The stock is down 7.3% at midday following the book chain’s warning last night that there’s bad news ahead regarding its NOOK e-readers and tablets. It now forecasts that NOOK revenues for the fiscal year that ends in April will come in below $3B, with a cash-flow (EBITDA) loss that will be “greater than it was in fiscal 2012.” That contradicts Barnes & Noble‘s assurance last month that the NOOK unit would generate revenues of about $3B, with a cash flow loss “at a comparable level to fiscal year 2012.” And it makes 2013 the third straight year that Barnes & Noble will miss its guidance, Maxim Group analyst John Tinker notes. The NOOK business “is proving to be expensive — and with slowing revenues makes spinning it off to tech investors harder,” he says. “At some point the company has to quantify the amount it is prepared to lose.” The company says it will report earnings for the three months ending in January on February 28, later than it tentatively planned. B&N owns about 78.2% of the NOOK Media subsidiary, while Microsoft controls 16.8% and Pearson has 5%.
So much for the hope that price cuts and favorable reviews would enable Barnes & Noble‘s NOOK tablets and e-readers to keep up with comparable products from Apple, Amazon, and Google. The No. 1 book retail chain says that NOOKs underperformed over the nine-week holiday season while revenues at the overall retail business fell 10.9% to $1.2B. “NOOK device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday,” CEO William Lynch says. “We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward.” The one saving grace of the numbers is that investors expected them to be worse. B&N shares are up 1.9% in early trading Thursday, after falling 3.9% yesterday. The company says that core sales — not including NOOK products — fell 3.1% over the nine-week holiday period at stores open at least a year. That was better than B&N expected, and means the results for the basic business should be down by low- to mid-single digits for the fiscal year that ends in April. The holiday season decline rises to 8.2% when you factor in the fact that B&N has fewer stores, and had lower online sales.
The stock is down about 6.5% in early trading following the leading bookstore chain’s earnings report that left open questions about whether it can keep up with online rivals led by Amazon that continue to take market share. Helped by $2.8M in dividends received from preferred shares, Barnes & Noble reported net income of $2.2M for the quarter ending in October — up from a $6.6M loss a year ago — on revenues of $1.88B, -0.4%. The revenue figure is slightly lower than the $1.91B that analysts expected. But excluding the dividend, the net loss attributable to B&N of 4 cents a share beat the Street’s forecast of a 6 cent loss. At the retail unit, which includes the bookstores and book sales at BN.com, revenues fell 2.9% to $996M. The company says that last year’s numbers were helped after Borders liquidated. But in stores open at least a year, sales (not including its NOOK eReaders and tablets) were up 1.8%. In college textbooks B&N revenues were up 0.4% to $773M. Meanwhile the NOOK operation — which includes the hardware as well as digital content — remains a mixed story: Revenues were up 5.6% to $160.3M but it still generates a cash flow loss as B&N invests in new products and overseas expansion. The company says that NOOK unit sales doubled in last week’s four day Black Friday period vs last year — which matches Amazon’s experience with its Kindles.
NBC Universal and 20th Century Fox Home Entertainment will supply standard definition and HD movies and TV shows to the NOOK Video download and rental service — just as Barnes & Noble prepares this week to ship its NOOK HD and NOOK HD+ tablets and offer them in its stores. The bookstore retailer’s release skimps on details about the agreements, including how much content the studios will provide, how much titles might cost, and what other devices might be able to handle Nook Video streams and downloads. But it says that titles include Snow White And The Huntsman, Battleship, Dr. Seuss’ The Lorax, Ice Age: Continental Drift, and Diary Of A Wimpy Kid: Dog Days. Along with its previous deals with HBO, Sony Pictures Home Entertainment, STARZ, Viacom, Warner Bros, and Disney, Barnes & Noble says it will offer “thousands of movies and TV shows for all ages and interests.” The new agreements, and tablets, also are designed to make it easy for NOOK owners to stream videos from their UltraViolet accounts.
The “sophisticated criminal effort” captured consumers’ credit and debit card numbers after conspirators planted bugs in PIN pads at 63 Barnes & Noble stores, the company says this morning. The scheme didn’t affect Barnes & Noble’s Nook tablets or mobile apps, the chain’s member database, or any Barnes & Noble College Bookstores. B&N says it caught the problem in mid-September, and that it’s safe now to use credit and debit cards at its stores. It pulled all of the PIN pads in nearly 700 outlets. Still, the company urges consumers at the stores that were hit — listed in the press release below — to change their PIN numbers and check their accounts to be sure that they don’ t include phony transactions.
