Barnes & Noble and Microsoft Form New Partnership
Author: Admin Posted on: 30.04.2012 at 08:00 PST
Can Microsoft rescue Barnes & Noble now, like it did Apple in 1997?
Back in 1997, Microsoft invested $150 million in Apple when its back was against the wall.
Today, Microsoft announced it would invest twice that amount in Barnes & Noble to make a Windows 8 version of its Nook e-book reader.
Microsoft will invest $300 million in Barnes & Noble Inc’s digital and college businesses, valuing them at $1.7 billion.
Microsoft will get a 17.6 percent stake in the new unit, while Barnes & Noble will own about 82.4 percent, the companies said in a statement on Monday.
The business, to be named Newco, will have an ongoing relationship with Barnes & Noble’s retail stores.
The companies will introduce an application for the Nook on Windows 8, the upcoming version of Microsoft’s operating system.
Barnes & Noble and Microsoft have settled their patent litigation, the companies said.
The deal gives Barnes & Noble ammunition to fend off shareholders who have agitated for a sale of the Nook business or the whole company.
The companies said that the subsidiary will have an ongoing relationship with Barnes & Noble’s retail stores, but what that relationship will be is unclear.
NEW YORK and REDMOND, Wash. — 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.
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.