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Barnes & Noble spins off Nook e-reader with $300M from Microsoft

Nooktablet

Microsoft will provide $300 million to a new Nook-led unit of Barnes & Noble, the companies announced Monday. Microsoft will get a 17.6 share in the new subsidiary, which has the temporary placeholder name of Newco.

Part of the announcement -- spinning the Nook off into a subsidiary -- did not come as a complete surprise. In January, Barnes & Noble Chief Executive William Lynch hinted that it was in the works, saying, "We see substantial value in what we've built with our Nook business in only two years, and we believe it's the right time to investigate our options to unlock that value." 

Microsoft's investment was, at least by most in publishing, unexpected. Last we heard, Microsoft was suing Barnes & Noble over alleged patent infringements related to the Nook, which could have blocked importation to the U.S. after its offshore manufacture. As part of the new Nook deal, Microsoft and Barnes & Noble announced settlement of the patent suit.

Another part of the deal: The new subsidiary will include Barnes & Noble's college textbook business.

Until now, Microsoft has stayed out of the e-reader wars, allowing Amazon and Apple to lead the device evolution. Amazon brought e-readers into the mainstream when it debuted its Kindle in 2007; Apple's iPad changed the landscape when it introduced its tablet in 2010.

For its part, Barnes & Noble's e-reader had a bumpy start: When it launched in late 2009, it didn't reach some customers, as promised, for the holidays. Since then, it's pulled on track and up to speed, launching its own tablet. Its competitively affordable Nook line gets consistently good reviews, and sales during the 2011 holidays were up 70%.

In Monday's announcement, Barnes & Noble's Lynch said, "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."

Microsoft President Andy Lees agreed. "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," he said. "We’re on the cusp of a revolution in reading."

The cusp? That sounds strangely out of date -- aren't we well into a revolution in reading? Or does Microsoft have something entirely new in store for its Newco Nook?

RELATED:

Barnes & Noble's Nook news: good, surprising

Amazon now sells more Kindle e-books than print books

Barnes & Noble's new Nook: A $249 tablet with e-reader bones

-- Carolyn Kellogg

Photo: Barnes & Noble Nook Tablet. Credit: Armand Emamdjomeh / Los Angeles Times

 

 
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