* New CEO Lynch says e-books business "key to our future"
* Lynch says "no potential" combination with Borders
* Promotes COO Klipper to CEO of retail group
* S&P maintains "sell" recommendation
* Shares up 2.3 percent
(Adds CEO interview, analyst comment, updates share move)
By Phil Wahba
CHICAGO, March 18 Barnes & Noble Inc (BKS.N)
promoted the executive who spearheaded the development and
launch of its Nook electronic reader to be its new chief
executive, as the largest specialty U.S. bookseller accelerates
its push into digital books.
William Lynch, whose appointment was announced on Thursday
and is effective immediately, called Barnes & Noble's e-books
business "key to our future" on a conference call.
Lynch, 39, joined Barnes & Noble in February 2009 and
oversaw its web business. Last October, he presided over the
company's launch of the Nook, which competes with Amazon.com
Inc's (AMZN.O) market-leading Kindle and Sony's (6758.T) e-book
reader, among other devices.
After several production delays during the fall and into
the holiday season, the Nook only became available for in-store
orders in February.
Last week, Barnes & Noble announced that users of Apple
Inc's APPL.O upcoming iPad device will be able to download
books from its bn.com e-bookstore.
Barnes & Noble's founder and Chairman Leonard Riggio
explained Lynch's appointment by saying the retailer needed to
"pick up the pace" of its shift to e-books as more bookselling
gravitates to the web and e-readers. Riggio said that Lynch had
quickly put the digital business on the fast track.
The company also promoted Chief Operating Officer Mitchell
Klipper to CEO of its retail group.
The management shifts come at a time when Barnes & Noble's
comparable sales at its namesake stores continue to decline.
They fell 5.5 percent during the holiday quarter, though online
sales surged 32 percent. [ID:nN23244634]
Barnes & Noble is also under fire from shareholder Ron
Burkle. The billionaire investor has sought to gain a
controlling stake in the company and criticized its management
structure led by the controlling Riggio family. [ID:nN26192061]
Shares of the company rose 2.3 percent.
NO PHYSICAL BOOK LEFT BEHIND
Lynch stressed that Barnes & Noble would not turn its back
on the physical book market, which makes up about 5 percent of
overall U.S. book sales.
"When you look at the book market, physical books will
continue to be the dominant format that consumers buy -- they
value having the object," Lynch told Reuters in an interview,
though he said that attachment was weaker for the mass market
Lynch also said he did not foresee the need to close
stores, saying that the company was winning enough market share
from struggling rivals, echoing the position of his
Last month, the largest investor in rival Borders Group Inc
BGP.N, William Ackman of Pershing Square Capital Management,
suggested the No. 2 U.S. specialty bookseller could end up in a
booksellers' consolidation with Barnes & Noble. Lynch dismissed
the idea, saying, "there is no potential combination."
Standard & Poor's Equity Research analyst Michael Souers
maintained his "sell" recommendation on the stock, saying its
shares remained expensive, but praised the appointment.
"From a strategic point of view, they are treating the
e-reader and e-books as their primary growth engine going
forward," Souers told Reuters.
"It begs the question of whether he (Lynch) has sufficient
experience given his age, but he's in the best position to
drive this change."
The bookstore chain's outgoing CEO, Stephen Riggio, who is
also the chairman's brother, will retain the role of vice
chairman. The Riggio brothers and other insiders own about 31
percent of the company's shares.
Stephen Riggio said on a call last month that Barnes &
Noble could reach the same market share in e-books as it has in
physical stores "literally overnight."
In January, investor Burkle, whose investment firm Yucaipa
Cos owns 18.7 percent in Barnes & Noble, had asked the board
for permission to double his stake in the company without
triggering a poison pill provision meant to prevent a hostile
takeover. However, the board rejected the request.
By replacing the chairman's brother, Barnes & Noble may be
placating other shareholders and directors concerned about the
family's hold on the company's management, S&P's Souers said.
Borders also replaced its CEO this winter, when Ron
Marshall stepped down after only one year. Its Chief
Merchandise Officer Michael Edwards is currently serving as
(Additional reporting by Nivedita Bhattacharjee in Bangalore,
editing by Michele Gershberg and Dave Zimmerman)