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As sales plunge, Barnes & Noble says it will stop manufacturing Nook tablets in-house

Laura Hazard Owen

Investors were expecting a bad earnings report from Barnes & Noble on Tuesday, and they definitely got it: Barnes & Noble’s Nook business lost a lot of money, dragging down the entire company’s results. In response, Barnes & Noble said it will stop manufacturing Nook tablets in-house, though it will keep developing its e-ink readers.

The company’s revenues were down 7.4 percent compared to this time last year, to $1.3 billion, in the fourth quarter of fiscal year 2013, with a net loss of $118.6 million, or $2.11 per share. For the full fiscal year, revenues were down 4.1 percent to $6.8 billion, with net losses of $154.8 million, or $2.97 per share, compared to $65.6 million the previous year.

Nook lost a lot of money: Nook revenues were down 34 percent to $108 million for the quarter, compared to $168 million this time last year. For the full year, Nook revenues declined by 16.8 percent to $776 million, compared to $933 million the previous year. “Device sales declined during the fourth quarter due to lower selling volume,” the company said. “Digital content sales increased 16.2 percent for the full year, however, they decreased 8.9 percent 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.”

In an attempt to stanch the bleeding, B&N said it will create “a partnership model for manufacturing” those tablets, while continuing to develop e-ink readers in-house. “The company’s tablet line will be co-branded with yet to be announced third party manufacturers of consumer electronics products,” the company said.

Barnes & Noble had recently slashed  prices on those tablets. It says it will keep selling them through the holiday season and will keep building its digital content catalog.

One question not addressed in the press release: The quarter brought reports that Microsoft, which already has a stake in B&N’s Nook and college businesses, is interested in buying the division outright for $1 billion. This stuff is bound to come up in the investor call at 10 AM ET. We’ll be on the call.

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