Barnes & Microsoft

This morning, Microsoft announced a new partnership with Barnes & Noble for their eReader business having settled the previous litigation on claimed patent infringement.

The new subsidiary of Barnes & Noble called Newco (not the real name, just a placeholder to be determined later) will focus on the digital and college business of the company. Microsoft is investing $300 million into the venture and will maintain a 17.6% equity stake in the new company.

Of course it should come as no surprise that a NOOK eReader will be one of the first priorities of the nw partnership with a client for Windows 8 in the works. Barnes & Noble commented on the newly announced deal noting:

“The 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,” said William Lynch, CEO of Barnes & Noble. “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.”

Although lots of pundits like to criticize Microsoft for "patent trolling" others would claim that the company is looking out for their shareholder's interest by defending what they see as their intellectual property. Despite this, some saw in B&N as standing up to Microsoft, fighting them publicly in the matter. Instead, B&N made a deal with the devil perhaps even angering Google along the way (Android powers the new Nook eReader).

Either way, Microsoft's strategy seems to be paying off for although B&N does not have to admit any guilt for the claimed violations, they clearly were forced to the table for what looks to be an exciting deal for both companies. In fact, this could be the lifeline the fading book retailer needs in its life and death struggle with adversary Amazon.com.

No mention of a Windows Phone client has been announced which has been missing since Windows Mobile and the HTC HD2. However, rumors suggest that Windows 8 and Windows Phone 8 are based on the same kernel and have large amounts of overlapping code. As a result the announcement of a Windows 8 client may in fact be a dual one for Windows Phone.

Regardless, you can imagine B&N will be getting some favorable treatment from Microsoft in the future. Something that Apple and Google will have trouble in matching. For this, we' very excited by this deal (even if we're Kindle fans here).

Full press release after the break...

 

Barnes & Noble and Microsoft Form Strategic Partnership to Advance World-Class Digital Reading Experiences for Consumers
April 30, 2012
Newly Formed Subsidiary to Include NOOK® Digital and College Businesses.

 

New York, NY and Redmond, WA (April 30, 2012) – 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 company’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 & 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 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.

“The 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,” said William Lynch, CEO of Barnes & Noble. “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.”

“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,” said Andy Lees, President at Microsoft. “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.”

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 eReader and Tablet products. This paves the way for both companies to collaborate and reach a broader set of customers.

 

Newco

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 & Noble’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.

Barnes & Noble and Microsoft will host an investor call and webcast beginning at 8:30 A.M. ET on Monday, April 30, 2012. To join the webcast, please visit: www.barnesandnobleinc.com/webcasts.

Media Contacts

For Barnes & Noble:

Mary Ellen Keating, Senior Vice President, Corporate Communications

Barnes & Noble, Inc.

(212) 633-3323 mkeating@bn.com

For Microsoft:

Rapid Response Team

Waggener Edstrom Worldwide

(503) 443-7070 rrt@waggeneredstrom.com

Investor Contact

For Barnes & Noble:

Andy Milevoj, Director of Investor Relations

Barnes & Noble, Inc.

(212) 633-3489 amilevoj@bn.com

About Barnes & Noble, Inc.

Barnes & Noble, Inc. (NYSE:BKS), the world's largest bookseller and a Fortune 500 company, operates 691 bookstores in 50 states. Barnes & Noble College Booksellers, LLC, a wholly-owned subsidiary of Barnes & Noble, also operates 641 college bookstores serving over 4.6 million students and faculty members at colleges and universities across the United States.  Barnes & Noble conducts its online business through BN.com (www.bn.com), one of the Web's largest e-commerce sites, which also features more than two million titles in its NOOK Bookstore™ (www.bn.com/ebooks). Through Barnes & Noble’s NOOK™ eReading product offering, customers can buy and read digital books and content on the widest range of platforms, including NOOK devices, partner company products, and the most popular mobile and computing devices using free NOOK software. Barnes & Noble is proud to be named a J.D. Power and Associated 2012 Customer Service Champion and is only one of 50 U.S. companies so named.

General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company's corporate website: www.barnesandnobleinc.com.

NOOK®, NOOK Tablet™, NOOK Simple Touch with GlowLight™ , NOOK Simple Touch ™, NOOK Color™, Reader’s Tablet™, Best-Text™, NOOK Store™, NOOK Bookstore™,NOOK Magazines™, VividView™, NOOK Newspapers™, FREE NOOK Reading Apps™, NOOK Kids™,NOOK Digital Shop™, Read In Store™,More In Store™,LendMe®,NOOK Library™,NOOK Books en español™, NOOK Study™, Lifetime Library™ and Read What You Love. Anywhere You Like™are trademarks of Barnes & Noble, Inc. Other trademarks referenced in this release are the property of their respective owners.

Follow Barnes & Noble on Twitter (www.bn.com/twitter), Facebook (http://www.facebook.com/barnesandnoble) and YouTube (http://www.youtube.com/user/bnstudio).

About Microsoft

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.