Barnes & Noble will cease manufacturing its Nook HD and Nook HD+ tablets, bowing out of a tablet market dominated by Apple, Amazon and Google.
In the last fiscal year, Barnes & Noble lost $475 million on the Nook business, due to lackluster sales combined with high manufacturing costs.
"It was very capital intensive to build our own tablets," Barnes & Noble chief executive William Lynch said to investors in a call.
Sales of Nook tablets and e-readers dropped 34 percent in the last quarter, despite repeated price cuts. Barnes & Noble often had to accept returns from retailers who could not sell the devices.
Barnes & Noble will continue to produce black-and-white e-readers. "We are not 100 percent exiting the device business," Lynch said.
As Barnes & Noble tries to sell its Nook Media subsidiary, comprised of Nook and its college bookstore chain, this retreat from the tablet market might be a roadblock. In May, rumors circulated that Microsoft was interested in buying out Nook.
Barclay's Capital analyst Alan Rifkin told Reuters the losses "reduce the likelihood" of Barnes & Noble finding a buyer for its digital assets.
After the news broke on Tuesday, B&N shares plummeted 17 percent.