By Chelsey Dulaney 

Barnes & Noble Inc. said it has terminated its commercial agreement for its Nook e-reader with Microsoft Corp., a move it said provides a clearer path toward the impending split of its business.

The bookstore retailer bought out Microsoft's preferred interest in Nook for about $120 million in cash and stock, freeing Microsoft from further investments in the business.

Barnes & Noble, struggling to adapt as book buyers migrated to online retailers like Amazon.com Inc., said Thursday that it expects the planned split of its Nook Media unit from its retail stores to occur by the end of August, behind its initial projection for a separation by March.

The company also reported a much weaker-than-expected profit for its November quarter, helping push its shares down about 8% premarket.

Microsoft invested in Nook in 2012, pledging more than $600 million to help prop up Barnes & Noble's digital-reading business. In return, Barnes & Noble committed to creating e-reading apps for new computers, phone and tablets powered by Microsoft's Windows software.

But since the deal was struck, circumstances for both companies have changed. Barnes & Noble slowed work on its e-reading devices and tablets as its sales slumped and laid off much of the workforce devoted to its Nook devices.

In June, it signed deal to sell color tablets made by Samsung Electronics Co. co-branded with the book chain's Nook label. The deal was seen fulfilling Barnes & Noble's previously stated plan to reduce its heavy investment in the Nook, allowing the retailer to focus more on its stores and college business.

Meanwhile, Microsoft, which has its own Windows tablets and smartphones, shifted its consumer-device strategy following sales hiccups.

The companies scaled back their partnership earlier this year, allowing Barnes & Noble to stop developing the Nook e-reading app for devices powered by Microsoft software.

The planned split of the retailer, along with sharply narrower Nook losses and other promising signs, has driven up the retailer's shares up 49% this year through Wednesday's close. Shares, however, dropped about 8% premarket.

The company had sought to carve out its own niche in the tablet and e-reader space, but the device failed to catch on, posting a series of losses.

For its second quarter ended Nov. 1, the Nook segment's revenue fell 41% to $63.9 million, while digital content sales fell 21% to $45.2 million. Device sales fell 64% from a year earlier, though cost-cutting helped stem the division's loss in the quarter.

Sales at the company's retail unit, meanwhile, fell 3.6% in the quarter, due partly to store closures.

Barnes & Noble has sought to inject excitement into its stores to combat the tepid store traffic that has plagued much of the retail industry. The retailer has gotten more creative with how it organizes its titles, added new displays and toys, and introduced big-ticket gifts like a $100 Crosley turntable ahead of the crucial holiday shopping season.

Revenue from its college unit ticked up 1.9%, buoyed in part by the back-to-school rush season.

Overall, Barnes & Noble reported a profit of $12.3 million, or 12 cents a share, down from $13.2 million, or 15 cents a share, a year ago. Revenue fell 2.7% to $1.69 billion.

Analysts polled by Thomson Reuters had projected per-share earnings of 31 cents and revenue of $1.69 billion.

Write to Chelsey Dulaney at chelsey.dulaney@wsj.com

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