Lynch’s Departure Seen Boosting Barnes & Noble Founder’s Control
Riggio and Lynch clashed on the “proper spending levels” for Nook Media, something that led Riggio to move to acquire the retail business, a proposal the B&N board continues to weigh, Janney Capital Markets analyst David Strasser said. The board also continues to seek potential partners for the Nook division and will consider selling it, he said. Lynch was named B&N CEO in 2010, having previously served as president of BarnesandNoble.com. He helped launch Nook in 2009 (CED Oct 22/09 p1). Yet Riggio’s taking on a greater management role -- B&N Chief Financial Officer Michael Huseby was named CEO of Nook Media and president of B&N -- “does call into question whether he still intends to purchase the retail business,” Strasser said. “That seems less likely with this new management structure."
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Among the potential buyers or partners for the money-losing Nook business are Microsoft and Pearson, which both once valued the division at $1.8 billion, analysts have said. Its value has since declined as the Nook business deteriorated, analysts said. Pearson purchased a 5 percent stake in Nook Media earlier this year for $89.5 million (CED Jan 24 p3), while Microsoft has a 16.8 percent stake it bought for $605 million, including $300 million in equity.
With Huseby’s financial background, spending on the Nook business will be reviewed more in line with Riggio’s viewpoint, Strasser said. Huseby played key roles in landing the Microsoft and Pearson investments in Nook Media, he said. “We look for a more financially disciplined strategy to stem losses” at Nook Media, Strasser said. “We anticipate a scaled-down version of Nook that will be more focused on profitability than growth at any cost.” Tensions between Riggio and Lynch “became more apparent” as losses mounted because spending was “more robust than Mr. Riggio wanted it to be” amid the “weak” financial results, Strasser said.