Barnes & Noble’s lavish spending on its $249 Nook e-reader is getting mixed reviews from investors — including Los Angeles billionaire Ron Burkle.
The New York-based book chain — headed by controversial founder and Chairman Len Riggio — said yesterday the handheld device has quickly captured a 20 percent market since its launch last year, despite stiff competition from Amazon’s Kindle and Apple’s iPad.
Nevertheless, the Nook’s quick growth has come at a price. Yesterday, B&N reported a wider-than-expected quarterly loss, and said losses for the current fiscal year could surpass $50 million — twice as steep as the previous forecast — as B&N invests heavily in the Nook.
B&N shares plunged as much as 17 percent yesterday on news of the steeper-than-expected loss before closing at $14.02 — down 5.7 percent.
The retailer’s Nook spending will continue although the company had just $30 million in cash as of Oct. 30 — a fact that has rankled investors like Burkle, who still owns nearly 20 percent of B&N shares despite losing a proxy battle against Riggio this fall.
In an interview shortly after B&N’s September shareholder meeting, Burkle said he believes the bookseller could generate $400 million in cash annually if it ditched its lavish plans for tech spending — and found a tech-savvy partner to foot the bill instead.
“How does a company with a $1 billion market capitalization compete with giants like Apple and Amazon on developing hardware?” Burkle told The Post. “If Barnes & Noble got a strategic partner on the digital side, they could stop the cash burn.”
Amazon has a market cap of $79 billion and Apple’s market cap is $285 billion.
B&N said yesterday it expects sales of digital content will be running at an annual clip of $400 million by the fiscal year’s end. While B&N has held talks with computer giant Hewlett-Packard to discuss a potential partnership, sources said B&N executives pooh-poohed the idea of farming out the company’s Nook initiative.
“We decided to control our own destiny,” Joe Lombardi, B&N’s financial chief, told The Post in an interview yesterday. “If you want the rewards, you’ve got to spend. Somebody else could do the spending for us, but they’re not going to give us the rewards.”
If B&N can navigate its cash squeeze while successfully establishing the Nook, some industry insiders believe it could eventually be acquired by a deep-pocketed tech player.
In the meantime, however, an auction of B&N that was launched in August appears “nearly dead,” according to one banking source.
Brooklyn-born Riggio, who has signaled he might try to take B&N private, appears lately to be “backtracking” on the idea, according to one source close to the situation. And while it’s still possible Burkle might bid, he isn’t particularly interested taking outright control of the retailer, sources said.
B&N CFO Lombardi yesterday reiterated a statement by B&N that the company’s board is “meeting with strategic and financial institutions.” The company, however, has set “no timetable” for the auction and Lombardi declined to comment on the level of interest B&N is drawing from prospective acquirers. james.covert@nypost.com