Analysis: Departure of Barnes & Noble CEO may put focus on retail

Tue Jul 9, 2013 5:30pm EDT
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By Phil Wahba and Atossa Araxia Abrahamian

NEW YORK (Reuters) - The sudden resignation on Monday of Barnes & Noble Inc's (BKS.N: Quote) chief executive could indicate the struggling bookseller is closer to breaking up and returning to basics: bookstores.

William Lynch, who became CEO in 2010 to take on Inc (AMZN.O: Quote) in the e-books wars, quit on Monday just two weeks after the company reported a 34 percent drop in revenue in its Nook business, a venture he spearheaded that has cost Barnes & Noble hundreds of millions of dollars. His departure was somewhat of a surprise to investors because he signed a two-year contract renewal in March.

The company is not looking for a replacement for Lynch and instead named finance chief Michael Huseby to be the CEO of its Nook Media division, which it created in 2012 as a potential spin off. The CEO of Barnes & Noble Retail, Mitch Klipper, and Huseby will both report to Leonard Riggio, who built the chain and owns 30 percent of its shares.

"With no plans to hire a CEO in the near term and Len Riggio once again in control, this management restructuring could bring the company closer to a more formal break up," Janney Capital Markets analyst David Strasser wrote in a note to clients.

Barnes & Nobel did not respond to a request for comment.

The management shakeup puts Riggio, who said in February he wanted to buy the company's 680 bookstores, in the driver's seat. It also deepens the separation between its main book store business and its digital business, which the company had long touted as complementary.

The company has struggled for years with the gradual shift to e-books, which is what led to its venture into e-readers in 2009. Last month, it said it would stop producing Nook tablets on its own, but will continue to make black-and-white e-readers.

At first, the Nook was a success, helping Barnes & Noble garner as much as 27 percent of the U.S. e-books market. But as tablets' reading functions improved, Barnes & Noble found itself competing against very popular devices such as Amazon's Kindle Fire and Apple Inc's (AAPL.O: Quote) iPad.   Continued...

Customers enter a Barnes and Noble store in New York June 25, 2013. REUTERS/Brendan McDermid