Barnes & Noble and Microsoft Team Up to Sell Electronic Books.

Barnes & Noble and Microsoft Corp. on Monday announced the formation of a strategic partnership in a new Barnes & Noble subsidiary, which will build upon the history of strong innovation in digital reading technologies from both companies. The partnership will accelerate the transition to e-reading, which is revolutionizing the way people consume, create, share and enjoy digital content.
The new subsidiary, referred to as Newco, will bring together the digital and college businesses of Barnes & Noble. Microsoft will make a $300 million investment in Newco at a post-money valuation of $1.7 billion in exchange for an approximately 17.6% equity stake. Barnes & Noble will own approximately 82.4% of the new subsidiary, which will have an ongoing relationship with the company’s retail stores. Barnes & Noble has not yet decided on the name of Newco.
“Microsoft’s investment in Newco, and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business,” said William Lynch, chief executive officer of Barnes & Noble.

One of the first benefits for customers will be a Nook application for Windows 8, which will extend the reach of Barnes & Noble’s digital bookstore by providing one of the world’s largest digital catalogues of e-books, magazines and newspapers to hundreds of millions of Windows customers in the U.S. and internationally.
The inclusion of Barnes & Noble’s college business is an important component of Newco’s strategic vision. Through the newly formed Newco, Barnes & Noble’s Nook Study software will provide students and educators the preeminent technology platform for the distribution and management of digital education materials in the market.
“The shift to digital is putting the world’s libraries and newsstands in the palm of every person’s hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content. Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We’re at the cusp of a revolution in reading,” said Andy Lees, president at Microsoft.
Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for its Nook e-book reader and tablet products. This paves the way for both companies to collaborate and reach a broader set of customers.