02-28-2013 05:44 PM
From B&N CEO William Lynch, unless otherwise noted [reported out of sequence from the call]:
- Q3 revenue and earnings shortfall across the company was almost entirely a function of our missing sales targets for our 2 new NOOK tablet devices.
- bigger brands, larger technology brands have more resonance in that multifunction tablet market than we do.
- CFO Michael Huseby: NOOK expenses increased primarily to support the company's international expansion plans, as well as increased advertising spend during the quarter.
- We are working to complete the global expansion of the NOOK digital content and retailing service in approximately 10 countries, selling it over 10 languages by this summer.
- 25% share of the eBook market and an over 35% share of digital subscription market in the U.S.
- Our digital content is a profitable business for us. We carry approximately 30% gross margins and obviously has no inventory associated with it.
- CFO Michael Huseby: $59 million of device markdowns ... $21 million of incremental channel partner returns ... [and] $15 million of promotional allowances
- CFO Michael Huseby: The [NOOK] holiday sales results were below the rate we expected but there's a lot of inventory that's been built that we'll be selling into fiscal year and through fiscal year '14 that's already been paid for.
- taking significant actions to begin to rightsize the cost structure of the NOOK segment.
- I want to be clear about the fact that we continue to remain committed to the eReader and tablet business
- But yes, we are not going to continue doing what we're doing. ... we'll have announcements forthcoming
- In terms of the device hardware investments going forward, we will adjust our approach to better mitigate our investment risk, while pursuing models that better position NOOK for success.
- not investing as much in specific areas of hardware ... That's part of it. Although, you will see some innovation from us going forward.
- NOOK Media has sizable cash, no current debt and a good plan to unlock value for shareholders
- Our plan is to have NOOK Media self-finance, and we will do that by carefully managing our costs, converting existing NOOK device inventory into cash and generating cash flow in the Barnes & Noble College business. ... objective of operating the NOOK Media business at a positive EBITDA within a reasonable time frame.
- we're extremely excited about the growth opportunity digital education presents
- Education has not tipped the way the trade business has towards digital, but we expect that will happen within an abbreviated time frame and we plan to be leaders in it.
- I can tell you from talking to the CEOs of all the [publishing] houses regularly, it's something -- they've looked at the music business, and so there is value in that content and they're going to charge for it with various models. And that's all I'll say about it.
- the eBook market greatly slowed from the trajectory we'd seen before, which benefits physical books, which is obviously good for our business. ... physical book sales will have longer tail than previously anticipated.
- Retail CEO Mitchell Klipper: I want to make something very clear, given the recent news reports that we may be accelerating our store closings. That is simply not the case. ... any successful retailer closes unprofitable stores. ... Our Barnes & Noble stores will be here to serve our customers and communities throughout the country for a long, long time to come.
- regardless of what happens, our bookstores and NOOK will continue to have a close relationship for the foreseeable future.
- we're repositioning BN.com, our ship-to-home service.
Transcript from Seeking Alpha.
I have to say, over and over again they noted that they have a large inventory to sell off over the next year (yes, year). I take that to mean that we're not likely to be seeing a lot of new device models for a while.
02-28-2013 08:30 PM - edited 02-28-2013 08:32 PM
As for what isn't selling - in my experience it's the eink readers, which are getting nearly impossible to give away at this point. The people who would use a dedicated reader have one, and they also seem to be the demographic that doesn't feel the need to upgrade every year to the new model - I still get tons of happy people plunking along on their 1st Gens.
Nook Touches in like-new condition are listed on the local Craigslist for $40 and up, starting this week. This is less than Nook 1st Editions (w/ 3G) are listed for, which is about $60.
Nook Touch, and Nook Touch Limited Edition: B&N 1.2.1 rooted
Nook 1stEd/3G (two): B&N 1.7.0 rooted.; Acer Iconia A500: Android 4.0.3 rooted;
Nook Color: B&N 1.4.3 rooted; Samsung Galaxy Tab2 (7.0"): Android 4.2.2 rooted
Customer loyalty is earned, not commanded or deserved, and easily lost.
Never suspect intent where incompetence will do.
03-01-2013 10:14 AM
I unhappily noted that original NOOK Color/Tablet charger and cable sets have jumped to $45. I guess they're "classic" parts now.
03-01-2013 12:03 PM
I unhappily noted that original NOOK Color/Tablet charger and cable sets have jumped to $45. I guess they're "classic" parts now.
They're still 24.95 on the BN website. I have not seen one in my store, we still have the cable alone for 14.95. I noted awhile back when the original announcement came about the NC/NT being discontinued that these were accessories were going to become harder and harder to obtain due to the HD/+ using a new cable.
03-01-2013 12:09 PM - edited 03-01-2013 12:11 PM
Hmm. I looked at B&N last night and they showed unavailable. Weren't they $15 only a few months ago, or was that just the cable? I wound up ordering a $15 cable. (My son tripped over his and busted the cable, then swiped mine on his way back to school.)
I suspect some enterprising sould is going to snarf up proprietary charging kits and hold onto them for a bit until they become scarce. Charger kits may be worth more than the devices before too long!
03-01-2013 12:17 PM
Yeah the cable alone is 15.
I'm not surprised it came up as unavailable. I searched the site for 'nook tablet charger' and the only thing that came up was a blackberry charger. I then tried navigating through Nook - Nook tablet accessories - nook essentials, where I found the cable, and the power kit.
I have to suspect that if the power kits become overly expensive some of those people will buy a HD/+ though I also imagine a good number will be turned off from their NC/NT cable experience. It's already pretty much a financial win to buy the HD if you find you go through cables. Even at 15 a pop it's not too long before you end up spending more on cables than you would on a new device. A new device which does not appear to have a faulty connection type.
