Microsoft and Barnes & Noble announced a deal Monday for a joint venture that has an educational bent and will put apps for the Nook e-reader on Windows 8 desktops.
The deal is a much-needed step into the content world for Microsoft, which lags behind competitors Apple and Amazon in that area — particularly for e-books. Microsoft paid $300 million for a minority stake (17.6 percent) in the new venture, referred to as “Newco.”
The price is nothing compared with the $8.5 billion that Microsoft put down for Skype or the $1 billion it paid out for the AOL patents it then flipped to Facebook last week.
But the partnership could have a big payoff for the Redmond, Wash.,-based tech giant, which is looking to build out its content offerings ahead of the launch of Windows 8 and the Microsoft App Store.
Breaking into the college market — through Barnes & Noble’s many university bookstores — is a smart way to target students who might appreciate a cheaper option than Apple’s iPad for reading e-books. Microsoft could also push what will likely be cheaper tablets running Windows RT . (Although Amazon offers online textbooks, it hasn’t devoted the same resources to the education market as have Apple and Microsoft.)
Far behind in the tablet game, Microsoft is trying to play catchup. Offering content could be crucial if the company is going to compete with Apple and Amazon’s Kindle line and marketplace. Microsoft now has its app store, a book and magazine store and content that links in the Xbox. It is piecing together a marketplace to compete with the iTunes store and the Amazon.
The deal also resolves a suit filed against Barnes & Noble by Microsoft alleged that the bookseller owed licensing fees for Microsoft patents used in the Android platform.
In that way, this could be another “the enemy of my enemy is my friend” deal, such as the one Microsoft struck with Nokia (against Apple and Google) early last year.
There’s also the patent deal with Facebook, which has partnered with it on Skype integration in the past. That patent flip was bad news for Google and its Facebook rival Google + network and disappointing for Yahoo, which is locked in its own patent dispute with Facebook. Both Google and Yahoo compete with Microsoft Bing in the search engine game.
Barnes & Noble is locked in a battle with Amazon on e-books, while Microsoft is running to catch up with the online retailer in the tablet market. By joining forces — and research and development ideas — the companies want to emerge together as a stronger player and take on the industry’s leaders.
Barnes & Noble stock soared on the news of the venture when markets opened on Monday, jumping to $25.8 a share, from $13.68 at Friday close. As of late afternoon, shares were hovering around $21.42, up 56 percent. Microsoft stock was up a slight 0.13 percent, at about $32 a share.