Barnes & Noble and Microsoft Form Strategic Partnership

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.

There is more than just a Windows 8 App for Microsoft in this. Let's look at the win's for Microsoft here:

  1. Settled the patent litigation with Barnes & Noble (B&N) and this new subsidiary will now have a royalty-bearing license on Microosft's patents. That leaves Motorola Mobility as the only one standing, not paying royalties on Android use of Microsoft patents.
  2. Microsoft entering the competitive market of e-Books and will now compete with Amazon and Apple. Barnes & Noble has around 25% of the US e-book market share (which is larger than their share of physical books) and sells twice as many ebooks as all formats of physical books combined on
  3. NewCo will use the [Windows Phone] Marketplace as the in-application commerce transaction platform, when available, for commerce transactions in the NewCo Phone App, including payments and fees associated with Content acquisition and subscriptions (if available). Some revenues to be made when this is available.
  4. And, Microsoft will get the Nook Windows 8 App.