Microsoft Pays $300M for a Stake in Barnes & Noble Subsidiary

Money Sign

Microsoft purchased its own stake of the eBook market for $300 million as it prepares to take on Amazon and the Kindle.

The software giant purchased a 17.6 percent stake in the Nook subsidiary of Barnes & Noble, with the rest remaining with Barnes & Noble.

The move will stave off shareholders pushing for a sale of the Nook business or perhaps the entire company.

“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,” said William Lynch, CEO of Barnes & Noble.

The two companies are exploring separating the businesses entirely. Though currently unnamed, the new subsidiary, dubbed Newco by Microsoft in a press release, will combine the digital and College businesses of Barnes & Noble.

Following the announcement of the sale, shares of Barnes & Noble shot up 85 percent in pre-market trading.

One of the first projects of the subsidiary includes a Nook application for Windows 8. Though it was certainly on Barnes & Noble’s to-do list, Microsoft’s checkbook should accelerate the development and be more closely aligned with the tablet features of Windows 8.

The new partnership should also bury some old lawsuits. The two companies settled their patent litigation. As part of the agreement, Barnes & Noble retains royalties under Microsoft’s patents for the Nook eReader and Tablet products.

Though the subsidiary will remain under Barnes & Noble, the move allows Microsoft entrance into its new partners higher education market, potentially pushing for digital options to replace textbooks.

“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.