Barnes and Noble has finally settled its patent suit against Microsoft and in the wake of that settlement, have created a new digital partnership with the Redmond software giant. In a press release sent out this morning, the two companies have come together to create a new Barnes and Noble subsidiary, Newco. Newco will now be in charge of Barnes and Noble’s digital (ie. E-reader and Tablet) and college businesses. As part of the deal, Microsoft will invest $300 million, for about 17.6% ownership, and B&N’s Nook will receive a Nook application in the upcoming Windows 8 release.
What’s not discussed,and leads us to wonder, what does this mean for B&N using Android in future e-readers and tablets? Could Barnes and Noble release the first or even budget priced Windows 8 RT tablet, with Nook functionality built in? It would certainly be a great way to get the new OS in front of millions of people and a way to push it into the mobile space. It could also give B&N a much needed push over Amazon’s Kindle Fire. We could also see a version of Windows Phone 8, rather than the full-fledged Windows 8 OS, like how Amazon decided to use Gingerbread for the Kindle Fire, instead of Android Honeycomb (their tablet OS).
The official press release is below, with more details.
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 catalogs 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.
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.