Here’s the release:
Shares rose 8.3% to $14.96 this afternoon after CEO William Lynch vigorously argued at a Liberty Media investors’ meeting that stock buyers aren’t giving the book retail chain its due. With a market price of about $884M, the company that generated $7.2B in revenues last year “is undervalued,” he says. There’s a “strong, profitable and vibrant business” in its traditional bookstores, especially as rivals including Borders have closed. Lynch also urged investors to take a closer look at its new Nookmedia LLC partnership with Microsoft. The operation was valued at $1.7B this year when the computer giant invested $300M for a 17.6% stake in an operation that includes B&N’s Nook e-readers and tablets, e-Books, and college-targeted software. B&N’s stock price suggests that “investors are getting Nookmedia for free,” Lynch says. That overlooks the opportunities for the company as it builds its eBook sales, digital subscriptions, and eLearning — which he says has “big plans and announcements coming.” Lynch also talked up the new Nook HD and Nook HD+ tablets, which have won encouraging reviews ahead of the October 25 ship date. Nookmedia is “a big and growing company in an exploding space,” Lynch says. Liberty owns 17% of B&N.
That’s hard to say: Even Barnes & Noble can’t articulate why consumers might favor its planned digital video purchase and rental service over its more established rivals. There’s no word on how much movies and TV shows will cost. It’ll be “incredibly competitive,” says B&N General Manager of Emerging Digital Content Jonathan Shar. We don’t know how many movies and TV shows B&N will offer, or how recent most titles will be. We don’t even know whether it will work with all flavors of Apple and Android powered devices. “As one of the world’s largest retailers of physical video discs and digital copyrighted content, our new NOOK Video service will give our customers another way to be entertained with a vast and growing digital video collection, as part of our expansive NOOK Store,” CEO William Lynch says.
Shares in Barnes & Noble were trading up ahead of the opening bell today as the company reported fiscal 2013 Q1 results. The bookseller’s consolidated Q1 net loss narrowed 28% to $41M as compared to a loss of $56.6M a year ago. Consolidated revenues were $1.5B, up 2.5% from the year prior. Digital content sales were up 46% while bookstores saw growth thanks in part to market consolidation, but also to the best-selling Fifty Shades Of Grey series. Retail, which includes bricks & mortar outlets and BN.com, was up 2% over the same period in 2011 with $1.1B in revenues. Overall, the Nook business unit was essentially flat compared to last year with $192M in revenues. On Monday, Barnes & Noble said it would begin offering the Nook e-readers and digital content in the UK. Products will be available through new online storefront www.nook.co.uk beginning in mid-October, and also through partnerships with leading retailers.
Barnes & Noble shares are up more than 70% in pre-market trading following the announcement. The computer software giant will own 17.6% of the Nook subsidiary, valuing it at $1.7B, and provide a Nook application in its new Windows 8 operating system, the companies said this morning. Barnes & Noble will own the remaining 82.4% of the venture. The agreement also settles the patent infringement complaint that Barnes & Noble raised against Microsoft last year. The bookseller and its Nook subsidiary “will have a royalty-bearing license under Microsoft’s patents for its NOOK eReader and Tablet products,” the companies said. Barnes & Noble is throwing its College books business into the subsidiary. Its Nook Study software “will provide students and educators the preeminent technology platform for the distribution and management of digital education materials in the market.” Barnes & Noble CEO William Lynch says that Microsoft’s investment will help “bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, (and) will allow us to significantly expand the business.” Barnes & Noble said in January that it was considering a spin off of its Nook business. The book chain says in an SEC filing that Microsoft will pay the Nook subsidiary $60M a year in the first three years after it launches Windows 8, as well as $25M a year for five years to help the enterprise acquire digital reading content and develop technology.
The stock is down 25% in early trading following the book store chain’s announcement that it may unload or spin off its Nook operation. “We see substantial value in what we’ve built with our Nook business in only two years, and we believe it’s the right time to investigate our options to unlock that value,” CEO William Lynch said. The company added that it’s talking to ”strategic partners including publishers, retailers and technology companies in international markets that may lead to expansion of the Nook business abroad.” There’s no timetable for the review of the Nook business, and Barnes & Noble says that it doesn’t plan to comment on the process “unless and until a decision is made.”
