Barnes & Noble (NYSE: BKS) lost 29% of its market cap on news that it might spin-off its NOOK e-reader operations. The book company is now worth only $850 million. That is despite its contention that digital sales rose 113% over the last nine weeks compared to the same period last year.

Barnes & Noble tried to “sell” the decision about the NOOK to Wall St. with the following comments

The Company expects fiscal 2012 digital content sales to be approximately $450 million. By fiscal 2012 year-end, based upon forecasted device sales, the Company expects annualized U.S. digital content sales will achieve a run-rate of approximately $700-$750 million.

Barnes & N0ble may have a NOOK partner in one of the largest consumer electronics companies in the world–Sony (NYSE: SNE). Sony’s “Reader” has been a failure, along with many of its other recent product launches. It has no product to challenge the Amazon.com (NASDAQ: AMZN) Kindle reader and tablets, or Apple’s iPad.  The NOOK, by several measures, has about a quarter of the e-reader market, and Barnes & Noble has a huge library of e-books.

Sony could do worse than to take a large equity position in a NOOK spin off. If the $750 million digital content sales forecast for Barnes & Noble digital sales in 2012 is right, a NOOK company could be worth $3 billion or $4 billion. A Sony investment of several hundred million would help assure that. Barnes & Noble shareholders could retain a majority interest in NOOK, and that may be more worth more than Barnes & Noble is in it entirety today.

Douglas A. McIntyre

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