As sales plunge, Barnes & Noble says it will stop making Nook tablets; e-readers live on

Investors were expecting a bad earnings report from Barnes & Noble on Tuesday morning, 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. Shares were down 10 percent before the market opened.

Nook sales and digital content sales fall, despite slashed prices

Nook lost a ton 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. (Gotta point out that B&N slashing the Nook line was one of my predictions for 2013.)

Barnes & Noble recently slashed prices on those tablets, and the money it spent doing so contributed to its losses: “Nook EBITDA losses were $177 million for the fourth quarter, which include an additional $133 million of inventory charges as the company adopted more aggressive promotional strategies given the shift in strategic direction. Nook EBITDA losses were $475 million for the full year, primarily driven by cumulative Nookinventory related charges of $222 million.”

Barnes & Noble says it will keep selling Nook tablets through the holiday season, will keep building its digital content catalog and will keep focusing on e-readers. “We plan to continue to innovate in the single purpose black-and-white e-reader category,” CEO William Lynch said in a statement, “and the underpinning of our strategy remains the same today as it has since we first entered the digital market, which is to offer customers any digital book, magazine or newspaper, on any device.”