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Barnes & Noble Investor Wants a Nook Spinoff for Christmas

Tickers in this article: AMZN TGT WMT MSFT BKS

Schottenfeld's letter comes at a crucial time for Barnes & Noble, Nook and Microsoft. With just week's left in the holiday season, both Nook and Microsoft face stiff competition in their tablet offerings.

In the case of Nook, its HD tablet is being challenged by a Amazon's(AMZN) Kindle Fire line of tablets and those offered by Apple (AAPL) and Google (GOOG) , among many 2012 tablet launches.

Microsoft also is getting into the mix with the launch of its Surface tablet, which is hoped to push the software giant into the consumer hardware market and put its Windows 8 launch in direct competition with Apple's iOS and Google's Android.

Meanwhile, questions on Barnes & Nobles finances and Nook's viability as a competitive alternative to Amazon, Apple or Google Android-powered products remain hazy.

Barnes & Noble missed second quarter earnings in late November, as revenue fell short of analyst estimates and Nook sales rose over 5% to $160 million, reversing declines in previous quarters.

On the upside, Nook sales benefitted from a doubling of Thanksgiving weekend sales, fueled by promotional offerings at Target (TGT) and Wal-Mart Stores (WMT) , who've both dropped selling the Amazon Kindle.

While its to be seen how in demand Nook tablets or Microsoft's Windows 8 are this holiday season, Schottenfeld's letter indicates a Nook spinoff would be a welcome gift for the new year.

Barnes & Noble shares were rising nearly 2% to $14,87 in Friday afternoon trading after Schottenfeld's letter was made public.

Year-to-date Barnes & Noble shares have gained just over 2%, erasing dramatic gains after the early May Microsoft deal was announced on investor concern over Nook's competitiveness in the tablet market.

-- Written by Antoine Gara in New York