Barnes & Noble says that during the nine-week holiday season total sales for the Nook line were up 70% vs the same period last year. But while demand for its new Nook Tablet was strong, sales for its Nook Simple Touch “lagged expectations, indicating a stronger customer preference for color devices.” B&N updated its earnings guidance saying that it now expects cash flow of as much as $180M in the fiscal year that ends in April — down from its forecast in December for as much as $250M. “The change in guidance is due primarily to a shortfall in the expected sales of Nook Simple Touch, as well as additional investments in growing the Nook business, such as advertising to support new products and international expansion …
The trading day ended with a thud. The benchmark Standard & Poor’s 500 wound up -2.1% as word spread that Germany might balk at a proposal to help bail out debt-laden members of the European Union including Greece and Portugal. That affected media stocks; the Dow Jones U.S. Media Index fell 3%. Disney was the hardest hit among the Big Guns, with shares off 3.2%. It was followed by News Corp (-3.1%), CBS (-3%), Comcast (-2.9%), Time Warner (-2.7%), Viacom (-2.3%), and Sony (-2.1%). Newspaper companies were big losers led by McClatchy (-10%), New York Times (-7.3%), E.W. Scripps (-6.5%), and Gannett (-6.3%). But others weren’t far behind: Cablevision (-6.1%) hit a 52-week low. The losers list also included Crown Media (-6.6%), AOL (-5.9%), DirecTV (-4.7%), Live Nation (-4.4%), Barnes & Noble (-4.3%), TiVo (-4.2%), Sirius XM (-4.2%) and Dish Network (-4.2%). Today’s few gainers were led by Coinstar, up 7.8% on a report that its Redbox unit will team up with Verizon to offer an online video service. Martha Stewart Living Omnimedia was up 1.7% the day after J.C. Penney said it bought 16.6% of the company. And Madison Square Garden was up 1.7%, hitting a 52-week high, after Morgan Stanley’s Benjamin Swinburne changed his recommendation to “overweight” from “underweight” following the resolution of the NBA lockout.
The federal government will have to slash $1.2T in spending, mostly beginning in 2013, if the 12-member congressional Super Committee can’t strike a deficit reduction deal soon. They still appear split — even though, as a practical matter, they have to reach an agreement by midnight in order to have something ready for the official Wednesday deadline. That drove most company shares down, with a late uptick possibly softening the blow. The Dow’s U.S. Media Index was down 1.2% about 20 minutes before the end of the trading day. Disney was hardest hit among the industry’s biggest players: Its shares were -3.5%, followed by Sony (-3.4%), CBS (-2.3%), Viacom(-2%), and Time Warner (-1%). Comcast was up about 0.5%. Among other media companies, Cinedigm (-8.8%) and RealD (-7.2%) took the worst beatings. Others down at least 4% include E.W. Scripps, Entercom, Crown Media, Netflix, National CineMedia, Live Nation, LIN TV, and Dish Network. Gainers include Westwood One, Barnes & Noble, Sirius XM, Radio One, McClatchy, and McGraw Hill.
Investors seemed to like what they heard at today’s annual confab for John Malone’s Liberty Media. Shares of the hodge-podge of companies it either owns or controls were up on a day when the market was shaken by new fears that the European debt crisis will widen. Liberty Starz ended the day +1% and Liberty Capital was +0.5% after their parent said it will combine the two tracking stocks into a single asset-based security. But Live Nation was +6.7%, Barnes & Noble was +5%, and Sirius XM was +4.8% following CEO presentations to the Street.
Malone was more subdued than usual. But the executive who became a billionaire on the back of his devilishly complex deals — often to help him avoid paying taxes — got a chuckle in his response to a question about whether the changes in his tracking stocks will make their businesses confusing for investors. “We’ll get as complicated as we need to get to highlight value.” he said.
Sirius XM’s Mel Karmazin won the biggest laughs, though, with
Amazon stoked the hype around its new Kindle Fire tablet by shipping it a day ahead of schedule, the company announced today. That’s a smart move: In addition to the extra PR and customer goodwill it generates, the decision gives the online retailer one more day to sell videos, music, and books that will “offset the weaker margins (or even losses)” it may see this quarter by selling the tablet below cost, Caris & Co analyst Scott Tilghman says. Research firm iSuppli estimates that Amazon spends about $210 to make each Kindle Fire that it sells for $199. No wonder the promotion machine is in high gear: Hulu Plus — which is available on the iPad and Barnes & Noble’s new Nook Tablet — today joined the parade of content companies crowing about their Kindle Fire apps. A Hulu Plus subscription costs $7.99 a month, and can be used on any device that accommodates it. Hulu’s “never-ending mission is to bring you the world’s premium content when, where and how you want,” senior product manager Lonn Lee says in a blog post.
