Digital division of Barnes & Noble received financial boost from British Pearson

The Media unit of Barnes & Noble Inc has given a boost to the national bookstore operator following the buying of Pearson Plc of 5 percent stake of the said division, estimated to be at $89.5 million. The acquisition of the British education and media publisher sent the shares of Barnes & Noble Inc skyrocketing with as much as 9.7 percent last Friday.

The Nook Media unit makes up the digital business of the American bookstore business, which includes the store’s Nook digital bookstore and Nook tablets and e-readers, as well as 674 college bookstores in the entire United States.

Pearson Plc owns both the Penguin Group publishing house and the Financial Times news agency.

The investment of Pearson follows Microsoft Corp’s investment in April which gave the digital business of  Barnes & Noble $300 million in cash. The move of Microsoft was a positive one  as it increased the bookstore’s shares up to 79 percent afterwards. Microsoft and Barnes & Noble concluded their deal in October.

Following the deal with Pearson, Barnes & Noble will be owning 78.2 percent of its digital business, while Microsoft will have around 16.8 percent ownership.

“We always believed that Microsoft was as interested in Barnes & Noble’s opportunity in education as it was in the digital consumer arena,” Janney Montgomery Scott analyst  David Strasser said.

“But after this investment from Pearson, it is more clear that Nook Media has its sight set on transforming the way education is administered in the US and around the world,” Scott  wrote in a research note to clients.

Barnes & Noble’s Nook unit had been a hit revenue source after it was launched in 2009 as more and more readers buy ebooks. But product development and marketing expenditures to   stay competitive against rivals like Amazon also made the venture expensive to maintain.

Last November, Barnes & Noble said that its Media unit has increased its quarterly loss following the division’s increasing spending to develop its r-readers and tablets so it could compete with its bigger rivals–Apple Inc and Amazon.

The company also announced on Friday that sales during the holiday season will not hit the targets as preliminary results and sales trends show demand for its products.

The top US bookstore operator planned to give figures of its holiday sales on January 3. During November, the company said that its digital product sales during the four-day weekend on Thanksgiving–usually the busiest time of the year for retailers–had doubled compared to its last year sales figures. Barnes & Noble said that the increased in sales due to the advertising effort by Target Corp and Wal-Mart Stores Inc.

Some early findings find the 2012 holiday season to be the worst yet for retailers since the 2008 financial crisis as sales targets are falling well below expectations.

Barnes & Noble shares rose as much as 6.1 percent on the New York Stock Exchange on Friday afternoon, from $15.23 to $15.74. The company shares were the fourth highest gainer in percentage in the stock brokerage during that day.

source: reuters

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