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Microsoft Investing in Barnes & Noble’s Nook e-Reader

Microsoft invests $300 million in Barnes & Noble, giving them a large stake in a newly forming subsidiary company of the bookstore giant.

Microsoft is looking to influence the world of eBooks, eReaders, and college textbooks with a $300 million investment into a new subsidiary company being formed by Barnes & Noble. The as-yet unnamed company will focus on Barnes & Noble’s digital bookstore as well as their college textbook business. After the investment, Microsoft will own 17.6 percent of the new company, and will produce a Nook application for the Windows 8 operating system, which unofficial sources have pegged as being released in October of this year.

Barnes & Noble announced their intention to split their business into physical and digital stores. The formation of this new company to handle digital books and college textbooks could be the first step towards that endgame. Some commentators believe that it could have a detrimental effect on the company, however, saying that the move will not help save the physical Barnes & Noble stores; it’s possible the split could even accelerate the physical stores’ decline.

The partnership between Microsoft and Barnes & Noble also signals an end to the patent disputes. Barnes & Noble released the Nook eReader to compete with Amazon’s Kindle in 2009. Microsoft then sued the bookstore giant in March of last year, claiming that the Nook tablet, which runs on the Android operating system, infringed on their patents.

Barnes & Noble, like many other book sellers, has been struggling to cope with the eBook revolution. Competing with Amazon’s reduced prices for used books was difficult enough, but with the popularity of the Kindle, and eBooks in general, book stores have been struggling to compete. With the cost of publishing an eBook at almost nothing, publishers have quickly embraced the format, leading to higher profits. Readers enjoy the new format as well, as it allows them to carry a library of books with them in a convenient, lightweight format.

Shortly after the announcement of the collaboration, Barnes & Noble’s stock price rocketed to $25 per share, an increase of around 85%. Trading slowed as the day wore on, and Monday closed with Barnes & Noble up 52%.

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