Home >companies >people >Barnes and Noble’s CEO William Lynch resigns after sales decline

New York:Barnes and Noble Inc. chief executive officer (CEO) William Lynch resigned amid profit losses and declining sales as the largest US bookstore chain tries to navigate a shift to digital books and considers a breakup.

Lynch, who also stepped down from the board, resigned effective immediately, the New York-based company said Monday in a statement after US markets closed. Barnes and Noble, which isn’t seeking a CEO, appointed chief financial officer Michael Huseby, 57, as president of the company and CEO of its Nook Media unit. Huseby will report to Leonard Riggio, founder and executive chairman.

“Lynch was always the champion of the Nook and it didn’t work," said John Tinker, a New York-based analyst for Maxim Group, who has a buy rating on the stock.

Barnes and Noble named Lynch CEO in March 2010 after joining the company the previous year to oversee its Web unit. After some initial success in building the Nook digital reading and tablet division, sales of Nook devices plunged during the last holiday shopping season and the company said last month it would stop making tablets.

“Huseby is now Barnes and Noble’s most senior executive and the company isn’t looking for a replacement for Lynch as it weighs options for selling and separating its businesses," Mary Ellen Keating, a spokeswoman, said in an interview.

Breakup review

The retailer is considering a breakup after it initially pursued separating its digital and retail divisions because it said investors had undervalued the success of the Nook. Last year, it created the subsidiary Nook Media, which includes the Nook and college bookstore units, and received investments from Microsoft Corp. and Pearson Plc.

“With the decline in Nook sales last year, the strategy of spinning off Nook Media into its own company shifted to how and if the business could be revived," Tinker said. Then in February Riggio announced that he wanted to buy the chain’s retail stores and website. If that plan goes through it would leave Nook Media as a public company.

“The company is reviewing its strategic plan and will provide an update when appropriate," Riggio said in the statement today. Keating declined to comment on what these changes mean for the possible separation of the company and declined to provide an executive for an interview.

Unanswered questions

“The possible offer from Riggio leaves unanswered questions about what will become of Nook Media if it were left as a public company," Tinker said. “The answer may be Microsoft because it’s already invested $300 million," Tinker said. Microsoft’s spending goes further than that as it also pledged $305 million in additional payments over five years to help Nook expand overseas.

“It all comes down to what Microsoft’s real intentions are," Tinker said.

In May, TechCrunch reported that Microsoft was planning to make a bid for Nook Media. The shares surged 24% to $22.08 on 9 May after the report.

The shares fell 4.9% to $16.80 in extended trading Monday, after they slipped less than 1% to $17.66 at the close in New York. The stock has gained 17% this year through Monday, compared with a 15% rise for the Standard & Poor’s 500 Index.

Lynch’s resignation comes less than two weeks after the company posted a loss in the quarter ended 30 April that was twice as wide as analysts estimated. Revenue from the Nook unit sank 34% and its loss before interest, taxes, depreciation and amortization increased to $177 million from $77 million a year ago.

Huseby was named CFO in March 2012 after holding the same position at Cablevision Systems Corp. While there, he helped Cablevision spin off two units.

Under the changes today, Mitchell Klipper, head of the company’s retail unit, will also report to Riggio. Allen Lindstrom was promoted from corporate controller to chief financial officer and Kanuj Malhotra, vice president of corporate development, is now CFO of Nook Media. BLOOMBERG

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