In about-face, Barnes & Noble now wants to keep Nook by Phil Wahba @FortuneMagazine February 26, 2015, 5:37 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons So Barnes & Noble BKS changed its mind. The top U.S. bookstore chain said Thursday that it has dropped plans to spin-off its Nook digital book unit into a separate company. But it will plow ahead with the related plan to cleave its college bookstore division into a standalone business by August. The company gave no explanation for its about-face. Analysts, however, have said that Nook is a more natural fit with the retail business because it is a vehicle for selling books to the general public rather than students. Nook, which includes the devices and digital books business, will now stay with the core retail stores group. Revenue at the division, which generates about 15% of overall sales, saw a 55% revenue drop during the holidays, while the core retail book-selling business grew with comparable sales up 1.7%. Barnes & Noble estimated in a filing that the 714-store college business is worth $774 million dollars, describing its untapped potential for growth given that 53% of college campuses still own their own stores. Barnes & Noble College is the second largest campus bookstore chain after Follett which has 940 campus stores. Barnes & Noble College is trying to win over those retailers with “academic superstores,” locations that are about 30,000 square feet, a size more typical of a traditional Barnes & Noble store. College is also offering far more than the usual at some schools with amenities like bigger cafes, a larger selection of clothing, and, in some places, Clinique cosmetics counters. It has a few dozen such locations, with plans for more. But some investors quibbled about that $775 million figure. While the college business is a cash cow, its growth has stalled of late. Comparable store sales fell 0.2% in the six months ending in October, while profits fell by half to $10.7 million. According to a Wall Street Journal report, an analyst at Janney Capital Markets, valued the business at $580 million, or six times earning before interest, taxes, depreciation and amortization. The college business is indeed facing some challenges. For one thing, any growth will have to come at the expense of Follett or by convincing more schools to outsource their stores. And frankly, the college market is stagnant: the National Association of College Stores says industry sales have remained at about $10 billion for a few years. And the percentage of campus stores that are outsourced has barely budged in recent years. However, Barnes &Noble College has been adding about 25 stores a year. What’s more, the only growing part of its business – textbook rentals– is not even 10% of revenue. And that might be a part of the college business that may soon slow down. Smaller rival Chegg saw its shares soar 27% last week this week when it announced it was exiting print textbook rentals and focusing solely on digital. Barnes & Noble College said in its regulatory filing that it will try to grow through acquisitions or mergers and seek to raise capital and form strategic alliances. “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 markets,” said Michael Huseby, Barnes & Noble’s CEO, in a statement.