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Barnes & Noble is splitting into two companies: one for Nooks and one for books

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Nook and Nook HD+ are being discontinued, leaving the new Samsung Galaxy Tab 4 Nook to carry the torch

By Carl Franzen Jun 25, 2014, 9:12am EDT From left: Barnes & Noble Nook e-reader and Nook Tablets Barnes & Noble

Barnes & Noble will divide itself into two companies, one dedicated to the tanking Nook hardware business and the other the more profitable —but still struggling— brick-and-mortar book-retail operation. As Barnes & Noble CEO Michael Huseby explained today in its 2014 fourth quarter earnings: "We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately." The move concludes a long, bumpy fall from grace for what was once America's largest bookseller chain, which launched the Nook in 2009 as a surprisingly sophisticated competitor to Amazon's Kindle.

1 million Samsung Nook tablets are coming to store shelves

Ultimately, Amazon won out as the preferred e-reader for Americans, and Barnes & Noble's attempts to offer a Nook Tablet also resulted in massive sales losses, leading to the ouster of its CEO in 2013. And if there's a turnaround in store for the Nook hardware division, it remains far from view. Barnes & Noble reported that Nook revenue decreased by $25 million in the quarter, a drop of over 22 percent from the same quarter last year. Nook revenues were down $274 million, or nearly 40 percent for the year. Barnes & Noble's main retail operation is faring better, but not tremendously so, up less than a percent for the quarter year-over-year and down nearly 6 percent for the year.

The spinoff of the Nook business into a wholly separate public company comes after years of contemplation by Barnes & Noble management. Barnes & Noble was already operating the Nook hardware division as a joint-venture with investment from Microsoft, and the company recently partnered with Samsung to manufacture a co-branded "Samsung Galaxy Tab 4 Nook" tablet. The details of the split remain to be seen. On an investor conference call this morning, Barnes & Noble executives remained guarded about details of the new companies, but indicated that currently, the plan is for the successful Barnes & Noble college textbook division to be folded into the new separate Nook company.

Other hardware makers could create Nook tablets

Executives further confirmed the company will be "sunsetting" its other tablets, the Nook HD and Nook HD+, although they will still be available for sale until the stock runs out. Barnes & Noble has committed to an initial order of 1 million Galaxy Tab 4 Nook devices from Samsung, but noted that there was no exclusive detail between the companies, leaving the possibility open that other hardware makers could make new Nook tablets at a later date.

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