Barnes & Noble will stop manufacturing its own Nook tablets, marking the end of its expensive attempt to compete alone with deep-pocketed rivals Amazon.com, Apple and Google in the tablet wars.
The top U.S. bookstore chain reported another quarter of dismal results on Tuesday, led by a 34 percent drop in sales of Nook devices and e-books business, and said it expects sales to continue to decline this fiscal year at its bookstores.
Barnes & Noble will still make and design black-and-white readers like the Nook Simple Touch, which it says are more geared to serious readers, who are its customers, than to tablets.
"We want to move away from taking on all that risk ourselves," Barnes & Noble Chief Executive William Lynch told investors on a call. "It was very capital intensive to build our own tablets."
In the fiscal year ended April 27, Barnes & Noble lost $475 million on the Nook business and it repeatedly had to slash prices on the Nook tablets and accept returns from retailers unable to sell the devices.
The retreat raised fresh questions about Barnes & Noble's ability to sell its Nook Media subsidiary, created in early 2012 and made up of Nook and its college bookstore chain. The bookseller's ability to look at strategic alternatives and its position in the e-books market were also matters of concern.
Barclays Capital analyst Alan Rifkin said in a research note the losses "reduce the likelihood" Barnes & Noble will find a buyer for its digital business.
Last year, Microsoft took a 17.6 percent stake in Nook Media, and British publisher Pearson Plc bought 5 percent. Barnes & Noble owns the rest.
Barnes & Noble shares shot up in May on unconfirmed reports that Microsoft wanted to buy Nook.
Barnes & Noble, the largest U.S. bookstore chain, launched the first version of the Nook e-reader in 2009 to take on Amazon.com Inc's market-leading Kindle and secure a place in the fast growing e-books market.
E-books now account for about 20 percent of book sales, according to the Association of American Publishers. By Barnes & Noble's estimates, it has a 27 percent share of the U.S. e-books market.