Barnes & Noble stock closed up nearly 7 percent Thursday following news that the 658-store book chain was going to keep its embattled Nook e-reader rather than spin it off.
At the same time, the New York company said it was going to separate the profitable 714-unit college bookstore business into a separate publicly traded company.
The college bookstores are primarily school-owned and operated under contract by B&N College.
It marks a sharp reversal for the Nook digital business, which started with much fanfare in 2009 and was championed as a way to boost sales of e-books as sales of traditional books struggled.
But the arrival of tablets with more powerful computing capabilities plus the ability to handle e-books undermined the e-reader market for Barnes & Noble and other e-reader manufacturers.
In April 2012, Microsoft threw what looked like a potentially game-changing investment of $300 million into the Nook division with the plan to compete with Amazon’s Kindle and Apple’s iPads.
But Microsoft soon lost interest in an e-reader and entered the market with its own Surface tablet the next year.
On top of that, sales of e-books, which were growing at a double-digit clip in 2012, came back down to earth and increased by single digits in the past year.
In December — as the holiday buying season began but sales results were horrible — Microsoft and Barnes & Noble said they were closing the book on their partnership.
Nook division sales for the nine weeks that ended Jan. 3 tumbled 55.4 percent to $56 million.
The college bookstore division, with outlets on university campuses across the country, accounts for about 45 percent of the company’s revenues.
The Nook division will now be housed in the Barnes & Noble retail division, which also includes b&n.com.
“Separating Barnes & Noble Education will create an industry leading pure play public company with more flexibility to pursue strategic opportunities in the growing educational services market,” said B&N CEO Michael P. Huseby.
Max Roberts, CEO of the college division, will retain that job after the division is spun off into a new company.
The company said shareholders will hold stock in both companies and it expects the move to be completed by the end of August.