The tablet wars are intensifying as the holiday shopping season approaches: Amazon kicked things up today by announcing that Kindle Fire customers will only have to fill out one form to register for multiple media services including Netflix, Rhapsody, Pandora, Facebook, and The Weather Channel — and games from companies such as Zynga, EA, Gameloft, PopCap, and Rovio. What’s more, people who go through Amazon to buy the apps for their tablet will also be able to access them on other Android devices including mobile phones. The company will start to ship Kindle Fire tablets on November 15. The announcement follows Barnes & Noble’s announcement on Monday that it’s new Nook Tablet will include apps for Netflix, Hulu Plus, and Pandora.
Barnes & Noble today unveiled its new Nook Tablet, which comes preloaded with apps from Netflix, Hulu Plus and Pandora. The boost in entertainment options compared with previous versions signals the company’s intention to compete in the space against the likes of Amazon’s Kindle Fire and Apple’s iPad. And it is throwing down the gauntlet just in time for the holiday buying season: Nook Tablet is set to begin selling around November 17 for $249. Billed as an update to its e-reader Nook Color, the new incarnation has a 7-inch screen, Web browsing and email in addition to “access to the world’s largest digital bookstore via Wi-Fi.” It plans to offer Flixster and UltraViolet soon. The device has 16 gigabytes of storage and a battery life that will enable 11.5 hours of reading time or nine hours of watching videos in a single charge. Barnes & Noble also said today that it is lowering the price of its Nook Simple Touch (to $99) and Nook Color ($199).
Media stocks suffered along with just about everyone else today after the Federal Reserve stirred recession fears by reporting “significant downside risks to the economic outlook” — and World Bank President Robert Zoellick warned that global economies are in a “danger zone.” The Dow Jones U.S. Media Index fell 3.9%, slightly more than the 3.5% drop in the DJ Industrial Average. Companies most exposed to advertising were hard hit. CBS led the pack among the industry’s Big Guns with shares down 7.2%. It was followed by Viacom (-6.6%), Disney (-5.5%), Comcast (-3.8%), Time Warner (-3.6%), News Corp (-3.3%), and Sony (-2.7%). Others falling at least 7% include Nielsen and Sirius XM. Those dropping at least 6% include Martha Stewart Living Omnimedia, The New York Times, Coinstar, IMAX, and Cumulus Media. Even in the battered market, a few media companies were up on the day including Live Nation (+2.1%), Barnes & Noble (+3.1%), Scholastic (+6.8%) and Westwood One (+20.8%).
It’s “more likely than not” that new online video streaming providers such as Amazon will offer some programming on a premium tier — a contrast with Netflix’s single-price package – Liberty Media CEO Greg Maffei said this morning at the Goldman Sachs Communicopia conference. He broadly hinted that his company’s desire to charge extra for Starz was a big reason why the premium channel recently ended negotiations to extend its carriage deal with Netflix. The current arrangement, he says, is “inconsistent” with the way consumers receive Starz on pay TV.
More broadly, Maffei says that Liberty is on track to split off its Liberty Capital and Liberty Starz tracking stocks by tomorrow now that it has beat back a court challenge by bondholders. The deal transfers some assets to the spun-off companies, violating some bond agreements. But the Delaware Supreme Court yesterday upheld a lower court decision that said the split-off is OK because it isn’t part of what it called an “overall scheme” to hurt bondholders. That likely won’t change the overall strategy for the company that’s controlled by the famously tax-averse former cable titan John Malone — and that some analysts say is little more than a portfolio of stock holdings. “Finding things to buy at attractive prices is the biggest chalenge we have today,” Maffei says.
In May, John Malone’s Liberty offered to buy all of Barnes & Noble for $1B. But the offer stalled and the book retailer said Thursday that the takeover talks had been ditched in light of the $204M investment agreement. Under the terms of the deal, Liberty Media bought preferred stock convertible into about 12 million Barnes & Noble shares at $17 apiece, giving it about a 17% stake in the company. The preferred shares will pay an annual dividend of 7.75%. Liberty will also get two seats on the company’s board of directors, which is being expanded to 11 members. It has nominated Greg Maffei, its president and CEO, and Mark Carleton, a senior vice president, to take the seats.
Barnes & Noble put itself up for sale last year in response to pressure from billionaire shareholder Ron Burkle, but the company didn’t strike a deal. Burkle, who has since stepped back and cut his stake, said Thursday in a statement that he had “grave concerns about the pricing and process.” Meanwhile, Barnes & Noble has continued to struggle along with other traditional book sellers — longtime rival Borders Group recently went out of business — facing tough competition from online retailers like Amazon.com and discounters like Wal-Mart. Leonard Riggio, chairman of Barnes & Noble, said the capital injection from Liberty will go toward expanding the company’s digital business.
Maffei said Liberty Media is …