03-01-2013 01:10 PM - edited 03-01-2013 01:17 PM
Actually... I was thinking as much of the HD/HD+ proprietary charging connectors. At least I can charge my NC/NT with a uSB cable and high-output charger, albeit a bit slowly (overnight). If the proprietary cables become scarce, will there be any recourse for owners of the new devices?
The news that B&N is essentially focused on selling warehoused existing stock, and no doubt cutting back on production of accessories, including chargers and cables, might be a bit of a deterrent for those savvy enough to ask those sorts of questions. That might impact B&N's ability to recoup the expense of having produced those devices.
I'm just noting that older devices and accessories can retain "value" longer than newer to support Dean's observation.
03-01-2013 01:51 PM
03-02-2013 09:45 AM
If one has a USB charger with a voltage variance from the USB specification, the maker of the charger is likely not going to last. USB spec is for 5V DC output. I'll concede that a poorly filtered unit may have ripple (my Staples unit even has the =_=_=_=_= [solid bottom line] graphic for the output, but I've not seen any problems in charging a 1st Ed, a Zune, or a Blackberry).
Amperage, OTOH, might be a factor. Non-charger USB is rated for five "units" per chipset (powered hub). That is, any combination that adds up to 5*100mA. Special "charger" USB may go to 1A per port and a total of 1.5A per hub. The LCD Nooks prefrr to charge at those high rates. That could induce overheating the charging port if it isn't current limited, or just very slow to no charging of the device.
03-03-2013 12:33 AM - edited 03-03-2013 12:34 AM
Wulfraed, you seem like a battery guy. What do you think of those USB filter plugs that are supposed to allow you to use low amperage adapters to recharge devices that require higher amperage normally? I've seen a few posts praising them, but I'm curious if they'll damage anything over the long term.
03-03-2013 01:50 AM
For the most part, I'd say it's a gimmick.
The USB spec is for 5V, so any comment about raising voltage is already suspicious. So-called "charging ports" are allowed to reduce voltage if a device tries to draw more than the port is rated.
I suspect what these devices do is disable the data pins, making the device seem to be a powere only device. One limit on USB is that high power modes can interfere with data signals, the source (computer) may limit the port when it sees a data connection on the cable. By blocking the data pins, the computer is fooled into passing its full current capability.
Note the warning -- that full current capability may still be less than the dedicated charger puts out.
06-25-2013 11:19 AM - edited 06-25-2013 11:38 AM
The fourth quarter and Fiscal 2013 numbers are out, and they're truly bad news for NOOK Media. Yes, the bottom-line EBITDA loss was a little bit less than during the holiday quarter, but it's still over double any other prior quarter, and about triple most prior quarters. Much of that loss — $133 million out of $177 million — was writedown of inventory on NOOK devices.
Sales were at the lowest level in years. Due to the inventory writedown, gross margin was in the red for the second quarter in a row, and almost double the gross loss of the holiday quarter. The gross margin ballooned beyond the -100% point, with NOOK Media bringing in about about $42 in sales for every $100 they spent (or had spent and written off). Add to that Sales & Admin expenses that were over 90% of the total NOOK sales — which to be fair includes another writedown: $18.3 million in goodwill — and it looks ugly.
NOOK quarterly figures since fiscal 1Q2012
(US$ million, rounded, except Margin %):
And the bad news wasn't just in device sales. 4Q2013 sales of digital content were down "8.9% for the fourth quarter due in part to the device sales shortfall as well as the comparison to the The Hunger Games and Fifty Shades of Grey trilogies a year ago."
B&N corporate reported a $119 million loss overall, which would have been a profit except for the $177 million in losses by NOOK Media.
Looking at the full 2013 fiscal year, EBIDTA numbers show the Retail division (big bookstores + BN.com) with a profit of $374+ million, the College bookstore division with a profit of $111+ million, and NOOK with a loss of $475+ million. The NOOK loss virtually wiped out the profits from both other divisions, leaving only $10 million EBITDA profit.
08-20-2013 01:24 PM - edited 08-20-2013 02:36 PM
The first-quarter (May-July) numbers are out, and it looks like the NOOK bleeding is somewhat under control. Yes, they're still losing money, but nothing like the previous two quarters. In fact, it's one of the least awful quarters that the NOOK business has had in the past two years, with an EBITDA loss of "only" $55 million.
Sales are back up into their traditional non-holiday range (mid-100s), and gross margin is once again positive at 18.1%.
[Sorry. The forums no longer permit tables in postings, so I'm unable to provide the updated historical table that used to appear at this point.]
Sales of digital content, however, are still headed the wrong way. This quarter they were down 15.8% year-over-year, which once again gets blamed on lower device sales plus comparison to big sales numbers for the The Hunger Games and Fifty Shades of Grey trilogies in the previous year. Excluding those two trilogies, digital content sales were still down 6.9% year-over-year. This, while e-book sales in general continue to climb.
B&N corporate reported an $87 million loss overall, which still would've been a loss even without mixing in the losses from the NOOK business. As usual, the first quarter was a weak one for the College bookstores, and they accounted for most of the rest of the overall corporate losses. Both the NOOK business and the College bookstores are part of NOOK Media, which B&N holds the majority of stock in but no longer provides on-going funding to.
In the press release (linked above), NOOK Media CEO Michael P. Huseby is quoted, "The company intends to continue to design and develop cutting-edge NOOK black and white and color devices. ... At least one new NOOK device will be released for the coming holiday season and further products are in development."
The press release also attributed some of the College division's losses to, "the company’s plans to introduce additional digital products to the higher education market under its partnership with Pearson." [Notice that this part says "products", not "devices".]