Barnesandnoble.com to go public

Barnes & Noble, the world's largest brick-and-mortar bookseller, today announced plans to spin-off its online unit in an initial public offering.

Investors cheered the news, pushing the company's stock to a 7.55 percent gain to close at 40.0625 in today's trading, up from its close of 37.25 yesterday.

Barnesandnoble.com had been a drag on earnings for the bookstore giant, and had been clouding its financial picture by creating confusion about the true value of the company's online operations and its core retail book business, analysts said.

"Part of the rationalization was to give investors greater clarity on the start-up spending for its Internet operations and the earnings from its core business," said Danielle Fox, an analyst with J.P Morgan Securities. "The company will now get a more accurate valuation."

Barnes & Noble said it plans to file a registration statement with the Securities and Exchange Commission within the next 30 days for an initial public offering of barnesandnoble.com stock. The bookseller noted that the registration is subject to market conditions, however. The company plans to sell up to 20 percent of barnesandnoble.com's stock to the public.

Analysts were in agreement that the IPO plan is a good move for Barnes & Noble.

Gary Balter, an analyst with Donaldson, Lufkin & Jenrette, said the capital barnesandnoble.com will raise in its IPO will help it better compete with Amazon.com.

Last year Amazon.com raised $54 million with its IPO, when it sold 3 million shares at a target price of $18 a share.

Balter said he doubts that other major players, like Borders Books and Music, will follow suit with IPO plans for their Internet operations.

"Borders feels it has an international, domestic, and Internet strategy, and plans to keep it as one," he said.

Like Amazon.com, barnesandnoble.com has yet to generate a profit.

While Barnes & Noble's brick-and-mortar business posted improved profits for the second quarter of $7.9 million, the company's online unit had a net loss of $13.6 million. That loss brought down the company's overall performance, resulting in a widened net loss for the quarter of $5.7 million, compared with a loss of $1.4 million reported a year ago.

Barnes & Noble, which reported its second quarter results today, noted barnesandnoble.com generated revenues of $12.5 million for the second quarter ending August 1, compared to $2.2 million for the same year-ago quarter.

Barnes & Noble added that its online unit had more than 720,000 customers in 175 countries as of August 1, an increase of 44 percent from 500,000 customers in 158 countries as of May 2, 1998. The site's "Affiliate Network'' grew to more than 17,000 sites and includes strategic partnerships with many of the top 20 Web sites, including Lycos as well as an exclusive relationship with America Online's proprietary online services.

Barnes & Noble announced its IPO plan in its second quarter earning report.