the firm is “in the process of reviewing its current strategic plan,” and will provide an update to that plan when possible.
Barnes & Noble had already been planning to spin off its unsuccessful Nook tablet business and had announced plans to stop making the color devices. (The Nook content business, which consists of ebooks and other electronic content, is apparently more successful and will continue alongside the black & white reader devices and Nook’s software efforts.)
With a 2012 investment of $300 million in the Nook business and rumors of a $1 billion offer for Nook this past May, Microsoft has emerged as the obvious suitor for the spun-off Nook business. Microsoft already makes a line of Surface tablets and could add the Nook reading software to Windows. The Nook business was valued at $1.7 billion at the time of that investment, so Microsoft owns about 18 percent of it, with Barnes & Noble owning most of the rest. (Pearson also owns a small minority stake.)
Although the Nook hardware and software is generally well regarded, the color devices have never sold well in a market dominated by Amazon’s Kindle lineup and Apple’s iPad. Indeed, the firm lost $475 million on Nook in the past year alone. But Barnes & Noble has made a Nook app available on all major mobile platforms, so customers can continue to access their content on other devices.