The partnership between Barnes & Noble and Microsoft is providing the bookseller with an infusion of capital it needs and the software giant with the foothold in the e-book and college textbook market it wants.
The deal calls for a new B&N subsidiary formed by spinning its digital and B&N College Booksellers divisions together into a new company, temporarily named Newco. Microsoft is investing $300 million into Newco for a 17.6% equity stake.
The infusion of money will allow B&N to grow its e-book business, while at the same time fending off shareholder calls for it to sell the Nook business or the whole company. In addition, it ends speculation that B&N doesn’t have the funds to go head to head with Amazon.com in the e-book business.
“Our biggest concern for Barnes & Noble has been its ability to compete against Apple and Amazon, two of the deepest-pocketed players in the technology and media world,” said Matthew Fassler, a Goldman Sachs analyst. “Newco now has an equally deep-pocketed partner.”
The investment also gives Microsoft a path into the e-book business and a presence on college campuses to compete with Apple. It was reported that a Nook app for the Windows 8 operating system would be developed, but B&N CEO William Lynch told Forbes that the only plan at this moment is to embed NFC chips into the device.
The deal should also give consumers greater confidence in the Nook, according to David Carnoy, executive editor at CNET News. Speculation about the future of B&N had Nook readers wondering about the titles they’ve purchased and if those would vanish if the company were to fail. But Microsoft’s willingness to invest millions means the Nook will remain.