It was a surprising announcement. Today Microsoft and B&N announced a partnership to form a new B&N subsidiary that will bring digital reading content to Microsoft platforms especially Windows 8. Its interesting to note that recently Microsoft Corp. sued Barnes & Noble Inc. for violating patents related to Android and B&N in return even filed an anti-trust case against Microsoft. Its good to see that Microsoft turned the patent battle into a huge content deal for its platforms and even made B&N have royalty-bearing license under Microsoftâ€™s patents for its NOOK eReader and Tablet products.
New York, NY and Redmond, WA (April 30, 2012) â€“ Barnes & Noble Inc. (NYSE: BKS) and Microsoft (NASDAQ: MSFT) today 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 in this release 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 companyâ€™s retail stores. Barnes & Noble has not yet decided on the name of Newco.
One of the first benefits for customers will be a NOOK application for Windows 8, which will extend the reach of Barnes & Nobleâ€™s digital bookstore by providing one of the worldâ€™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 & Nobleâ€™s College business is an important component of Newcoâ€™s strategic vision. Through the newly formed Newco, Barnes & Nobleâ€™s industry leading NOOK Study software will provide students and educators the preeminent technology platform for the distribution and management of digital education materials in the market.
â€œThe formation of Newco and our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the NOOK business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments,â€ said William Lynch, CEO of Barnes & Noble. â€œMicrosoftâ€™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.â€
â€œThe shift to digital is putting the worldâ€™s libraries and newsstands in the palm of every personâ€™s hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content,â€ said Andy Lees, President at Microsoft. â€œOur 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. Weâ€™re at the cusp of a revolution in reading.â€
Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoftâ€™s patents for its NOOK eReader and Tablet products. This paves the way for both companies to collaborate and reach a broader set of customers.
On January 5, Barnes & Noble announced that it was exploring the strategic separation of its digital business in order to maximize shareholder value. Barnes & Noble is actively engaged in the formation of Newco, which will include Barnes & Nobleâ€™s digital and College businesses. The company intends to explore all alternatives for how a strategic separation of Newco may occur. There can be no assurance that the review will result in a strategic separation or the creation of a stand-alone public company, and there is no set timetable for this review. Barnes & Noble does not intend to comment further regarding the review unless and until a decision is made.
Additional information will be contained in a Current Report on Form 8-K to be filed by Barnes & Noble.