Barnes & Noble continues to tell a sad story this morning. Shares plummeted 13% in opening trading after it said that Microsoft bailed out of a 2012 partnership designed to bolster the book chain’s Nook e-reading line — and unveiled disappointing earnings for the quarter that ended on November 1.

The termination of the pact with Microsoft relieves the computer giant of  “any obligation to continue to fund support and other payments” for the Nook tablets and e-readers, B&N says. But CEO Michael Huseby adds that the change will make it easier for B&N to cut its own costs and “provide a clearer path for the potential separation of our Retail and NOOK Media businesses” — expected in 2015. The split should make it easier for the units to find a buyer; shares are up about 20% over the last 12 months as investors look forward to a deal.

Microsoft invested $300 million in the Nook deal, with a promise to embed the reading app in Windows and its tablets. The vote of confidence sent B&N shares soaring. But the Nook was no match for Amazon’s ecosystem of Kindle e-readers and apps. Nook sales in the quarter ending November 1 fell 41.3% to $64 million, B&N says today. Cash flow losses, at $38 million, improved by $8 million due to cost cutting.

The Nook is just one of B&N’s problems, the latest earnings show. Net income fell 7% vs the period last year to $12.3 million on revenues of $1.69 billion, -2.7%. The top line was right were analysts expected. But earnings at 12 cents a share missed the Street’s forecast for 31 cents.

Revenues at the Retail unit — which includes B&N’s bookstores and web sales — declined 3.6% to $888 million, due in part to the sliding demand for Nook products. Sales at stores open at least a year fell 1.5%. If you take Nook out of the equation, then sales would have increased 0.5%. B&N says that it expects retail sales to fall by a low single digit percentage in the 2015 fiscal year.

College book sales in the back-to-school quarter picked up a little slack on the revenue side, with sales up 1.9% to $751 million  and same store sales +0.4%. But cash flow fell by $4 million to $80 million due to the company’s investments in the business, including its Yuzu digital distribution platform. B&N expects same store sales to fall by a low single digit percentage in 2015.

“Retail sales continued to benefit from improving physical book industry trends coupled with our own merchandising initiatives, while our College bookstores comparable sales improved on favorable textbook sales trends and higher merchandise sales,” Huseby says.