Quantcast
Get breaking news alerts via email

Click here to manage your alerts
Barnes & Noble, Microsoft in e-book gambit
e-book deal » Bookseller’s stock surges after tech giant’s $300M investment in Nook.
First Published Apr 30 2012 10:43 am • Last Updated Apr 30 2012 06:48 pm

New York • Books and bits united Monday as Microsoft provided an infusion of money to help Barnes & Noble compete with top electronic bookseller Amazon. In exchange, Microsoft gets a long-desired foothold in the business of e-books and college textbooks.

Microsoft Corp.’s $300 million investment sent Barnes & Noble Inc.’s stock zooming up $9.15, or 67 percent, to $22.83 in early afternoon trading. The opening price of $26 was a three-year high. Microsoft’s stock rose 2 cents, to $32.

At a glance

Barnes & Noble and the e-reader competition

Here’s how sales of Barnes & Noble’s Nook stacked up against competitors in both the tablet and e-reader market in the October to December period:

Apple » 15.4 million iPads

Amazon.com » 4.7 million tablet-like Kindle Fires, plus 6.1 million black-and-white Kindles

Barnes & Noble » 1 million Nook Tablets and Nook Color units, plus 1.4 million black-and-white Nooks

Samsung » 1.6 million tablets

Source: Research firm IDC

Join the Discussion
Post a Comment

The deal values the e-reader business at $1.7 billion.

The two companies are teaming up to create a subsidiary for Barnes & Noble’s e-book and college textbook businesses, with Microsoft taking a 17.6 percent stake.

The deal gives Barnes & Noble ammunition to fend off shareholders who have agitated for a sale of the Nook e-book business or the whole company, but the companies said Monday that they are exploring separating the subsidiary, provisionally dubbed Newco, entirely from Barnes & Noble. That could mean a stock offering, sale or other deal.

The deal also eases concerns that Barnes & Noble doesn’t have the capital to compete in the e-book business with market leader Amazon.com Inc. and its Kindle, said analyst David Strasser at Janney Capital.

For Microsoft, the investment means that it will own part of a company that sells tablet computers based on Google Inc.’s Android, one of the main competitors of Windows Phone 7, Microsoft’s smartphone software.

Microsoft said the deal also means that there will be a Nook application for Windows 8 tablets, set to be released this fall. The app probably will get a favored position on Windows 8 screens.

There’s already a Nook application for Windows PCs, but none for Windows phones.

William Lynch, the CEO of Barnes & Noble, said Nook software will continue to be available on devices such as the iPhone that compete with Windows Phone.


story continues below
story continues below

He declined to say whether it was Barnes & Noble or Microsoft that initiated the discussions, but he said the talks had been going on since before the beginning of the year.

"We have been circling the relationship for quite a long time," added Microsoft president Andy Lees. "When you think of different types of reading and what’s going to happen when that goes digital, it’s really quite dramatic to be bringing that to Windows customers."

The Nook has pleasantly surprised publishers, who worry about Amazon.com’s domination of the e-market. Unveiled to skeptical reviews in 2009, the Nook is estimated to account for about 25 percent of the U.S. e-book market. The Nook helped to cut Amazon’s share from what was believed to be 90 percent to around 60-65 percent. David Pogue in The New York Times called the initial device "an anesthetized slug," but praised the new Nook Simple Touch as a "very big deal" that offers "spectacular, crisp pages to read in any light."

Barnes & Noble investors have also been concerned about the recent government lawsuit against Apple and some leading publishers over alleged price fixing. When Apple launched its iPad in 2010, Simon & Schuster, Penguin Group (USA) and other publishers switched to an "agency" model that allowed publishers to set prices for e-books, a system many believe helped Barnes & Noble.

Amazon.com had been offering top-selling e-books for $9.99, a cost publishers, agents and writers believed was so low it could drive competitors out of business. Three of the five publishers sued — Simon & Schuster, HarperCollins and the Hachette Book Group — have already agreed to settle, meaning prices for their e-books likely will again drop on Amazon.

Microsoft has a long-standing interest in the e-book field. It launched e-book software in 2000, but was never able to build a substantial library of books. It’s discontinuing the software on Aug. 30.

Barnes & Noble, based in New York, runs 691 bookstores in 50 states. 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.

"The whole reason the Nook business is expanding so rapidly is because bookstores are committed to it and know how to market the product in that environment," said Michael Norris, an analyst at Simba information.

The possibility of a separation of Barnes & Noble’s digital and college businesses has been brewing.

In January, Barnes & Noble said it was considering options for its Nook business, including possibly spinning it off or expanding overseas, and said it expected the review to be complete by the end of the year.

And in March, private investment firm G Asset Management, a Barnes & Noble shareholder, offered $460 million for a 51 percent stake in the company’s college bookstore unit, Barnes & Noble College Booksellers LLC.

Next Page >


Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.